‘The North American economy will underperform until there's long-term certainty for investors’
The United States refused on July 1 to renew the Canada-United States-Mexico Agreement (CUSMA) for another 16 years, extending a period of trade uncertainty that the Bank of Canada has already linked to five straight quarters of declining business investment.
Under a mandatory six-year review clause, Canada, Mexico and the United States had to decide whether to extend the pact to 2042 or shift into annual reviews lasting until 2036, The Globe and Mail reported. Ottawa and Mexico City sought the longer extension. Washington declined.
Despite the non-renewal, nothing changes immediately for cross-border trade. The treaty remains in force, and the U.S. tariff exemption for Canadian and Mexican goods meeting CUSMA rules of origin stays intact, meaning supply chains built around that carve-out are not disrupted this quarter.
The U.S. has also not withdrawn from the agreement. Any party may exit with six months' notice, a longstanding provision, but whether President Donald Trump can do so without congressional approval remains legally unsettled and could ultimately reach the U.S. Supreme Court, The Globe and Mail noted.
Negotiations set to continue
With no long-term extension secured, the CUSMA enters a decade of annual reviews, though the three countries can still strike a deal at any point before the 2036 expiry. If none is reached by next summer, leaders will meet again on July 1, 2027, and annually after that.
Washington has opted to negotiate bilaterally rather than trilaterally, starting with Mexico. Two rounds of U.S.-Mexico talks have already covered automotive rules of origin, steel, aluminum, agriculture and labour, with a third round set for the week of July 20. Canada has not yet begun formal negotiations with Washington.
Intergovernmental Affairs Minister Dominic LeBlanc said bilateral arrangements are now his working assumption.
"I would expect that we'll have bilateral arrangements between Canada and the United States, between the United States and Mexico, sort of adjacent to the trilateral framework," he said, per The Globe and Mail.
Stakes for Canadian workforces
Bank of Canada Governor Tiff Macklem tied the drawn-out review directly to weakened investment last week, telling reporters, "There's uncertainty about what is going to play out. There is also uncertainty about exactly how the Canadian economy adjusts."
Sectors including steel, aluminum, automobiles, lumber and furniture continue facing U.S. tariffs of 25 to 50%, even though the Bank of Canada estimates the average effective tariff rate on Canadian goods at roughly 5.1%. Employers in these tariff-exposed industries face continued volatility in production and staffing needs.
Two dates warrant close attention from HR and workforce planners: the third round of U.S.-Mexico talks beginning July 20, and July 24, when Washington is expected to unveil a new global tariff regime under Section 301 of the U.S. Trade Act, potentially affecting supply-chain-linked employment across the country.
Stakeholder reaction
The Ontario Chamber of Commerce called for negotiators to remain at the table following the deferral. "Today's announcement confirms what businesses have been preparing for," said president and CEO Daniel Tisch, adding that "the North American economy will underperform until there's long-term certainty for investors."
Tisch went further, warning that the drawn-out review process carries its own economic cost. "Annual uncertainty is a tax on North American competitiveness," he said, noting that unclear rules cause businesses and investors on both sides of the border to pull back on hiring and capital spending.
Ottawa, meanwhile, struck a firmer tone. Minister LeBlanc said following the trilateral review meeting that he had reaffirmed "Canada's unwavering support for the CUSMA and its renewal," stressing that the deal underpins millions of jobs and gives Canadian employers secure, predictable access to their two largest trading partners. Global Affairs Canada noted that Canada-U.S. trade alone moves roughly $3.5 billion in goods and services across the border daily, underscoring how directly the outcome of these talks could touch Canadian payrolls and staffing plans.
Earlier, the Canadian Agri-Food Trade Alliance (CAFTA) joined nearly 160 North American agricultural organizations in calling for the renewal and strengthening of CUSMA.
“A predictable, rules-based CUSMA/USMCA is a strategic asset for North American food security, and new uncertainty would inject risk into supply chains across rural America,” said Michael Harvey, executive director of the Canadian Agri-Food Trade Alliance, in a statement emailed to HRD.
Canada is one of the United States’ top two agricultural export markets, buying more American agricultural goods than Japan, South Korea and the United Kingdom combined. The North American agri-food supply chain supports nearly 493,000 American jobs and $36 billion in wages, while helping sustain the broader $3.5 billion in goods and services traded across the Canada-U.S. border each day, the group noted.
“Keeping CUSMA/USMCA on stable, predictable footing is critical to North America’s competitive position and economic security,” said the CAFTA.
On June 2, Canada-U.S. Trade Minister Dominic LeBlanc sent a letter to United States Trade Representative Jamieson Greer and Mexico's Secretary of Economy Marcelo Ebrard, formally recommending that the three nations renew the continental trade pact, the Canadian Press reported.
Over a week later, a U.S. ambassador to Ottawa said that America needs a great deal from the world, and Canada is well-positioned to provide it. Speaking at the Eurasia Group summit in Toronto, U.S. Ambassador Pete Hoekstra told attendees that if Canada approaches upcoming trade negotiations with confidence, it can build a compelling case for deepening the partnership, CBC previously reported.
