After U.S. President Donald Trump declined to renew the USMCA agreement on July 1, experts warn that fear of prolonged uncertainty should not pressure Canada into a quick deal if one arises.Judi Bottoni/The Associated Press
A prominent group of Canadian trade and foreign policy experts says the United States-Mexico-Canada Agreement risks being left in a “zombie” state after U.S. President Donald Trump declined to renew the agreement on July 1.
They say the trilateral trade deal has been left in limbo – not extended, not terminated, and not clearly moving toward resolution.
However, the Expert Group on Canada-U.S. Relations warns that fear of prolonged uncertainty should not pressure Canada into a quick deal if one arises, arguing that speed will not guarantee stability. The July 3 report, titled Beyond Renewal, noted that Mr. Trump has repeatedly treated agreements with other trading partners as starting points for further demands.
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Canada must retain tariff-free access for the broadest possible range of products and achieve rollbacks in U.S. tariffs on steel, aluminum and autos, while preserving a solid dispute settlement mechanism that protects this country against arbitrary actions by Washington, the group recommends.
“Canada’s most prudent course is to keep negotiating in good faith where our efforts are reciprocated, while refusing to be rushed into a bad deal. Its posture should be firm but constructive,” the report said.
Any renewed USMCA “must rest on more than signatures: it needs enforceable terms, a shared understanding of how the parties will conduct themselves, and credible dispute settlement,” it said. “Without that, the agreement will not provide real security.”
On July 1, the U.S. announced that it would not agree to extend the USMCA at this stage of the review, leaving the agreement up in the air. Non-renewal means the treaty remains in effect, but moves into a period of annual reviews for the next 10 years. If no agreement is reached by 2036, the USMCA expires.
“What was intended as a technical review is now a political test of whether Canada can preserve reliable, rules-based access to its principal market while the U.S. administration increasingly questions the agreement itself,” the report said.
It was written by former cabinet minister Perrin Beatty, former Ontario deputy minister Drew Fagan and Fen Hampson, a professor of international affairs at Carleton University.
The authors argues Canada can live with a “zombie” USMCA and the uncertainty it brings.
“While far from optimal, this scenario is not necessarily disastrous for Canada. Much of the damage has already been done by U.S. tariffs and by pressure on U.S. companies to invest at home rather than in Canada,” the report said.
“In that sense, the process has already been taking place in a climate of permanent uncertainty, with CUSMA operating only to the extent that Washington chooses to respect it,” the group said, using another name for the USMCA.
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The report acknowledges the arguments for a quick deal: investor confidence, the risk of further damage to the steel, aluminum and auto sectors, as well as the chances that the longer the talks drag on, the more likely it is that the U.S. reaches a separate bilateral deal with Mexico and abandons the USMCA altogether.
But, it argues, Mr. Trump’s political capital is weakening and the U.S. business community is Canada’s ally. “Foreign governments are more willing to push back, and Americans are increasingly aware that his policies raise costs. Republicans could suffer losses in the congressional elections if these conditions persist,” the report said.
It added that many U.S. companies have been harmed by tariffs, and were supportive of extending the pact in congressional hearings. “The longer the process continues, the more pressure they are likely to put on Washington.”
The report argued for deepening co-operation with Mexico, where Canadian interests converge. “Mexico has generally been more willing to accommodate U.S. demands, and its talks with Washington appear to be moving faster,” it said. “The two countries have more leverage together than apart.”
The report was signed by seven additional former officials, including former trade negotiator John Weekes, former ambassador and foreign policy adviser Jonathan Fried, ex-diplomat Colin Robertson, as well as Thomas d’Aquino, former chief executive of the Business Council of Canada.