Trump rejects CUSMA extension. What happens next?

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OTTAWA — As expected, U.S. officials announced on Wednesday’s much-anticipated deadline that they’re opting against rubberstamping the Canada-U.S.-Mexico Agreement.

In a statement following a meeting of representatives from all three countries, U.S. Trade Representative Jamieson Greer pointed to what he called the deal’s “shortcomings,” and wrote: “The United States did not agree to renew (CUSMA) in its current form.”

So, what happens next?

Annual review process kicks in

In short, not much is changing from the perspective of the average Canadian.

Canada and the U.S. remain in a trade war that’s nearing the 18-month mark, after U.S. President Donald Trump imposed sweeping tariffs on Canadian imports last February.

While the vast majority of Canadian goods are exempt from the levies because they’re covered under CUSMA — with Canadian officials repeatedly stating Canada has “the best trade deal” in the world — a slate of sectoral tariffs remain in place.

Those are having significant impacts on the steel, aluminum, auto and lumber industries.

Wednesday’s CUSMA deadline, meanwhile, was baked into the original agreement, inked during Trump’s first term.

By July 1, officials in all three countries had to say whether they wanted to renew CUSMA for a 16-year period. Because the U.S. chose not to do so, an annual review process kicks in for the next decade.

That means weeks and likely months of negotiations ahead, led by Canada-U.S. Trade Minister Dominic LeBlanc and Canada’s chief negotiator Janice Charette.

Officials from the U.S. and Mexico already have a date set for official bilateral talks later this month, with representatives from the two countries having already met before. Canada, however, has not launched official negotiations with the United States.

Speaking to reporters on Parliament Hill last month, Prime Minister Mark Carney downplayed the significance of that, saying there’s a “series of … technical issues” the U.S. has with Mexico, which explains their more extensive bilateral discussions ahead of the July 1 deadline.

“But for us, there’s the more fundamental structural issues, as people know, which relate to the so-called strategic sectors, that’s the American term, the 232 tariffs that are on automobiles, on steel, aluminum, forest products, particularly,” Carney also said at the time. “We’re looking to determine whether there’s a possibility of a new partnership there.”

Any of the three countries are also able to pull out of the deal entirely with six months’ notice.

Despite Trump’s previous comments that he would prefer CUSMA not exist at all, saying he thinks the United States is better off without it, neither he nor his deputies have given any indication that they want to terminate it.

U.S. published list of irritants

Apart from the specific CUSMA process, U.S. officials release a list of trade irritants annually.

In April, Greer’s office released its longlist, with several pages specifically relating to Canada, and pointing to liquor, supply management, Buy Canadian procurement policies, and the Online Streaming Act, among others as sticking points.

In the weeks leading up to the July 1 deadline, Trump himself had also signalled the U.S. would not be renewing the trilateral trade deal.

Following the G7 Leaders’ Summit in France last month, Trump said he would rather leave CUSMA unsigned and have it immediately terminated, though he also said he may sign the deal.

Trump has also previously stated that the U.S. doesn’t need anything Canada has, and that “Canada lives because of the United States.”

In a broadcast exclusive interview with CTV Question Period last week, U.S. Ambassador to Canada Pete Hoekstra was pressed on Trump’s rhetoric.

“There were only two countries that responded in a strongly negative way,” Hoekstra said about Trump’s trade policy and 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 and has urged Canada to highlight its strengths in autos, energy, and resources.

Canada prioritizing sectoral tariffs

At various speaking engagements and reporter scrums in recent weeks, Canadian officials have repeatedly downplayed the July 1 CUSMA deadline, assuring that it’s “not a cliff.”

In a letter to his American and Mexican counterparts last month, LeBlanc stated Canada wanted to see CUSMA renewed for 16 years. In the letter, LeBlanc also laid out Canada’s priorities going forward, namely eliminating sectoral tariffs.

“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 in his letter to Greer and Mexico’s Secretary of Economy Marcelo Ebrard, adding Canada “looks forward to continued engagement” with the U.S. and Mexico.

“In parallel, discussions with the United States on addressing sectoral tariffs will be essential,” he also wrote.

With files from CTV News’ Stephanie Ha