To the Point for the Week of June 28, 2026

To the Point for the Week of June 28, 2026

We hope everyone had wonderful Canada Day celebrations this week despite the heat. Canada is jokingly said to have two seasons: winter and July. The meme is that Canadian summers are short, and pass by almost in an instant, if you’re not careful. Before you realize, a beautiful, although sizzling, Canada Day quickly turns into leaves falling off the trees and then our first snowfall. 

With Summer now in full swing, and legislatures adjourned, we will be adjusting the timing of our summer editions of To the Point to bi-weekly and return to our regular weekly cadence on September 5th. In our final weekly edition, we provide a brief commentary on the passing of the CUSMA renewal deadline this week. 

CUSMA 

Deal or No Deal

The three parties to the CUSMA agreement completed their ratification processes on July 1, 2020. Article 34.7 of the agreement enshrined a joint review on the sixth year of the agreement’s entry into force. Therefore, the renewal deadline of July 1, 2026, was merely an administrative happenstance.

Of course, the political context in which the relationship between the United States and Canada existed has dramatically changed since CUSMA’s signing, making the passing of the deadline to renew the agreement on Dominion Day more symbolic for Canada. That symbolism has been irresistible for political commentators, who have woven U.S.-Canada tensions into virtually every political dialogue in this country. The reflex to cast President Trump’s decision not to renew the agreement for another sixteen years as a rupture muddies the economic and political realities of the deadline’s passing.

The deadline’s passing has not ushered in an era of economic disruption. Over 98% of Canadian product categories still cross the U.S. border duty free under CUSMA’s existing framework. The agreement runs to 2036. Any of the three parties can agree to a 16-year extension at any annual review between now and then. The legal architecture is intact. Make no mistake, if you’re a manufacturer in Oakville or a grain farmer in Saskatchewan, your tariff treatment on July 2 was identical to what it was on June 30.

What changed is the political framework those economics now operate inside.

The sectors bleeding –  auto, steel, aluminum, softwood lumber – were never CUSMA’s to protect in the first place. The U.S.-Canada softwood lumber dispute dates to 1982. Five formal rounds of litigation across eight presidents, Democrat and Republican alike. The Biden administration raised lumber tariffs on Canada to 14.54% in 2024. Trump is louder about it, but he didn’t invent it. The 25% steel and aluminum tariffs were applied under Section 232 of the Trade Expansion Act; a law Lyndon Johnson signed in 1962. These are structural irritants in the relationship, not Trump inventions. These issues would be on the table under virtually any administration in Washington.

Canada’s dependence on the U.S. market has eased at the margins, but only at the margins. Depending on the quarter, between 68% and 72% of Canadian exports still go south. That is down from roughly 76% in late 2024, but it still leaves Ottawa negotiating from a position of deep structural dependence.

The real damage to the Canadian economy—U.S. exports down 5.7%, Ontario's auto parts sector facing a 22% GDP hit in worst-case modelling, and only 15% of Ontario businesses expressing confidence in the provincial economy—didn't happen this week. It happened over the last 18 months, driven by those Section 232 tariffs, not by an administrative review mechanism triggering on Canada Day.

In Ontario, that exposure is not abstract. The province’s motor vehicle, body, trailer and parts manufacturing sector employed 148,300 people in 2024, or 1.8% of the total workforce. Ontario’s Financial Accountability Office has warned that tariffs could mean 119,200 fewer jobs in the province in 2026, with manufacturing and supply chain industries taking the hardest hit. CFIB estimates tariff uncertainty alone could translate into $2.9 billion in missed investment over the next year for Ontario auto businesses.

Here is what changed on July 1. Canada lost the chance to lock in CUSMA until 2042 and now faces annual reviews until the agreement’s current 2036 expiry. That is not an economic shift. It is a structural political one. Washington has now said out loud what it has been signalling for months: you need this deal more than we do, and we intend to use that.

There is more to it than that. U.S. Trade Representative Jamieson Greer’s statement did not just flag trade deficits and automotive rules of origin. It explicitly linked CUSMA renewal to Canada’s relationship with China, warning that the U.S. will not allow Beijing to use Canada as a back door into the American market. That is not a trade demand. That is a foreign policy demand dressed in trade language. The Carney government’s bet that it could deepen ties with China while preserving CUSMA access has been rejected, directly, on the record, by the U.S. trade representative. That tension does not resolve at the next negotiating session. It defines every one that follows.

Ottawa is not treating this like a theoretical dispute. The federal government has already allocated $3 billion from its Strategic Response Fund, along with up to $100 million from the Regional Tariff Response Initiative, to help the auto sector adapt to tariff pressure and diversify into new markets. Governments do not spend that kind of money on a file they think is merely symbolic.

The political trap for Ottawa is a genuine one. The government needs a deal more urgently than the public thinks it does. Fifty-five percent of Canadians told pollsters earlier this year that the end of CUSMA would make no difference or be good for Canada. That is the political environment in which Dominic LeBlanc must negotiate an agreement that protects roughly three quarters of Canada’s export economy, without looking like he caved.

The commentators calling this a crisis are wrong. The ones calling it a non-event are also wrong. What July 1 produced was a decade of managed ambiguity, presided over by an administration that has demonstrated it will use every tool available, including this one, as leverage. That is not an economic problem yet. It will become one if Ottawa loses the thread.

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