Ottawa presses Washington for structure and predictability as North America’s trade pact slides into an unprecedented decade of annual reviews, leaving tariff relief for steel, aluminum, autos and lumber to a parallel bilateral track
Peacock Tariff Consulting Trade Desk
OTTAWA, July 5, 2026
Four days after the United States formally refused to renew the Canada-United States-Mexico Agreement, Canada’s lead minister on the file has acknowledged that the country is negotiating its most important commercial relationship without a map. In an interview with The Canadian Press published Sunday, Canada-U.S. Trade Minister Dominic LeBlanc conceded that Ottawa still does not know how the annual review process that Washington has now triggered will actually work, when it will convene, or what the Americans intend to put on the table.
“We don’t have any more predictability about the annual review process because this is somewhat uncharted territory. It’s not typical for this kind of agreement,” LeBlanc said in the telephone interview, conducted Friday, describing the mood in Ottawa in the aftermath of the July 1 joint review meeting at which the United States declined to extend the pact.
The admission crystallizes the central problem now facing Canadian exporters, importers and policymakers: the trade agreement that shields roughly 90 per cent of Canada’s exports to the United States from tariffs remains legally in force, but its long-term future has been placed on a rolling one-year clock, and nobody, including the ministers responsible, can yet say what the annual check-ups will look like.
LeBlanc said he pressed U.S. Trade Representative Jamieson Greer directly on how Washington intends to structure the discussions, a request he made jointly with Mexican Economy Secretary Marcelo Ebrard during the July 1 meeting. “There wasn’t an answer at the meeting. It was agreed that we would continue the conversation over the coming weeks,” the minister said. “At the conclusion of the conversation, we suggested bringing some structure and rigour to the review process the Americans have proposed.”
A Deadline Passes Without a Deal
The July 1 meeting of the Free Trade Commission was the first mandatory six-year joint review required under Article 34.7 of CUSMA, the trilateral agreement that replaced NAFTA in 2020. Under the pact’s so-called sunset mechanism, the three parties had until that date to confirm whether they wished to renew the agreement for a further 16-year term running to 2042. Canada and Mexico both formally signalled in advance that they wanted the extension. The United States did not.
“The United States did not agree to renew (CUSMA) in its current form,” Greer wrote in a statement reported by CTV News. “As a result, (CUSMA) is not renewed.” Greer added that Washington “will continue to engage with Mexico and Canada to address the agreement’s shortcomings and our trade deficits with these countries,” while stressing that “the agreement remains in force pending resolution of these issues or until the agreement’s termination.”
The decision was widely anticipated. U.S. President Donald Trump had repeatedly disparaged the deal he himself signed during his first term, and after the G7 summit in France in June he mused publicly that he would rather leave CUSMA unsigned and see it terminated. Prime Minister Mark Carney, speaking to reporters in Kuujjuaq, Quebec, on the eve of the review, downplayed expectations, saying he anticipated “a constructive exchange” but “wouldn’t expect any drama” and was “not looking for (his) pen.”
Former senior White House trade adviser Kelly Ann Shaw went further, telling CTV News Channel that July 1 amounted to “a boring day when it comes to the trade agenda” precisely because the American refusal had been telegraphed for weeks. But the procedural anticlimax masks a consequential shift in the architecture of North American trade.
In a statement issued after the meeting, LeBlanc reiterated Canada’s preference for renewal and set out Ottawa’s priorities for the talks now beginning. “We agreed on the importance of continuing our discussions and identifying ways to ensure trade and investment frameworks between Canada, the United States and Mexico continue to support North American prosperity and competitiveness,” he said. “For Canada, this includes substantive discussions with the United States on addressing sectoral tariffs on Canadian steel, aluminum, autos and lumber.”
How the Sunset Clock Now Runs
The mechanics matter enormously for businesses trying to plan. Because the United States withheld its consent, CUSMA was not renewed to 2042. Instead, the agreement enters a renewable annual review process that can run for up to a decade. If, at any point during those yearly reviews, all three parties agree to the 16-year extension, the clock resets. If no agreement is reached, CUSMA expires on its scheduled sunset date in 2036.
Trade lawyers at McMillan LLP, in a client bulletin published July 3, emphasized that the immediate practical effect is limited. “The July 1 review preserves the status quo,” the firm wrote, noting that the broad exemption from U.S. tariffs for goods meeting CUSMA rules of origin is unaffected by the passing of the deadline. Any party may still withdraw from the agreement entirely on six months’ notice under Article 34.6, though no U.S. official has signalled an intention to do so, and the agreement would remain in force for the other two parties even then.
What has changed is leverage. The annual reviews hand Washington a recurring, institutionalized platform to press for concessions on the long list of grievances it has catalogued against Canada, from dairy quotas to digital policy. As McMillan put it, the U.S. decision “signals the start of what is likely to be a prolonged renegotiation process” in which the Americans can raise market access, trade balances and perceived structural shortcomings of the deal year after year, with the 2036 expiry date looming as the ultimate pressure point.
Steve Verheul, Canada’s former chief trade negotiator and the architect of the original CUSMA bargain, told a BMO-hosted event last week that the current dynamic bears little resemblance to the NAFTA renegotiation of 2017 and 2018. “We’re looking at a very different kind of discussion than we had in President Trump’s first term. At that point we were trying to negotiate 34 chapters of an agreement,” he said. “Now we’re looking at pursuing a number of bilateral irritants that the U.S. is trying to reach some kind of accommodation on. And there’s a handful of trilateral issues that are also under consideration, but most of, if not all of, the agreement is going to remain as it is now.” Verheul said he expects negotiations to run past the U.S. midterm elections this fall, and possibly into 2027.
Two Tracks: Trilateral Reviews and Bilateral Bargaining
Complicating the picture, the annual review process is only one of two negotiating tracks now in motion. Canada and Mexico are each pursuing separate bilateral discussions with Washington aimed at unwinding the sectoral tariffs that sit outside CUSMA’s protective umbrella: the section 232 national security levies of 25 per cent on autos, 50 per cent on steel and aluminum, and 10 per cent on softwood lumber, according to figures reported by Reuters.
Asked how Canada will decide which issues belong in the trilateral review and which in the bilateral channel, LeBlanc acknowledged in the Friday interview that he does not yet have all the answers. “One of the difficulties since Mr. Trump arrived is precisely these uncertainties,” he said. “The goal of our conversations with the Americans is, obviously, to reduce the sectoral tariffs that are hurting the economies of all three countries and, at the same time, to try to bring some predictability or some rigour to the conversations on the CUSMA review.”
There are early signs of movement on the bilateral track. LeBlanc said that on the same day as the joint review, Deputy U.S. Trade Representative Jeffrey Goettman contacted Canada’s chief negotiator, Janice Charette, “to discuss the agenda for the next bilateral discussions” expected in Washington in the coming weeks. LeBlanc said he and Greer have agreed to resume their own direct talks soon. “I remain confident that we’ll reach a bilateral agreement and that we’ll reduce the uncertainty surrounding the CUSMA review, but we’ll do the work over the summer to put ourselves in that position,” he said.
Mexico is moving on a similar schedule, and arguably faster. Ebrard said Mexico expects to host a U.S. delegation during the week of July 20 for its own bilateral negotiations. Canada has not yet announced a date for an equivalent session. In a video posted to social media after the review meeting, Ebrard said the road map for the annual review has yet to be defined, adding, in Spanish: “We’re not in a hurry, but we’re also not interested in having uncertainty.”
The twin-track structure has stirred concern among some observers that Washington will seek to play Canada and Mexico off against each other, extracting concessions bilaterally that weaken the two countries’ common front in the trilateral review. A senior Trump administration official sharpened those worries by telling reporters that Mexico had been constructive on trade even amid disputes while placing Canada “in a different position,” accusing Ottawa of failing to address non-tariff barriers the U.S. has raised, according to CBC News reporting cited by Wealth Professional.
LeBlanc pushed back on the divide-and-conquer thesis. “My conversation on July 1 was encouraging in the sense that all three countries recognized the importance of having a North American economy that will be competitive with other economic blocs in other parts of the world,” he said, pointing to shared interest in integrated supply chains. He noted that the same fear circulated during the original CUSMA negotiation. “That didn’t happen,” he said. “We have issues in common with Mexico, just as there are bilateral issues that are different.”
Washington’s List of Grievances
Any business trying to anticipate where the annual reviews will bite should start with the U.S. Trade Representative’s 2026 National Trade Estimate report, which reads as a preview of the American negotiating agenda. As summarized by Reuters, the complaints against Canada span nearly a dozen policy areas.
Dairy and supply management top the list. Washington objects to Canada’s production quotas and tariff-rate quotas for dairy, poultry and eggs, under which over-quota imports can face tariffs exceeding 200 per cent, and it has long complained about how Ottawa administers the dairy import quotas created under CUSMA itself. The Carney government has said repeatedly that supply management is not on the table, setting up one of the clearest collision points in the talks ahead.
Procurement is a second flashpoint. The U.S. says Canada’s Buy Canadian initiative, which gives preference to Canadian firms and domestically produced steel, aluminum and wood in major federal contracts, discriminates against American suppliers, and it objects to provincial measures in Ontario, Quebec and British Columbia that restrict U.S. bidders. Provincial liquor boards draw similar fire, particularly after several provinces pulled American alcohol from shelves in retaliation for U.S. tariffs. Ontario Premier Doug Ford has refused to restore U.S. liquor until tariffs are lifted or a new deal is reached.
The remainder of the list runs from Canada’s digital services tax, which Ottawa pledged to repeal but had not formally eliminated by the end of 2025, to the Online News Act, streaming contribution rules, a seed registration system the U.S. calls slow and cumbersome, intellectual property enforcement concerns that keep Canada on the USTR Watch List, Alberta’s electricity market rules, and the Patented Medicine Prices Review Board’s approach to benchmarking drug prices. Washington has also said Canadian enforcement of the ban on goods made with forced labour remains insufficient, a complaint Ottawa moved to address in June by introducing Bill C-35 to strengthen its forced labour import regime.
Ottawa Extends Its Tariff Relief Lifeline
While the diplomatic machinery grinds, the Canadian government has quietly extended the domestic relief measures that have become a lifeline for import-dependent manufacturers caught in the crossfire of the 18-month-old trade war. Canada’s counter-tariffs remain in place on U.S. vehicles and on approximately C$15.6 billion worth of American steel and aluminum products, and the remission regime that softens their impact on Canadian businesses was due to lapse at the end of June.
On July 1, amendments to the United States Surtax Remission Order (2025) published in the Canada Gazette extended horizontal relief that had been set to expire on June 30, 2026 for a further year, to July 1, 2027. According to McMillan’s analysis, the extended relief covers aluminum and steel goods and motor vehicles used for public health, health care, public safety and national security purposes; aluminum goods used in manufacturing, processing, food and beverage packaging or agricultural production; and aluminum and steel goods used in manufacturing motor vehicles, aerospace products and related parts.
The amendments also extended remission to a range of steel mill products determined not to be made in Canada and added a substantial number of goods to the eligibility list. A parallel amendment to the Steel Derivative Goods Surtax Order extended the exemption for automotive and aerospace inputs to July 1, 2027. Remission orders, once granted sparingly and case by case, have become a central tool of Canadian trade policy, with sector-, product- and company-specific relief available where domestic sourcing alternatives do not exist or where duties would cause significant economic harm.
Business Reaction: Fatigue and Frayed Ties
For Canada’s small and medium-sized businesses, the outcome of the review lands as one more extension of an uncertainty that has already reshaped balance sheets and supply chains. Dan Kelly, president of the Canadian Federation of Independent Business, said small business owners are frustrated that the tariff and trade impasse keeps delaying “real decisions on investment and growth.” Protecting Canada’s existing CUSMA exemptions, he said, “must remain government’s top priority.”
CFIB research reported by Wealth Professional suggests owners would nonetheless rather wait than settle. Sixty-four per cent of small firms back taking the time needed to secure the best possible terms, against just 16 per cent who would accept a quicker but weaker agreement. The same research charts the damage already done: 75 per cent of small and medium-sized enterprises said in April 2026 that the tariff fight had strained relationships with U.S. partners or clients, up from 49 per cent in March 2025, and only 40 per cent now consider the United States a reliable trading partner.
The strain is redrawing trade maps. Nearly half of SMEs that trade with the U.S., some 48 per cent, have shifted to non-U.S. suppliers or customers, with most turning to the domestic market and smaller shares looking to Asia (40 per cent) and the European Union (39 per cent). Kelly cautioned that diversification has hard limits: business owners will never fully replace a market of 340 million people sitting on Canada’s border, he said, which is why any deal has to “hold for years to come” for owners to trust it.
Compliance costs are a recurring complaint of their own. Corinne Pohlmann, CFIB’s executive vice-president of advocacy, said unclear rules of origin and heavy administrative burdens push some small firms to consider simply paying tariffs rather than using CUSMA at all. She urged Ottawa to bring small business voices into the talks and to secure “a deal that is clear, accessible and works for businesses of every size.”
The Economic Stakes
The numbers underline why the stakes are so high, and why the ambiguity is so corrosive. Annual trilateral commerce among the three economies runs into the trillions: CBC News has put the figure above US$1.9 trillion, while Reuters estimates it at about US$1.6 trillion. For Canada, CUSMA compliance is the difference between tariff-free access and exposure to the sweeping levies Trump has imposed since returning to office, with close to 90 per cent of Canadian exports to the U.S. currently shielded by the agreement’s rules of origin.
Trade deficits sit at the centre of the American position. A senior administration official told reporters the president’s primary concern is the U.S. goods gap with its neighbours, which reached US$197 billion with Mexico and US$48.3 billion with Canada in 2025, according to Reuters. Much of the Canadian shortfall reflects U.S. imports of Canadian crude oil, a structural feature of the energy relationship rather than evidence of unfair trade, but the political salience of the headline number is undiminished in Washington.
Meanwhile, the sectoral tariffs that fall outside CUSMA’s protections continue to bite. Steel and aluminum shipments face 50 per cent duties, automobiles 25 per cent, and softwood lumber 10 per cent under the section 232 national security regime, which applies to Canadian goods even when they meet CUSMA rules of origin. Canadian manufacturing output has borne the brunt, with economists noting that energy exports have been carrying the broader economy through the tariff shock.
What Importers and Exporters Should Do Now
For Canadian businesses, the practical takeaways from the past week are more concrete than the diplomatic fog might suggest. First, nothing about the July 1 outcome changes tariff treatment today: CUSMA-compliant goods continue to enter the U.S. tariff-free, and Canada’s counter-tariff and remission architecture rolls forward for another year. Companies that have deferred certification of origin paperwork because of doubts about the agreement’s future are, in effect, leaving the deal’s protections on the table.
Second, the newly extended and expanded remission orders reward attention. McMillan advises businesses in affected sectors to confirm tariff classifications and origin determinations, review customs valuation methodologies for intercompany and cross-border transactions, assess eligibility under the expanded surtax relief, and ensure audit-readiness in light of increased enforcement activity by the Canada Border Services Agency. Firms importing steel, aluminum or automotive and aerospace inputs from the U.S. should re-check the amended eligibility lists published July 1, which now cover a substantially broader range of goods.
Third, the medium-term planning horizon has genuinely changed. An agreement that businesses once treated as settled infrastructure until 2036 is now subject to annual renegotiation pressure, and the possibility of substantive amendments emerging from either the trilateral reviews or the bilateral talks is real. Scenario planning that once seemed alarmist, including modelling the loss of CUSMA preferences in specific product lines, now belongs in mainstream risk management, particularly for sectors named in the USTR’s grievance list: dairy and agri-food, digital services, procurement-dependent contractors, and any business reliant on provincial alcohol distribution or pharmaceutical pricing frameworks.
The Road Ahead
The calendar for the rest of the summer is starting to fill in. Mexico hosts American negotiators the week of July 20. Canada-U.S. bilateral discussions are expected in Washington in the coming weeks, with LeBlanc and Greer agreeing to meet “over the course of, I would say, the next few weeks,” as the minister put it. The structure of the annual review itself, the very thing Ottawa asked Washington to define, remains an open question that the parties have agreed to keep discussing.
Mexican President Claudia Sheinbaum has noted that the three countries can agree to the 16-year extension at any point over the next decade, meaning the door to restoring long-term certainty never fully closes. But few in Ottawa expect a quick resolution. Verheul’s forecast, that talks will run past the U.S. midterms and possibly into next year, is increasingly the consensus view among trade watchers.
For now, Canada’s strategy is to keep the two tracks moving in parallel: chip away at the sectoral tariffs bilaterally while trying to impose discipline on an annual review process that Washington controls and has yet to define. It is an uncomfortable position for a country whose economy depends so heavily on predictable access to the American market. As LeBlanc’s own words made plain this weekend, the agreement survives, the exemptions hold, and the uncertainty deepens. The sunset clock is running, and only Washington knows how it intends to use the years on it.