Trade
Tom Cooney
- Expect annual CUSMA reviews rather than a quick 16-year renewal, but the agreement stays in force, preserving core trade stability.
- Bilateral deals gain importance: U.S.–Canada and U.S.–Mexico agreements will tackle tougher issues unresolved in the trilateral framework.
- U.S. pushing stricter rules: Higher North American content requirements, tighter supply chain controls, and digital trade priorities will shape negotiations.
Q: What’s your outlook for CUSMA?
Tom: While the CUSMA review could determine whether the agreement is extended for another 16 years, my base case is that it won’t be quickly renewed. Instead, we likely shift into an annual review cycle. Importantly, that doesn’t mean disruption, as CUSMA should remain in place, continuing to provide trade stability and duty free access for most goods.
Q: How will the trade framework evolve from here?
Tom: I believe we’ll see bilateral agreements layered on top of CUSMA, specifically U.S.–Canada and U.S.–Mexico deals. These will tackle more targeted issues like dairy, lumber and digital trade that are difficult to resolve in a trilateral format.
Q: Where do these bilateral talks stand?
Tom: U.S.–Mexico discussions are further along and could conclude this year. U.S.–Canada talks have lagged, reflecting ongoing political and trade tensions and Canada’s perception of leverage following the recent U.S. Supreme Court decision on tariffs, which curtailed the use of certain emergency tariff authorities reshaping the negotiating dynamic.
Q: What are the key U.S. priorities?
Tom: Expect a push to strengthen Regional Value Content requirements — rules that determine how much of a product must be produced within North America to qualify for duty free treatment, currently at 75% in key sectors like autos. The U.S. is seeking to raise this North American content requirement above 80%. Further, the U.S. also seeks to ensure that at least 50% of the content of a vehicle built in North America is of U.S. origin. The existing CUSMA pact has no minimum U.S. content requirement, so this would be new. The U.S. also wants to tighten restrictions on Chinese investment in supply chains and minimize taxation and other restrictions on digital trade. Labour enforcement and critical minerals cooperation are also central themes.
Q: What happens if the agreement isn’t renewed at the review?
Tom: It is important to understand that if all three countries don’t agree to extend CUSMA at the July 2026 review, the agreement doesn’t terminate. Instead, it moves into annual reviews until 2036, giving policymakers time to negotiate changes while keeping the deal in force. The fact that CUSMA would remain in force even if forced into annual reviews is important because it guarantees that about 85%–90% of Canadian exports still enter the U.S. duty free.
Q: What’s the bottom line for markets and businesses?
Tom: CUSMA survives without necessarily being embraced. It provides a stable foundation, while bilateral deals evolve at different speeds and are layered on top of the CUSMA foundation. As the July review proceeds, expect more public brinkmanship and volatility in headlines. But the most likely outcome is continuity with incremental change, not wholesale disruption, despite noise you may hear.
*Does not include U.S. tariffs on furniture, cabinets and vanities (25%), heavy trucks (25%), buses (10%) and transshipped goods (up to 40%), nor the June 1 U.S. proclamation to reduce tariffs on some steel and aluminum derivative products, including certain types of agricultural machinery and residential heating, air conditioning and ventilation equipment to 15% from 25% previously.
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