CUSMA renewal deadline passed, U. S. tariffs remain—what it means for Canada and its economy
The Canada-United States-Mexico Agreement’s (CUSMA) mandatory review date arrived this week without a deal. U. S. President Donald Trump’s administration formally declined to extend the pact on Canada. . .
The Canada-United States-Mexico Agreement’s (CUSMA) mandatory review date arrived this week without a deal. U. S. President Donald Trump’s administration formally declined to extend the pact on Canada Day,starting a 10-year review processthat could leave CUSMA in limbo through 2036 rather than locking in a fresh 16-year term. “We think there are substantial issues,” U. S. Trade Representative Jamieson Greer said on Wednesday, adding the U. S. would continue to engage Canada and Mexico to fix the “agreement’s shortcomings and our trade deficits with these countries. ”Canada and Mexico had both submitted formal requests for extension in June. Dominic LeBlanc, the minister of intergovernmental affairs and Canada’s point minister on U. S. trade, said Canada is negotiating “from a position of strength. ”Steve Verheul, Canada’s former chief trade negotiator, said Monday he did not expect a deal before this fall’s U. S. midterm elections. CUSMA’s sunset clause requires a joint review every six years. Absent a unanimous agreement to extend, the deal still runs until July 1, 2036, with annual reviews in between. The only way out sooner is the termination clause, letting any party exit with six months’ notice, which Trump hasn’t ruled out. University of Toronto economist Joseph Steinberg, in a previous interview withThe Hub, called that scenario unlikely. “Canada doesn’t really have an option other than to remain at the negotiating table, however long it takes. ”The case for not rushing a new dealSteinberg argued Canada’s position is stronger than commonly understood. “We already have a hell of a lot better deal than Europe does today,” he said, pegging Canada’s effective tariff rate—even on autos—at 10 to 12 percent, comparable to what Europe accepted only after agreeing to blanket tariffs. “I see absolutely no reason for Canada to negotiate some kind of deal that’s like Europe,” he said, calling any blanket-tariff concession “really dangerous” for Canada’s economy. Goldy Hyder, president of the Business Council of Canada, agreed that Canada needs to get a good deal but warned that delay carries costs. Citing Canada’s exports to the U. S. falling 5. 8 percent over the past year—evidence, he argued, that the current 90 percent tariff exemption is the only thing preventing recession. “The ongoing instability results in delayed investment,” he said. Former Conservative MP and trade veteran Ed Fast argued, in an interview withThe Hub, for broadening, not narrowing, the talks into a “continental trade and security agreement” with enforcement provisions preventing unilateral tariffs. “I am not in favour of a quick renegotiation of CUSMA,” he toldThe Hub, though he acknowledged the cost. “It is impacting foreign investment flows into Canada. ”Canada has failed to uphold the agreement in key areas, per U. S. officialsCUSMA’s rules of origin were designed partly to keep non-market economies—chiefly China—from using Canada as a backdoor into North America. Canada’s recent conduct cuts against that. In January, Prime Minister Mark Carney signed a deal in Beijing cutting Canada’s 100 percent tariff on Chinese EVs to 6. 1 percent for 49,000 vehicles annually, growing 6. 5 percent each year to 70,000 by 2030, in exchange for China lowering canola tariffs. At the G7, a hot mic caught Carney telling Trump, “Less than 3 percent of our market, 49,000 cars…I thought you’d like that. ”However, Carney failed to mention the annual growth clause in the quota of EV cars Canada is looking to allow China to export in subsequent years. Industry Minister Mélanie Joly has since courted Chinese companies BYD, Chery, Geely, and Shanghai Launch about Canadian manufacturing, requiring majority Canadian ownership. Canada’s latest China deal also created a “new strategic partnership” spanning trade and public-safety cooperation that has drawn scrutiny from security analysts and at least one U. S. senator. Enforcement failures have also compounded U. S. -Canada trade relations. The United States Trade Representative (USTR) agency concluded at the start of June that Canada is “failing to effectively enforce” its forced-labour import ban. A previous CBC investigation reportfound that Canadian authorities intercepted just 50 suspect shipments since 2020 and formally barred only two—compared to more than 6,300 shipments the U. S. denied entry in 2024 alone under its own forced-labour law. Chinese EV companies also havedocumentedties to car parts being sourced from forced-labour camps in Xinjiang, which further complicates importing them if Canada is to honour CUSMA. The USTR cited Canada as a “dumping ground” for goods rejected by American border agents. Citing those findings, Washington has proposed a 10 percent tariff on Canadian goods not covered by CUSMA, pending hearings beginning July 7. Dairy is a third flashpoint, though less settled than commonly assumed, despite Ottawa late last yearenshrining into lawthat the Canadian government is unable to legally discuss eliminating the supply management system. A U. S. International Trade CommissionSection 332 factfinding report released in Mayfound that Canadian exports under a protein-isolate tariff line not formally regulated by CUSMA grew from 76 metric tons before the deal to more than 32,000 metric tons in the three years following implementation, with the USITC estimating most were dairy-based—a finding the National Milk Producers Federation and U. S. Dairy Export Council cited in calling on Washington to use the CUSMA review to close what they described as a loophole in Canada’s dairy export regime. Politics complicating the fileTalks collapsed dramatically last October after the Ontario government aired a Reagan-narrated anti-tariff ad in the U. S. during the World Series. Trump terminated negotiations and threatened to add an additional 10 percent tariff before Premier Doug Ford paused the campaign days later. The damage was already done, however, as final negotiations to lift Trump’s punitive tariffs were halted according to multiple American officials andPrime Minister Carney. The breakdown of negotiations on lifting punitive tariffs hit Ford’s Ontario, the province most exposed to auto and steel tariffs, hardest. Trump’s repeated “51st state” musings, meetings between his officials and Alberta separatists ahead of a fall referendum, and the broader tariff regime, have entrenched an “elbows up” posture domestically in the Canadian electorate, according to repeated national polling. Politicians have leaned into this impulse, despite the harm an impasse in hammering out a renegotiated trade deal with the U. S. may cause the Canadian economy. Carney insists no “realistic, fair deal” has been offered, even while pursuing a contradictory messaging—courting “Fortress North America” integration with Washington while also telling audiences in Beijing and Davos that Canada must build resilience against great-power coercion and rupture of the old order. U. S. Ambassador Pete Hoekstra toldThe Hubin an exclusive interviewlast September that the review could stretch into 2027, given the page-by-page negotiating process. Reasons for hopeDespite the impasse, there are reasons not to treat July 1 as a calamitous for Canada. A senior Trump administration official told theNew York Timeson Wednesday that Washington would like to conclude the deal “as quickly as possible,” and could push to have separate protocols with Canada and Mexico before the end of Trump’s term. The U. S. and Mexico have a round of talks scheduled for the week of July 20; U. S. -Canadian negotiations, though not yet begun in earnest, remain on the table. Business and political opinion on both sides of the border is pushing for resolution. David Paterson, Ontario’s trade representative in Washington,told CBClast Sunday that the consensus in Congress and the U. S. business community points toward a deal well before the fall midterms. “I would say we should really go the way of the consensus of business, and Congress, and everyone down here, that it would be really smart to arrive at a deal by Labour Day, before the midterms,” he said. “That gives us a chance for a lift of the American economy, it allows us to get investment flowing back onto things, and starting to move things forward. ”That instinct is supported by newly released polling data of both the Canadian and American electorate. AUniversity of Calgary School of Public Policy surveyconducted by Ipsos Public Affairs and Nanos Research in spring 2026 found that majorities on both sides of the border support deeper bilateral economic cooperation: 73 percent of Canadians and 58 percent of Americans back closer economic ties, while support for a trilateral free trade agreement reaches 88 percent in Canada and 56 percent in the U. S. Crucially, just eight percent of Americans describe Canada as a major economic challenge—the lowest of any country tested, far below China at 49 percent, Mexico at 16 percent, and the EU at 11 percent—suggesting the political ground for a deal exists. The economic cost of waitingThe Bank of Canada projects GDP will finish 2026 roughly 1. 5 percent lower than its pre-tariff trajectory, with about half the shortfall from reduced potential output. Deloitte’ssummer outlookfound that Canada technically didn’t quite slip into recession this year, but that the country’s economy is experiencing anemic growth and stagnation, citing CUSMA uncertainty as a leading culprit. The report also projects a paltry 0. 7 percent of growth for Canada’s economy in 2026. Goods exports to the U. S. fell 5. 8 percent in 2025, nearly offset by a 17. 2 percent jump elsewhere—though much of that gain reflects record gold shipments rather than diversification, and the U. S. share of Canadian exports fell to 71. 7 percent, its lowest since the early 1980s. A new BBC analysispointed to some of the main issues of Canada’s struggling economy previously covered byThe Hub: a technical recession in late 2025 and early 2026, inflation climbing to 3. 2 percent in May, youth unemployment at 13. 4 percent, and the largest household debt burden in the G7. Ontario auto-parts manufacturer James White told the BBC his firm’s sales are down 20 percent since the Trump tariffs began, with steel-derivative levies eating into investment in staff and equipment. RBC chief executive Dave McKay warned bluntly that “the capital is impatient, and it will move where it thinks they can get the most sure and fastest return. ”A recentHubanalysisfound that pattern already underway: the gap between Canadian capital invested abroad and foreign capital invested in Canada has widened from $100. 5 billion in 2014 to $828. 4 billion by 2025—more than half the country’s entire inward investment stock. Canada lost more than $1 trillion in net investment to other countries during the preceding Trudeau government, the largest capital exodus in the country’s modern history, leaving Carney’s team racing to reverse a decade-long drought just as the trade uncertainty threatens to deepen it further. Hyder said the uncertainty is paralyzing investment regardless of underlying resilience. “Rational actors are saying: time is my friend here,” he said, describing CEOs unwilling to seek board approval for billion-dollar bets given ongoing geopolitical tension, tariff uncertainty, and the unresolved CUSMA review. Without resolution, he warned, Canada risks an extended stretch of sub-1 percent growth. Graeme GordonGraeme Gordon is The Hub's Senior Editor and Podcast Producer. He has worked as a journalist contributing to a variety of publications, including CBC,…The deadline for the mandatory review of the Canada-United States-Mexico Agreement (CUSMA) has passed without a new deal, leaving U. S. tariffs in place and potentially extending the review process until 2036. Experts suggest that Canada must remain at the negotiating table, despite the risks of delayed investment and economic instability. The current tariff exemptions are seen as crucial for preventing a recession, while Canada’s recent trade agreements with China have raised concerns among U. S. officials. The ongoing uncertainty is projected to hinder Canada’s economic growth and investment inflows significantly. Canada’s exports to the U. S. fell 10 percent over the past year. The Bank of Canada projects GDP will finish 2026 roughly 1. 5 percent lower than its pre-tariff trajectory.