Tension between key trading partners is rising, and the central agreement governing billions in trade is back on the negotiating table.
Overview of the USMCA Agreement
The United States and Canada will begin a review of their free trade agreement next month. The course of these negotiations could have serious consequences for both countries, as well as for Mexico. This process is taking place against the backdrop of last year’s trade disputes, when the Trump administration imposed tariffs on imports from many countries around the world.
Canadian Prime Minister Mark Carney confirmed that government officials will meet with their American counterparts in mid-January to begin formal discussions. The United States-Mexico-Canada Agreement (USMCA), signed in late 2018 and entered into force in July 2020, contains provisions for a mandatory review in 2026.
U.S. Trade Representative Jamieson Greer states that his country continues to be concerned about access to the Canadian dairy market, particularly regarding Canada’s export of certain dairy products.
He also mentioned objections to provincial bans in Canada on the distribution of American alcohol. These restrictions were initially introduced in response to the Trump-era tariffs.
Prime Minister Carney states that Canada seeks to protect its agricultural sector and sees “enormous benefits” in pooling resources with the United States, particularly in the automotive, steel, aluminum, and forestry industries.
Seeking Compromises
The United States and Canada had already begun trade talks several months ago, but President Trump abruptly halted them after the government of the province of Ontario launched an anti-tariff advertising campaign.
According to Carney, the talks were close to a breakthrough on lifting tariffs for a number of sectors, including steel, aluminum, and energy, before they were canceled. These same discussions about removing tariffs are now expected to be integrated into the broader USMCA review process.
Canada’s economy is heavily dependent on trade: approximately 75% of its exports go to the United States. It is also a major export market for 36 U.S. states. Goods and services worth approximately $2.7 billion cross the U.S.-Canada border daily.
Preparations for these negotiations are taking place in a context of global economic uncertainty, adding extra weight to them. Experts note that the results could directly impact consumer prices for goods such as cars and food products. The success of the talks will depend on the parties’ ability to find a balance between protecting the national interests of key industries and maintaining the free and fair trade that has been the foundation of prosperity for both economies for decades.