What’s Next for CUSMA as Trump Administration Rejects Renewal?

Canada’s Prime Minister Mark Carney and U.S. President Donald Trump speak at the G7 working luncheon, during the G7 summit in Evian-les-Bains, France, on June 16, 2026. The Canadian Press/Christopher Katsarov

News Analysis

The United States has rejected the renewal of the North American free trade agreement, leaving its long-term future uncertain and setting the stage for continued negotiations between the three partners.

The outcome of the July 1 review of the Canada-United States-Mexico Agreement (CUSMA) didn’t come as much of a surprise. U.S. President Donald Trump suggested in recent weeks he would not renew the deal, and the United States and Mexico have a third round of bilateral negotiations on CUSMA planned for later this month.

The United States Trade Representative (USTR), which is leading the negotiations, has yet to announce a first round of formal bilateral talks with Canada.

According to Canadian officials, progress has continued despite the lack of formal talks. Prime Minister Mark Carney said earlier this week Canada is working through “technical” trade issues with the United States while “big challenges” remain on the issue of U.S. sectoral tariffs on steel, aluminum, autos, and lumber.

With the United States formally announcing it doesn’t want to renew CUSMA, the trade deal does not unravel. Pending no developments, the agreement remains in place for the next 10 years, with annual reviews like the one that just took place on July 1.

At any time during this period, the parties could decide to extend the agreement for another 16 years, as is the stated wish of Canada and Mexico. The agreement also has a clause that allows one party to withdraw from CUSMA after providing six-months’ notice. The deal would remain in force for the other parties.

The USTR issued a statement on July 1 to explain the U.S. administration’s stance on CUSMA, saying it opposes a renewal “in its current form.”

“The United States will continue to engage with Mexico and Canada to address the Agreement’s shortcomings and our trade deficits with these countries,” the statement noted.

The USTR says the U.S. goods trade deficit with Canada totalled US$46.4 billion in 2025, a drop of 25 percent over the previous year. Meanwhile, the U.S. deficit with Mexico in goods trade was US$196.9 billion over the same period—a 14.8 percent increase over 2024.

Canada-U.S. Trade Minister Dominic LeBlanc participated in the July 1 joint review, conducted virtually, and said he “reaffirmed Canada’s unwavering support for the CUSMA and its renewal.” LeBlanc said discussions around ensuring North American competitiveness must include “substantial” talks on U.S. sectoral tariffs.

“Canada approaches these discussions from a position of strength and with the goal of preserving and strengthening one of the most successful trading relationships in the world,” LeBlanc said in a statement.

Trade talks between Canada and the United States were frozen from November to March. Trump ended negotiations in October after the Ontario government ran an anti-tariff TV ad campaign in the United States.

At the time, Ottawa and Washington were making progress on a deal on steel, aluminum, oil, uranium, and auto parts, according to U.S. Ambassador to Canada Pete Hoekstra.

The outline of the deal was made when Carney met Trump at the White House in early October 2025.

Canada made two key concessions before talks advanced to that stage. In June 2025, Ottawa pledged to repeal the Digital Services Tax (DST), which the Trudeau government had introduced to target major U.S. technology companies. The tax was formally repealed with the passage of the Budget 2025 Implementation Act in March.

Canada also lifted most of its counter-tariffs on U.S. goods in September 2025, just weeks before Carney’s Oval Office meeting.

Ottawa recently signalled another potential concession when it asked the Canadian Radio-television and Telecommunications Commission (CRTC) to review its decision to triple the levy on major online streaming services, including Netflix and Paramount, to support Canadian and indigenous content.

The Liberal cabinet’s directive to the CRTC came one day after LeBlanc met United States Trade Representative Jamieson Greer in Washington, D.C.

Hoekstra has called for the Online Streaming Act, which underpins the CRTC’s decision, to be repealed entirely.

The DST and the Online Streaming Act are among the measures that Greer’s office has identified as trade barriers. Others include Canada’s supply management system for dairy and poultry, as well as provincial liquor board restrictions on U.S. alcohol.

It remains to be seen whether Canada will have to make further concessions to advance the talks and achieve its primary objective of eliminating U.S. sectoral tariffs. That may prove difficult, as Washington has insisted the tariffs must remain in place to support its efforts to reshore manufacturing.

Canada’s former chief negotiator for CUSMA, Steven Verheul, said this week he doesn’t see a breakthrough before the U.S. midterm elections, unless the administration wants to tout a win before the polls.

Conservative MP Shuv Majumdar, recently appointed as his party’s critic on Canada-U.S. trade, said the “wait-and-see” approach of the government lacks urgency amid prolonged uncertainty.

“Canada requires a serious government equal to the urgency and intensity of this moment: one that secures North American market access for Canadian workers, strengthens our industrial base, advances major projects, unlocks investment, and negotiates with purpose,” he said on social media on July 2.

Carney said on June 30 that Canada is ready to negotiate improvements to CUSMA.

“We’re ready to continue discussions but it will take more time, and that has been obvious for a long time,” Carney said.