WASHINGTON – U.S. president-elect Donald Trump’s pledge to hit Canada and Mexico with 25 per cent across-the-board tariffs has sent shockwaves through America’s closest neighbours — but it’s likely just a first step in his plan to rattle a critical trilateral trade pact.
The Canada-U.S.-Mexico Agreement is up for review in 2026. Greta Peisch, the former general counsel for the Office of the U.S. Trade Representative, said she doesn’t expect the Republican leader will wait that long to review the agreement.
“Given the focus the incoming administration, that the president-elect himself has had on the trade relationship in North America, I think we could expect he’s not going to wait an entire year to get going on these issues,” Peisch said in recent interview.
Trump demonstrated how vulnerable Canada is to America’s whims when he scrapped the North American Free Trade Agreement during his first administration.
The U.S. is Canada’s closest neighbour and largest trading partner. More than 77 per cent of Canadian exports go to the U.S.
The negotiation of CUSMA, commonly dubbed “the new NAFTA,” was a key test for Ottawa following Trump’s first victory.
During negotiations in 2018, Trump floated the idea of a 25 per cent tariff on the Canadian auto sector but it was never implemented. But he did use his national security powers to impose a 25 per cent tariff on steel and a 10 per cent tariff on aluminum imports.
Former U.S. trade representative Robert Lighthizer wrote in his book that the duties sent an “unmistakable signal that business as usual was over.”
“The Trump administration was willing to ruffle diplomatic feathers to advance its trade agenda.”
After administering targeted tariffs of their own, Canada and Mexico were able to negotiate exemptions and the new trilateral trade deal was signed.
Meredith Lilly, a professor at Carleton University in Ottawa who studies international trade, said the deal was a significant achievement for Trump and his team. She said she hopes the Republican leader won’t want to dismantle a key part of his legacy.
But Carlo Dade, director of trade and trade infrastructure at the Canada West Foundation, is less optimistic. During the presidential campaign, Trump said that “upon taking office, I will formally notify Mexico and Canada of my intention to invoke the six-year renegotiation provision of the (CUSMA) that I put in.”
Dade has warned repeatedly that Trump’s “Make America Great Again” mantra does not include Canada.
“Negotiations are as much about sitting down at the table as … they are about setting conditions for when you do sit down at the table,” he said.
Trump has already started shaping public opinion by beating up on the United States’ trading partners, Dade said.
He said the CUSMA review could have one of three outcomes. The three partner nations could submit recommendations for changes, tweak the agreement and sign up for another 16-year term. The United States could also pull out of the agreement entirely.
The third possible outcome – the one Dade said would be the worst for Canada – would see the Trump administration withhold U.S. renewal, pushing the issue back for 12 months.
“Which would mean the Americans have us by the shorts for an entire year,” Dade said.
In fact, the Trump administration could continue delaying CUSMA’s renewal for years until the entire agreement is scrapped, causing investment insecurity in Canada along the way.
Canada is only partly prepared for what’s coming, Dade said. Canadian negotiators, including Canadian Ambassador to the U.S. Kirsten Hillman, have been connecting with Republicans in Washington and around the country for a year.
But Ottawa dropped the ball in other ways, he said. A special cabinet committee on Canada-U.S. relations, revived by Prime Minister Justin Trudeau after Trump’s win, should never have been allowed to fall dormant, Dade said.
Ottawa also should have more extensively tapped into Canadian business and industry for information and advice long before the presidential election, he added.
“I’m losing some of my patience and some of my politeness with the federal government,” Dade said.
Lilly said the federal government made the proper preparations. Ottawa opened public consultations last year and continues to connect with various Canadian interests.
“I would say that on the Canadian side, they’ve been ramping up and preparing for the review for a while,” she said.
New challenges also have emerged. Trudeau’s decision to step away when a new Liberal leader is chosen in March, and the federal election that’s expected to follow soon after, leave “not a lot of agreement about who speaks for Canada at the moment,” Lilly said.
Trump’s substantive tariff threat will also be a huge barrier to efforts by Canada and Mexico to have good faith discussions about the trade deal, she added.
“I think that is actually going to be quite a stumbling block.”
This report by The Canadian Press was first published Jan. 18, 2025.
