A mandatory assessment of the Canada-U.S.-Mexico Agreement on trade is set to begin next year, with U.S. President Donald Trump aiming to reshape global trade and attract key industries from neighboring countries. Negotiations for the trade deal, also known as CUSMA, tested Ottawa during Trump’s initial term in office. While discussions were sometimes tense, the agreement that replaced NAFTA was ultimately deemed successful across all three nations.
However, concerns about the future of CUSMA have emerged since Trump’s return to office. During a meeting with Prime Minister Mark Carney, Trump referred to the deal as “transitional,” suggesting its potential obsolescence. According to Fen Osler Hampson, an international affairs professor at Carleton University, trade with Canada may not be a top priority for Trump, but it represents a crucial, intricate economic relationship beneath the surface.
The review process for CUSMA began in the U.S. with public consultations in September, and the Trump administration is expected to present a report to Congress early next year outlining desired changes. While the formal review kicks off in July, Trade Minister Dominic LeBlanc plans to start discussions with American counterparts in January.
The three countries involved in CUSMA face the decision to renew the agreement for another 16 years, withdraw from it, or signal non-renewal and non-withdrawal to initiate annual reviews and ongoing negotiations. Trump’s statements hint at potential extended negotiations, but he has also mentioned the possibility of allowing CUSMA to expire.
Key issues likely to be addressed during negotiations include longstanding trade irritants between the U.S. and Canada, such as dairy supply management, softwood lumber subsidies, and non-tariff barriers. Additionally, concerns about the impact of Canadian regulations on U.S. digital services and provincial bans on American alcohol sales may be raised.
The renegotiation process will take place against the backdrop of a contentious midterm election as Democrats vie for control of Congress. Uncertainty remains regarding the extent of potential changes to the agreement and whether congressional review would be required. Nevertheless, if Trump opts to withdraw from CUSMA unilaterally, congressional approval may not be necessary.
As negotiations unfold, Canada could leverage its critical minerals and energy resources, aligning with the U.S.’s goals in developing AI data centers and reducing China’s dominance in critical minerals supply. The outcome of the trade talks may also be influenced by a pending Supreme Court ruling on Trump’s tariff policies and the evolving dynamics of international trade relationships.