Donald Trump has refused to renew the North American trade pact he once championed as his signature deal, opting instead to keep it alive on a short leash of annual reviews rather than committing to another 16 years.

Wednesday was the deadline built into the United States-Mexico-Canada Agreement (USMCA) for the three countries to jointly decide its fate, which is set to expire in 2036.

After virtual talks between officials from all three governments, the US trade representative’s office confirmed that Washington had walked away from renewing the deal on its existing terms, pointing to persistent US trade deficits with both neighbors.

The refusal does not kill the pact outright, however. USMCA stays in force while negotiations continue, but it will now face a review every year rather than once every six, as originally designed.

A senior administration official, briefing reporters on a call announcing the decision, said Trump had “chose not to rubber stamp a USMCA renewal without addressing existing issues”.

The official added: “So in other words, the United States did not agree to renew the USMCA in its current form. So, as a result, the USMCA is not renewed.”

In a statement, Jamieson Greer, the US trade representative, said the US would “continue to engage with Mexico and Canada to address the Agreement’s shortcomings”.

At a press conference on Wednesday, Mexico’s economy minister, Marcelo Ebrard, said his government wants to address the issues raised by the US on foreign dependence.

“There is no difference that I can identify ​between Mexico, the United States and Canada that is so big that ​we cannot resolve it,” he said, according to Reuters.

Trump has routinely criticized the USMCA as of late, and last month threatened to abandon it. “We don’t need anything that Canada has. We don’t need anything that Mexico has, but they need everything that we have. And they have to treat us better,” he told reporters in the Oval Office.

But Trump struck the deal himself in 2020, during his first term, as an updated version of the 1992 North American Free Trade Agreement (Nafta). At the time, the US president even described the USMCA as the “fairest, most balanced, and beneficial trade agreement we have ever signed into law”.

The decision to shift to annual reviews raises the prospect of damaging businesses that rely on the USMCA, and could limit investments across North America. The deal currently governs about $2tn annually in goods and services between the three countries, according to CNBC.