U.S. refusal to renew North America’s trade pact at its mandatory six-year review pushes CUSMA into a decade of annual check-ups – and leaves the tariff shield covering most Canadian exports riding on negotiations Ottawa has not yet formally begun.
By the Canada Trade Desk | Peacock Tariff Consulting
OTTAWA – July 3, 2026 – The United States has formally declined to renew the Canada–United States–Mexico Agreement, using this week’s mandatory six-year review of the continental trade pact to withhold the consent that would have locked the deal in place until 2042. The decision, announced Wednesday by U.S. Trade Representative Jamieson Greer following a virtual meeting of the three countries’ trade representatives, does not suspend or terminate the agreement known in Canada as CUSMA. But it shifts North America’s most important commercial arrangement into a legally more fragile phase of annual reviews that could stretch to the pact’s scheduled expiry on July 1, 2036 – and it confirms that the tariff protections shielding the vast majority of Canadian exports to the United States now depend on the outcome of negotiations that, for Canada, have not yet formally started.
“The United States did not agree to renew the USMCA in its current form,” Greer said in a statement issued July 1, using the deal’s American name. “As a result, the USMCA is not renewed.” The statement said Washington “will continue to engage with Mexico and Canada to address the Agreement’s shortcomings and our trade deficits with these countries,” while confirming that “the Agreement remains in force pending resolution of these issues or until the Agreement’s termination.”
The announcement surprised almost no one in Ottawa. U.S. President Donald Trump had telegraphed the outcome for weeks, telling reporters after the G7 leaders’ summit in France in June that he would rather “leave it unsigned” or “have it terminated,” before adding, in a characteristic hedge, “I would rather not have the agreement but I may sign it.” Canadian officials had spent the run-up to the deadline insisting July 1 was “not a cliff,” and Prime Minister Mark Carney, speaking to reporters in Kuujjuaq, Que., on the eve of the review, set expectations low. “We’re expecting, you know, a constructive exchange. I wouldn’t expect any drama tomorrow,” Carney said, according to The Canadian Press. “I’m not looking for my pen.”
Both Canada and Mexico confirmed at the meeting that they want the agreement extended for a full 16-year term. The United States alone said no – and under the treaty’s text, one no is enough.
A deadline written into the deal
The July 1 review was not a political improvisation. It was hard-wired into CUSMA when the agreement was negotiated during Trump’s first term to replace the North American Free Trade Agreement. Article 34.7 of the pact required the CUSMA Free Trade Commission – the body of trade ministers from all three countries – to conduct a “joint review” of the agreement on the sixth anniversary of its entry into force, and gave each party the opportunity to confirm, in writing, that it wished to extend the deal’s 16-year term for another 16 years. Had all three said yes, CUSMA would have been guaranteed through 2042.
Because Washington declined, the fallback machinery of Article 34.7.4 now takes over, according to an analysis published Thursday by trade lawyers at White & Case LLP. The Free Trade Commission must now conduct a joint review every year for the remainder of the agreement’s term – a rolling series of annual decision points running through 2036. Crucially, the law firm notes, the 16-year extension is deferred rather than dead: the three countries can revive it “at any time” before expiry through a written confirmation by their heads of government, with no formal renegotiation required. That “at any time” pathway, the firm argues, is now the single most important provision for businesses to monitor.
Nothing else changes on the ground, at least immediately. CUSMA’s preferential tariffs, rules of origin, investment protections and dispute-settlement mechanisms all remain fully operative. The agreement stays in force unless a party gives six months’ written notice of withdrawal – a step neither Trump nor his deputies have signalled they intend to take, despite the president’s repeated musings that the United States would be better off without the deal.
For Canada, the stakes of that continuity are difficult to overstate. CUSMA compliance currently exempts Canadian goods from the sweeping tariffs Trump has applied to most of the world since returning to the White House, including the global 10 per cent baseline duty. CBC News has reported that the agreement shields nearly 90 per cent of Canadian exports to the United States from those levies – protection that Canadian officials have repeatedly described as “the best trade deal” any country currently has with Washington.
Ottawa plays it cool
The Canadian government’s response to the non-renewal has been studied calm. Canada-U.S. Trade Minister Dominic LeBlanc, who leads the file alongside chief negotiator Janice Charette, said after the July 1 meeting that the three parties “agreed on the importance of continuing our discussions,” and reiterated that Canada’s priority is the elimination of U.S. sectoral tariffs on steel, aluminum, automobiles and lumber, according to a statement published by Global Affairs Canada and cited in the White & Case analysis.
LeBlanc had laid out Canada’s position a month earlier in a June 1 letter to Greer and Mexican Economy Secretary Marcelo Ebrard, formally recommending a 16-year renewal. “Canada recognizes that either or both other parties to the agreement may wish to propose areas where improvements may be warranted to strengthen North American competitiveness,” LeBlanc wrote, adding that Canada “looks forward to continued engagement” with its partners. “In parallel, discussions with the United States on addressing sectoral tariffs will be essential.”
Carney, for his part, has repeatedly counselled patience – and warned against panic-driven concessions. The prime minister told reporters Canada will not rush into “a bad deal,” and, reflecting on his dealings with the U.S. president, offered a note of studied optimism: “What I’ve seen with the president is that you’re not close to making a deal and then you make a deal,” he said, according to CBC News. Speaking before the review, Carney also framed Canada’s core problem as distinct from Mexico’s: while Washington has a “series of technical issues” with its southern neighbour, he said, Canada faces “more fundamental structural issues” – the Section 232 national-security tariffs on “automobiles, on steel, aluminum, forest products, particularly.” “We’re looking to determine whether there’s a possibility of a new partnership there,” he said, as reported by CTV News.
Industry Minister Mélanie Joly’s office and other Canadian officials have said the government is “ready for every scenario,” a message repeated across ministerial statements since Wednesday’s announcement.
Washington’s list of grievances
What, exactly, does the United States want changed? Greer’s statement pointed to unspecified “shortcomings” and to American trade deficits with both partners. But the administration’s fuller bill of particulars is on the public record. In April, the U.S. Trade Representative’s office published its annual inventory of foreign trade barriers, with several pages devoted to Canada. Among the irritants: provincial restrictions on the sale of American alcohol, the supply-management system that governs Canadian dairy, poultry and eggs, “Buy Canadian” government procurement policies, and the Online Streaming Act’s treatment of U.S. digital services, as reported by CTV News.
Several of those files are politically radioactive in Canada. Supply management is protected by recent federal legislation and defended by a powerful farm lobby concentrated in Ontario and Quebec; the two previous CUSMA-era negotiations both ended with Canada conceding limited market access while preserving the system’s core. American negotiators have signalled they will press harder this time, and dairy-state lawmakers in Congress have long complained that Canada allocates its tariff-rate quotas in ways that blunt the access the deal promised.
Trump himself has been blunter than his trade representative. He has called CUSMA “irrelevant,” suggested it “may have served its purpose,” and claimed at various points that the United States “doesn’t need anything Canada has” and that “Canada lives because of the United States.” U.S. Ambassador to Canada Pete Hoekstra, pressed on that rhetoric in a CTV Question Period interview last week, defended the administration’s posture. “There were only two countries that responded in a strongly negative way,” Hoekstra said of the global reaction to U.S. tariffs. “The rest of the world, we’ve negotiated trade agreements. We’ve worked on frameworks, and those types of things. We did not take aim at Canada.” More recently, Hoekstra has framed Trump’s remarks as a sign the U.S. is open to offers, urging Canada to lead with its strengths in autos, energy and resources.
Two tracks, one continent
Perhaps the most striking feature of the review process so far is its asymmetry. The United States has chosen to negotiate bilaterally rather than trilaterally – and its talks with Mexico are far more advanced than anything underway with Canada.
Washington and Mexico City have already completed two formal negotiating rounds tied to the joint review: a first round in Mexico City from May 28 to 30, covering automotive rules of origin, steel and aluminum, and economic-security issues; and a second in Washington on June 16 and 17, which extended into agriculture, labour and the environment, according to summaries published by both governments and compiled by White & Case. A third round is set for the week of July 20 in Mexico City – a date Greer confirmed in his July 1 statement. Canada has not been announced as a participant.
Ottawa, by contrast, has held no formal text-based negotiating rounds with Washington at all. Carney has downplayed the gap, arguing that Mexico’s issues are technical while Canada’s are structural, and that there is little point convening formal rounds until the United States shows willingness to deal on the sectoral tariffs that matter most to Canada. Critics see risk in the sequencing: if Washington and Mexico City strike bilateral understandings on autos, steel and agriculture first, Canada could find the template set before it sits down. Some observers have warned that the U.S. approach amounts to divide-and-conquer – a reading given voice on Canadian business television within hours of the announcement.
Greer has said publicly that there are “pillars” of the agreement that work well, and he has floated openness to converting CUSMA into two separate bilateral deals – an outcome Canada has resisted since the NAFTA renegotiation of 2017-18, when preserving trilateralism was a core Canadian objective.
Eighteen months of trade war as backdrop
The review is unfolding in the shadow of a Canada-U.S. trade conflict now approaching the 18-month mark. Since February 2025, the Trump administration has layered tariff regimes on Canadian goods: border-security-justified duties from which CUSMA-compliant goods are exempt, and Section 232 sectoral tariffs on steel, aluminum, automobiles, lumber and, more recently, cabinetry – which apply regardless of CUSMA compliance. It is these sectoral measures that are doing the visible damage, hitting steel towns in Ontario, aluminum smelters in Quebec, the auto corridor in southern Ontario and forestry communities in British Columbia.
Canada has retaliated, and much of that retaliation remains live. Ottawa’s counter-tariffs on U.S. steel, aluminum and automobiles are still in effect, the Department of Finance confirms, in recognition that Washington maintains its sectoral tariffs without a CUSMA carve-out. Ottawa has also moved to defend its steel market from diverted global supply: measures effective December 26, 2025 imposed 25 per cent tariffs on imports of selected steel derivative products from all sources, and cut the tariff-free quota for steel from countries without a Canadian free trade agreement from 50 per cent to 20 per cent of 2024 volumes.
The trade war’s costs are no longer hypothetical. The Bank of Canada has repeatedly flagged tariff uncertainty as a drag on business investment, and a year-in-review analysis by RBC Economics concluded that tariff shocks have reshaped Canadian trade flows and forced a national conversation about diversification. On the other side of the border, the agreement underpins nearly US$2 trillion in annual U.S. goods and services trade with its two neighbours, and exports to Canada and Mexico support close to three million American jobs, according to U.S. government figures cited by customs brokerage GHY International.
Markets shrug, experts squint
Financial markets treated Wednesday’s announcement as the non-event officials promised – largely because it had been priced in for weeks. But trade practitioners see a meaningful deterioration in the quality of certainty on offer.
Carlo Dade, director of international policy at the University of Calgary’s School of Public Policy, told The Canadian Press the blown deadline matters less than the tone of what follows. The missed extension “doesn’t mean much” to CUSMA’s future “as long as there is constructive work and dialogue occurring,” Dade said. “I think the market is adjusting to a new normal of uncertainty with the U.S. That said, awareness of the reality also means greater awareness of the cost.” He added a caution about reading too much into presidential rhetoric: “Trump is negotiating in public, so we have to discount, heavily discount, what he says, view it through the lens of his seeking leverage.”
Scott Lincicome, vice-president of general economics at the Cato Institute in Washington, argued at a panel last week that the annual-review process could, in principle, be used productively. “But there’s a very wide gulf between fixing a good agreement and torching it,” he said. “And it’s clear which side we should all be on.” While there is no reason to “freak out” about the missed deadline, Lincicome said, “there is some uncertainty that is increased because of these annual reviews.”
Andrew Hale, a fellow at Advancing American Freedom, the conservative advocacy group founded by former U.S. vice-president Mike Pence, was less diplomatic about the administration’s method. “They’re so unpredictable and it’s so chaotic. If I knew what their strategy was, I could make a gold mine. It’s like asking me if I have a crystal ball,” Hale told The Canadian Press, warning that annual consultations “are never usually harmonious with the Trump administration” and that “they push people right to the edge of the cliff every time they have these negotiations.”
Canada’s former chief trade negotiator Steve Verheul offered a glass-half-full read at a Bank of Montreal client event this week: the fact that Washington has preserved the CUSMA tariff exemption at all, he said, shows the United States “does attach a considerable amount of importance” to the agreement. He also noted the deal’s deep bench of American defenders – industry groups, a supportive public, and a bipartisan group of more than 100 House lawmakers who wrote to the administration in December backing the pact. But Verheul was unsparing about the state of the bilateral bargaining: “I don’t think there’s been anything close to a good deal on the table so far.”
Republican congressman Adrian Smith, speaking at the same Cato event as Lincicome, called CUSMA “a huge victory” that has been a boon for American farmers and consumers – while making clear that Congress’s free-traders still expect Canada to give ground. “I think it’s reasonable to expect other countries to make some concessions, you know, having the access to our markets that they have, and they need to give us access to theirs,” Smith said. “I would say Canada did not expect Mr. Trump re-entering the White House as he is right now. So they’re going to have to deal with that.”
Public opinion, meanwhile, remains firmly on the side of the deal. Polling conducted this spring for the University of Calgary’s New North America Initiative by Ipsos Public Affairs and Nanos Research found 88 per cent of Canadians and 56 per cent of Americans support the trilateral agreement. Just eight per cent of Americans described Canada as a major economic challenge – while 77 per cent of Canadians said they viewed the United States as one, a gap that neatly captures the asymmetry of attention that has bedevilled the relationship since the tariff war began.
What it means for Canadian business
For importers, exporters and supply-chain managers, the practical takeaways from this week are threefold.
First, nothing changes at the border today. CUSMA preferences, rules of origin and duty-free treatment for compliant goods are intact, and customs brokers on both sides of the border spent Thursday reassuring clients of exactly that. GHY International, the Winnipeg-based brokerage, summarized the situation for clients: the agreement “remains legally in force pending resolution of outstanding issues or eventual termination,” with no immediate change to tariffs or legal terms. Companies that have invested in CUSMA certification since 2025 – a wave triggered by the tariff exemption’s sudden value – should maintain and audit that compliance, because the preference it secures is now the main buffer between most Canadian export sectors and the U.S. tariff wall.
Second, the horizon of certainty has shortened from 16 years to roughly 12 months at a time. Annual reviews mean annual leverage points, and as Hale’s warning suggests, each one is an opportunity for Washington to demand concessions with the threat – explicit or implied – of escalation. Businesses making decade-scale capital decisions, particularly in automotive, steel-consuming manufacturing and agri-food, will need to price in the possibility that the rules change, or are held hostage, every July. That is precisely the chill on long-term investment that economists on both sides of the border have warned about, and it compounds the hesitation already visible in Canadian business investment data since the trade war began.
Third, the sectoral tariffs – not CUSMA’s text – remain the real battlefield for Canada. Steel, aluminum, autos and lumber producers get no relief from CUSMA compliance, and Ottawa has made the removal of those Section 232 measures its price for a broader accommodation. Exporters in those sectors should not expect the annual-review process itself to deliver relief; that will come, if it comes, from the parallel bilateral discussions LeBlanc has called “essential.” In the meantime, Canadian importers of U.S. steel, aluminum and vehicles continue to face Ottawa’s counter-tariffs, and importers of offshore steel face the tightened December quota regime – a reminder that trade-war costs cut in both directions.
The road to 2036
The next visible milestones come quickly. The U.S.-Mexico round the week of July 20 will signal how far Washington intends to get bilaterally before engaging Canada in earnest. Ottawa’s decision on when – and on what terms – to open formal negotiations is the biggest open question on the Canadian side; officials have suggested talks on sectoral tariffs and the review will effectively merge. And the first of the new annual joint reviews must occur within a year, giving all three governments a recurring deadline against which to bargain.
The deeper question is whether the “at any time” extension clause becomes a live instrument or a dead letter. White & Case calls it the critical provision to watch: a single trilateral statement by three leaders could restore the 2042 horizon overnight. Verheul’s observation that the United States still values the agreement, Greer’s acknowledgment that its “pillars” work, and the polling showing majority American support all suggest the raw material for a renewal exists. Trump’s own words – “I may sign it” – keep the door ajar.
But Canada has been here before, and the lesson of the past 18 months is that proximity to a deal is not a deal. As Carney put it, with the president “you’re not close to making a deal and then you make a deal.” Until that moment arrives, Canadian trade will live review to review – protected by an agreement the United States has just declined to embrace, yet cannot quite bring itself to abandon.