Canada Needs a Framework for CUSMA Renewal Before It’s Too Late

August 12, 2025 – While trade diversification is imperative, Canada must move quickly to secure a trade and security framework with the United States and Mexico ahead of the formal Canada–United States–Mexico Agreement (CUSMA/USMCA) review, according to a new Communiqué from the C.D. Howe Institute’s Trade Crisis Working Group.

The group of trade and industry experts emphasized that Canada must push to conclude a new trade and security framework agreement being negotiated with the United States. Without such a framework deal, prospects for a renewal and extension of the CUSMA, and hence for maintaining as tariff-free trade as possible, are uncertain. Growing uncertainty around tariffs, they say, is already impacting production and investment confidence, and could have long-lasting negative economic consequences on both sides of the border.

The Working Group points to reasons for cautious optimism. The Canadian market remains critically important to key US industries like autos and trucks. At the same time, legal challenges to the US President’s authority to impose tariffs are mounting, and American businesses and voters are beginning to push back against rising costs and disrupted supply chains.

Based on the limited insights provided by the “deals” concluded between the administration and other countries, the Communiqué argues that cooperation has proven more effective than retaliation in securing favourable terms. According to the group, Canada should be open to leveraging similar tools – such as offers that can be framed as a “win” by the US – to help secure a deal that restores substantially open trade and provides certainty for investors.

Canada should also consider temporarily suspending retaliatory tariffs while it explores strategic avenues for negotiation. The experts caution against rushing into a weak or unstable agreement, stressing that Canada must not settle as other peer countries such as the UK or Japan have, and instead continue to diversify its trade relationships while striving for a mutually beneficial deal.

With rising uncertainty, mounting trade pressures, and critical sectors at risk, Canada must move decisively and carefully. The window is narrow, but with the right strategy, Canada can shape its future in North American trade before others shape it for us.

The Trade Crisis Working Group will meet again as necessary to assess ongoing developments and explore ways Canada can protect its interests. The Working Group consists of members drawn from the C.D. Howe Institute’s International Economic Policy Council, Supply Chain Working Group, and other relevant experts.

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For more information, contact: Daniel Schwanen, Senior Vice-President, C.D. Howe Institute; Raquel Schneider, Communications Officer, C.D. Howe Institute, 416-479-9520 ext. 9520, rschneider@cdhowe.org.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

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