Canada is on the verge of vital negotiations. This important trade agreement was first negotiated in the first Trump administration to replace the North American Free Trade Agreement (NAFTA). Canadian officials have been purposely fumbling their optics as they prepare for the agreement review coming next year. Strategically, this move is designed to strengthen their hand going into negotiations.
The urgency of these negotiations has been underscored by recent discussions between Canadian Prime Minister Justin Trudeau and former President Donald Trump. In a subsequent phone call, Trump reportedly promised Trudeau that dropping certain retaliatory tariffs would strengthen the trade talks. This was an important step in allowing CUSMA related discussions to move forward. This development indicates a potential shift in U.S.-Canada trade relations as both countries aim to navigate the complexities of their economic partnership.
As recently noted by Dominic LeBlanc, Canada’s Minister of Intergovernmental Affairs, CUSMA is vital for Canada’s economic recovery. He made clear that the negotiations with the Trump administration are focused on reaching an agreement bilaterally. This deal would match up exporters with importers by lowering costly, prohibitive sectoral tariffs for targeted industries.
LeBlanc told TP that he had no shortage of legal arguments at the ready to bolster their case. He’s looking to these points to help them win the bilateral deal.
Right now, U.S. tariffs on steel, aluminum, automobiles and copper are severely disrupting Canadian industries that CUSMA is meant to protect. LeBlanc emphasized that aligning Canada’s tariff strategies with recent American decisions was crucial in positioning the nation favorably for upcoming negotiations.
“It was important to align ourselves with that American decision,” he remarked. “That would take pressure off the strategic sectors of our economy that are the most integrated with the United States.”
In a move welcoming to the U.S., Canada agreed to remove certain retaliatory tariffs on U.S. exports. This action fits like a glove with the American tariff exemptions for goods that CUSMA covers. Proponents explained that this decision would be a clear communication to the U.S. that Canada is still an important trade partner.
Well, one very high-level representative—U.S. Ambassador to Canada Pete Hoekstra, for instance, is concerned. He argues that Canada’s targeting of CUSMA-compliant American goods could undermine CUSMA’s long-term survival. As we near the end of the review period, both parties know what’s at stake and are watching closely.
LeBlanc explained that the groundwork laid in conversations over the coming months will be critical to ensuring a productive dialogue when detailed CUSMA review discussions commence with both U.S. and Mexican representatives.
We have to begin the hard work of doing that work in the weeks and months to come. It’ll get us ready for the deeper CUSMA review discussions we plan to have with them and the Mexicans.
As Canada heads into these negotiations, one thing is very clear—retaining a positive relationship will be necessary. LeBlanc stressed, “Our responsibility as the government is to get the best deal we can for Canadian businesses and Canadian workers.”
The new negotiations will set the terms for our trade relations for years to come. More importantly, they’ll create an economic environment for both industries that depend on cross-border commerce. The outcome will depend on how well Canada can navigate its strategy amidst changing U.S. policies and tariffs.
