90 per cent of Canadian exports to the U.S. are covered by the USMCA – but any of the three signatories can leave the agreement with just six months’ notice.Rebecca Cook/Reuters
By now, dozens of countries know they cannot outplay U.S. President Donald Trump in the tariff game. Switzerland learned so the hard way this week, when President Karin Keller-Sutter came back empty-handed after an emergency visit to the White House, where she tried – and failed – to convince the Trump regime to dilute the 39-per-cent tariff imposed on her country’s exports.
Switzerland! Small, neutral, not a member of the European Union (for which Mr. Trump has utter disdain), and an enthusiastic buyer of U.S. military hardware such as F-35 fighter jets. But never mind. Switzerland has a fairly fat trade surplus with the U.S. and had to be punished, disproving TACO – Trump Always Chickens Out. The humiliation of getting nailed with an across-the-board tariff more than double that of the EU’s may cost Ms. Keller-Sutter her job.
America’s trading partners are not only getting outplayed on tariffs, they are, in effect, being forced into a double penalty: Take on a painfully high tariff and a commitment to make enormous investments in the U.S., or buy vast amounts of U.S. energy, in exchange for the right to sell Rolexes or Barolo or BMWs in Trumpland.
Canada has not been punished to Switzerland’s degree, at least not yet. That’s because some 90 per cent of Canadian exports to the U.S. are covered by the United States-Mexico-Canada Agreement, or USMCA – the tweaked successor to NAFTA, in place since 2020. The deal was congressionally-approved, meaning it is not subject to the whims of any U.S. president, that is, it cannot be torn up if Mr. Trump has a bad night’s sleep.
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Not so fast. The USMCA may be doomed. It is up for review in mid-2026 and the talks may not go in favour of Canada or Mexico. Also, the review date doesn’t mean much. Any of the three signatories can leave the agreement with six months’ notice. Theoretically, the USMCA could cease to exist early next year.
Ontario Premier Doug Ford, perhaps above all Canadian politicians, knows the USMCA could soon vanish faster than a Trump promise (who had vowed to end the war in Ukraine within 24 hours of taking office).
“He’s not waiting until 2026. At any given time, President Trump – not that he even follows the rules – he can pull the carpet out from underneath us on [USMCA] tomorrow with one signature,” Mr. Ford told reporters on Wednesday. “I think it’ll be coming in November. He’s going to come at us with double barrels, so we better be ready and throw everything and the kitchen sink at this.”
The federal government would be foolish to assume that the trade deal, which is open for review every six years, will survive intact until 2032, even if Mr. Trump does not back out of the agreement next year. Mr. Trump’s trade policy is based on tariff and investment shakedowns, not congressionally-approved deals, and certainly not multilateral deals – he’s not doing them.
Ottawa needs to hustle to prepare a fallback strategy in case the USMCA is doomed.Alex Wong/Getty Images
Far more likely is a hub-and-spoke arrangement, with Washington demanding separate deals with Mexico and Canada. This idea, by the way, might not come as a shock to Canada. Last autumn, then-prime minister Justin Trudeau mused about forging a trade deal with the U.S. sans Mexico; he suggested that Ottawa and Washington were more aligned on certain issues, such as policy on China.
The upshot is that the feds need to hustle to prepare a fallback strategy in case the USMCA is sent to the knacker’s yard, as Switzerland and all the other countries stung by Mr. Trump are learning in a hurry (India and Brazil are getting hammered with 50-per-cent tariffs). The Trumpian new global commercial reality will be based on tariffs that can go up and down at any time, coupled with unrealistic investment demands, that if broken, would give the president a reason to retaliate.
For Canada, there is no quick and easy insurance policy, meaning there will be pain while it pries open doors to other markets and strengthens its domestic economy by removing interprovincial trade barriers. Canada has a trade agreement with almost a dozen Asia-Pacific countries, including Japan and Australia, which could be expanded.
Another route is for Canada to embed itself fully in the EU defence pact. Canada formally joined the partnership in June and is only now figuring out its potential.
If Canada were to buy, say, Swedish-designed Saab Gripen fighter jets on top of the 16 F-35s it has so far put money down to buy from Lockheed Martin, Canada would forge a trans-Atlantic defence supply chain with the potential to create thousands of jobs. (Saab has said Canada could build the Gripens under licence.) Ditto warships. Canadian shipyards, such as Ontario Shipyards, could form partnerships with big name European naval companies, such as Italy’s Fincantieri, to bash out frigates, corvettes, patrol boats and more for Canada and other countries.
For Canada and everyone else, dealing with Mr. Trump is all about damage control, not seeking (impossible) victories. He loves tariffs imposed under executive orders and they are here to stay. Canada needs to open itself up to the world.