CUSMA Review: Negotiations, Uncertainty and the Stakes for Canada’s Economy

Canada’s ongoing negotiations over the Canada-U.S.-Mexico Agreement (CUSMA) have reached a critical juncture as the July 1 mandatory review deadline approaches, introducing renewed uncertainty for businesses and policymakers. The agreement, known in the United States as USMCA, was signed in 2018 to update NAFTA and is scheduled for renewal or review every six years. Unless one party gives six months’ notice to withdraw, CUSMA will remain in force until 2036. If a renewal is not agreed upon by all three countries, the agreement will continue for 10 years with annual review opportunities, and any signatory may exit with six months’ notice.

Prime Minister Mark Carney has stated that Canada will not accept a bad deal in the current negotiations, despite what he described as suboptimal proposals being on the table “for months.” Carney emphasized the importance of readiness and preparation, noting, “We could sign a bad deal this afternoon, right? We could have signed a bad deal a year ago. We’re not going to sign a bad deal, so it has to be a real deal.” He further indicated that breakthroughs on CUSMA are likely to occur at the leadership level, remarking, “Ultimately… a breakthrough, if you will, on this will… be at that level,” referencing direct engagement with U.S. President Donald Trump.

The United States’ approach to the negotiations has been characterized by unpredictability. President Trump has publicly described CUSMA as irrelevant and suggested the U.S. would be better off without it, while also claiming the best feature of the deal is the ability to terminate it. U.S. Ambassador to Canada Pete Hoekstra stated that Ottawa and Washington remain far apart on key issues, with little prospect for an imminent agreement. Nonetheless, Carney pointed out that with Trump, it is not uncommon for deals to materialize suddenly after appearing stalled, adding, “What I have seen with the president is that you’re not close to make a deal, and then you make a deal.”

Despite the rhetoric, major U.S. agricultural interests remain confident that the pact will endure. At a Washington, D.C., conference, Darci Vetter, a former chief agricultural negotiator and now vice-president of public affairs at Driscoll’s, expressed optimism: “I’m actually quite confident and very optimistic that at the end of this, we will still have a USMCA.” She attributed broad exemptions from Trump’s global tariffs for Canada and Mexico to the strength of the agreement. John Bode, president and CEO of the U.S. Corn Refiners Association, echoed this sentiment, stating, “The evidence is so compelling that this agreement is to the benefit of North Americans, whether in Canada, the U.S. or Mexico, and it would be bad for all of us for it to fall apart.” Gregg Doud, former chief agricultural negotiator under Trump and now president of the National Milk Producers Federation, described USMCA as the “gold standard” of trade agreements, highlighting improvements such as enhanced trade dispute resolution mechanisms.

However, U.S. negotiators have identified specific areas for further discussion, notably access to Canada’s dairy market and concerns over tariff-free access via Mexico for goods originating in countries like China. The U.S. administration is using the current review as an opportunity to seek changes to CUSMA’s terms, with two rounds of formal talks already held with Mexico and another scheduled for mid-July. In contrast, negotiations between Canada and the U.S. have lagged, although Trade Minister Dominic LeBlanc has met twice this month with U.S. Trade Representative Jamieson Greer. The first trilateral meeting for the CUSMA review is set for July 1.

Amid these discussions, other bilateral issues have become entangled with broader trade negotiations. According to Bloomberg, U.S. Commerce Secretary Howard Lutnick intervened to delay the opening of the Gordie Howe International Bridge, a major infrastructure project linking Windsor, Ontario, and Detroit, Michigan. Lutnick is reportedly pressing for renegotiation of the agreement governing toll revenues, with the White House supporting these changes. Under the current arrangement, Canada, which invested $6.4 billion in the bridge, collects tolls until costs are recovered, after which revenues are shared with Michigan.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association and a member of Carney’s Advisory Committee on Canada-U.S. Relations, stated that while the bridge is being used as leverage by the U.S., it is “not core” to the outcome of CUSMA negotiations. Volpe emphasized the long-term importance of the bridge, arguing against making short-term concessions: “That bridge will be operating beyond the lives of our grandchildren, and it’s important that we have that asset without hindrances going forward.” He noted that about $100 million in vehicles and auto parts cross through the Windsor-Detroit corridor daily, and he expects U.S. businesses to exert pressure for the bridge’s opening.

Ryan Donally, president of the Windsor Essex Chamber of Commerce, suggested that the resolution of the bridge dispute may align with broader trade negotiations. In 2023, Windsor-area businesses engaged in $31.2 billion worth of two-way trade with the U.S., including $16.8 billion in exports, underscoring the region’s economic dependence on cross-border commerce.

The uncertainty surrounding CUSMA has had tangible effects on Canada’s economy. A Deloitte report released Thursday identified trade uncertainty as the primary risk facing the Canadian economy, with businesses delaying investment decisions pending clarity on the agreement’s future. The report noted that “Business investment is expected to remain subdued in 2026, with firms largely in a holding pattern as trade uncertainty and the mid-year review of CUSMA weigh on confidence.”

Sectoral tariffs on Canadian steel, aluminum, lumber, automotive and auto parts remain in place, leading to significant impacts such as layoffs at firms like Algoma Steel. The report cautioned that failure to extend CUSMA or further U.S. tariff escalations would negatively affect Canadian exports and business confidence. Deloitte projected 0.7 per cent GDP growth for Canada in 2026, following a 1.7 per cent expansion in 2025, and stated that recession claims are “exaggerated” despite two consecutive quarters of GDP decline. The report concluded that the lifting of trade uncertainty could unlock stalled business investments, a view shared by Farm Credit Canada.

Carney, speaking at a press conference, highlighted that 85 per cent of Canada’s trade remains tariff-free under the current deal, describing it as “the best deal of any major U.S. trading partnership.” He reiterated his government’s objective to “modernize CUSMA to provide greater certainty for workers and businesses and to create lasting prosperity across the continent.”

Politically, the process has drawn criticism from opposition leaders. Conservative Leader Pierre Poilievre reproached Carney for not raising the CUSMA issue in a recent phone call with Trump, stating, “The aluminum, steel, auto, and lumber workers are desperate for their jobs and their paycheques, and Mr. Carney has a long telephone conversation with the president and doesn’t even bring it up. What could be a greater priority to this country?”

Some analysts, such as Dawn Desjardins, suggest the CUSMA review is unlikely to fundamentally alter Canada’s trade position, although it may encourage diversification if supported by further infrastructure investment. Others, including contributors to The Hill Times, argue that the U.S. increasingly treats trade as part of a wider political strategy, introducing an element of strategic uncertainty into Canada’s economic planning.

Looking ahead, officials and industry leaders believe a deal remains likely, even if talks extend into the fall or beyond the U.S. midterm elections. Volpe, of the APMA, remarked, “I’m bullish on this… We’re on our way to a deal that works and it probably is September, October, but if there are some surprises, maybe it goes past the midterms, or maybe it happens before the midterms. My real surprise is if we don’t have a deal.”

The review process continues to be shaped by direct leader-to-leader diplomacy, sectoral interests, and the ongoing interplay between trade policy and broader North American political dynamics. For Canadian businesses and workers, resolution of the current uncertainty remains central to the outlook for growth and stability.