Exactly one month from now, Canada’s trading relationship with the United States could face a major disruption. By July 1, representatives of Canada, the United States, and Mexico must meet to decide whether to agree to another 16 years of the Canada-United States-Mexico Agreement (CUSMA), opt for annual reviews, or see one or more parties withdraw with six months’ notice.
Most media outlets downplay this as a “technical review,” but the stakes are far higher. On July 1, the United States could announce its withdrawal from CUSMA, which would take effect by the end of this year. The best-case scenario would be an annual review, but that would still introduce ongoing uncertainty.
The CUSMA/USMCA agreement came into effect on July 1, 2020, replacing NAFTA, which had been in place since 1994. Unlike its predecessors, CUSMA includes built-in review mechanisms. Any party can walk away from the deal by providing six months’ written notice. If the US withdraws on July 1, Canada would still have a free trade deal with Mexico, but that offers little comfort given that in 2024, Canada’s exports to the US were US$419.7 billion compared to just US$6.1 billion to Mexico.
Alternatively, the US could push for annual reviews instead of a 16-year extension. This would add deep uncertainty to the Canadian economy. Donald Trump’s trade negotiator, Jamieson Greer, has expressed frustration with Canada’s stance, including retaliation such as removing American alcohol from shelves and anti-American campaigns. “It’s hard to see necessarily where that ends,” Greer said of the fractured relationship.
With one month to go, Canada faces a critical crossroads. Either outcome—withdrawal or perpetual review—would be detrimental to the economy.
