American industry leaders couldn’t have made their message to U.S. President Donald Trump any clearer.
Over three days of public hearings in Washington, nearly 150 speakers representing every major sector of the economy depicted the Canada-U.S.-Mexico Agreement (CUSMA) as essential to the success of their businesses.
Yet even while the hearings were unfolding, purportedly to give the White House advice on whether to extend CUSMA when it comes up for review in 2026, Trump and his trade representative floated letting the agreement expire or withdrawing from it altogether.
After a year of Trump posturing about Canada becoming the 51st state, disparaging his northern neighbour as “nasty” on trade, and slapping tariffs on many of its exports, perhaps it comes as no surprise that he’d threaten to tear up the very free-trade agreement with Canada and Mexico that he signed in his first term.
There are, broadly speaking, two schools of thought about what’s behind this latest Trump threat: That it’s leverage to get concessions from Canada and Mexico in renegotiating some elements of CUSMA, while keeping the agreement fundamentally intact; or that there’s a serious plan to scrap it, aimed at forging new, separate trade deals with each country that skew far more favourably toward the U.S.
Some industry leaders who believe it’s about leverage say there’s no need to panic over Trump’s musings even with the crucial review of CUSMA looming in the new year.
Goldy Hyder, president and CEO of the Business Council of Canada, is focusing on the White House describing withdrawal from the trade deal as a possibility.
On the second day of high-stakes consultation hearings in Washington, several U.S. business leaders spoke in defence of CUSMA as President Donald Trump threatens to exit the trade deal early.
“It’s also possible the Toronto Maple Leafs might win a Stanley Cup one year, but it doesn’t mean it’s going to happen anytime soon,” Hyder told CBC News’s Katie Simpson in Washington.
Hyder, whose organization represents the biggest corporations in Canada, says the messages from the White House strike him as classic negotiating tactics.
“There is a process here where we’re supposed to sit down and talk about how to make [CUSMA] better,” he said. “The process is our friend here. Let’s just be a part of the process and not get distracted by the noise.”
Consumer Brands Association, which represents the biggest U.S. companies in the production and marketing of household goods, strongly supports CUSMA for allowing them to make and sell products in all three countries tariff-free.
The association’s vice-president Thomas Madrecki says “constructive engagement” with the White House is what’s needed to keep renewal of the agreement on track.
“The Trump administration is a deal-making administration, right? They want deals,” Madrecki said after testifying at the hearing.
“This is their gold-standard agreement, and I think that there’s a clear pathway towards renewal, provided that all the sides actually put their heads together and start working.”
Others say they believe Trump really does want to walk away from the agreement, or at least transform it substantially.
Ben Rowswell, a former Canadian diplomat and now a consultant with Catalyze4, a strategic advisory firm, says there is a substance to Trump’s threats that Canada needs to take very seriously.
CUSMA a ‘dead man walking’
“This likely is the end of CUSMA,” Rowswell told CBC News Network’s Andrew Nichols. “I think it’s a dead man walking.”
Rowswell says Canada needs to be prepared to abandon the existing agreement to get a better deal.
“The worst-case scenario for Canada is not the end of CUSMA. The worst case would be for us to accept some diminution of our sovereignty in order to maintain trade relations,” he said.
This week, U.S. President Donald Trump suggested that he could let the Canada-U.S.-Mexico Agreement (CUSMA) expire next year. Former Canadian diplomat Ben Rowswell says it isn’t the end of CUSMA that’s the worst-case scenario — he says that would be accepting a reduction of our sovereignty ‘to maintain trade relations.’
Rowswell says he believes Trump’s position on the agreement is not motivated by an economic rationale but by a desire to wield power over nations he perceives as vulnerable to U.S. infuence.
If true, that could go a long way to explaining the disconnect between American businesses so wholeheartedly urging Trump to keep CUSMA going and the administration so casually talking about killing it.
But Diamond Isinger, who served as special adviser on Canada-U.S. relations to then-prime minister Justin Trudeau, says there’s a long way to go until the July 1, 2026, deadline for each country to declare whether they want to renew or renegotiate CUSMA.
“I think it’s premature to suggest that anything is dead,” Isinger said.
She says there were also threats that the U.S. would withdraw from the North American Free Trade Agreement when it was being renegotiated in Trump’s first term, yet the deal for CUSMA still emerged.
However, she says Canada should be prepared for the Trump administration to push for breaking CUSMA up into separate agreements with Canada and Mexico.
Taking questions from reporters on Wednesday, U.S. President Donald Trump said he would either let the free-trade deal with Canada and Mexico expire or pursue a different agreement with the two countries. (Trump said the agreement expires in about a year, which isn’t correct. The three countries must declare by July 1, 2026, whether they want to renegotiate or renew the agreement, which is due to expire in 2036.)
“I think we have to be realistic and frank,” Isinger said. “The U.S. government is going to set so many of the parameters around what’s even in the realm of the possible.”
Much about how the CUSMA review process will play out in 2026 is unclear, largely because it’s never been done before.
“Is this a full-fledged renegotiation with really nitty-gritty technical details being worked out at the table? Is this sort of a broad political discussion between leaders?” Isinger said. “All that remains to be seen.”
Six months’ notice
What is clear from the text of the agreement is that any of the three countries can announce its intention to withdraw at any time, with six months’ notice.
Such notice could be used as a bluff to pressure the other countries on specific issues in the renegotiations.
You could tell what some of those issues could be from the hearings in Washington. While U.S. industry groups voiced strong support from CUSMA, some sectors raised strong concerns that Canada and Mexico are at times skirting the intent of the agreement.
Those concerns include the two countries allowing steel, vehicle parts and kitchen cabinets produced in China to get into the U.S. market tariff-free through the CUSMA back door.
Those concerns may not be enough reason for Trump to scrap the agreement altogether, but they could provide incentive for his administration to dangle the threat, especially if the U.S. believes the two countries aren’t doing enough to fix things.
