Trump’s Trade Czar Says Tariffs Will Stay on Canada — Even Under CUSMA

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The promise of tariff-free North American trade is being tested in a way that could reshape Canada’s economic relationship with the United States. U.S. Trade Representative Jamieson Greer has now signalled that tariffs will remain part of Washington’s trade strategy, even as Canada, the United States, and Mexico move toward the first major review of CUSMA.

That matters because CUSMA was supposed to provide certainty. Instead, tariffs on sectors such as steel, aluminum, autos, copper, lumber, and other goods have turned the agreement into a more complicated shield. For Canadian businesses, the key question is no longer whether CUSMA survives. It is whether the agreement still protects Canada the way many companies assumed it would.

Washington Is No Longer Talking About a Tariff-Free North America

Greer’s comments mark a clear shift in tone from the old promise of open continental trade. He said the United States is “going to have tariffs” as long as it has a large trade deficit, including with countries in its own hemisphere. That means the Trump administration is treating tariffs not as temporary leverage, but as a permanent feature of trade policy.

For Canada, the message is especially uncomfortable. Greer said the U.S. has “significant” issues with Canada and suggested the disagreement goes beyond normal trade irritants. He also pointed to Canada’s decision to retaliate against U.S. tariffs, placing Canada in a more confrontational category than countries that accepted U.S. tariff rates. In practical terms, Ottawa is being told that even a renewed CUSMA may not bring back the predictable, mostly tariff-free environment Canadian exporters relied on for decades.

CUSMA Is Heading Into Its First Major Stress Test

CUSMA entered into force in 2020, replacing NAFTA and creating the rules that now govern much of North American trade. Its most important built-in checkpoint arrives in 2026, when the three countries must conduct a joint review. The review gives each government a chance to recommend changes, decide whether to extend the agreement, or leave it in a more uncertain annual-review cycle.

That design gives Washington major leverage. If all three countries agree to extend CUSMA, the deal can continue for another 16 years. If one country refuses, the agreement does not immediately collapse, but it moves into yearly reviews until its scheduled expiry in 2036. That may sound technical, but businesses hate uncertainty. A factory deciding whether to expand in Ontario, Michigan, or Mexico needs rules that last longer than one political cycle. Without that confidence, investment decisions slow down.

The Tariff Fight Is About More Than One Product

The biggest misunderstanding is that “tariffs on Canada” means every Canadian good faces a new duty at the border. That is not the current reality. Many CUSMA-compliant goods still receive preferential treatment, and Canada has acknowledged that most Canadian goods can continue entering the U.S. tariff-free when they meet the agreement’s requirements.

The problem is the growing list of exceptions. Steel and aluminum face heavy Section 232 tariffs with no CUSMA-compliant exemption. Copper, softwood lumber, buses, some furniture, kitchen cabinets, semiconductors, and certain auto-related goods also face special treatment under U.S. tariff rules. This creates a confusing split-screen economy. A Canadian exporter may be protected under CUSMA in one product line, exposed to tariffs in another, and forced to recalculate pricing, contracts, and sourcing decisions almost month by month.

Autos Are at the Centre of the Fight

The auto sector is the most politically explosive part of the dispute because it is deeply integrated across Canada, the United States, and Mexico. Under CUSMA, vehicles already face strict rules of origin, including a 75% regional value content requirement, requirements for core parts such as engines and transmissions, and a 70% North American steel and aluminum requirement.

Greer has suggested that future negotiations will focus heavily on rules of origin, with the goal of increasing U.S. content inside North American goods. Reuters has reported that U.S. negotiators have discussed requiring 100% North American sourcing for some key components, including engines, major electronics, and software. For automakers, that is not a small paperwork change. It can mean redesigning supplier networks, shifting contracts, and rethinking where vehicles are assembled. For Ontario’s auto corridor, that could determine whether investment flows north, south, or stalls entirely.

Canada’s Trade Exposure Makes the Stakes Bigger

Canada is unusually dependent on the U.S. market, even after recent signs of diversification. Statistics Canada reported that Canada’s merchandise exports to the United States fell from 75.9% of total exports in 2024 to 71.7% in 2025. That is a meaningful drop, but it still leaves the U.S. as Canada’s dominant customer.

The numbers show why this issue lands so hard in Canada. U.S. goods trade with Canada totalled an estimated $719.5 billion in 2025, according to USTR. From Canada’s side, the country still recorded an $81.6 billion merchandise trade surplus with the United States in 2025, even though that surplus was down from the year before. For a small manufacturer in Ontario, a lumber mill in British Columbia, or a metals supplier in Quebec, tariff uncertainty is not abstract. It affects quote sheets, payroll decisions, and whether customers delay orders.

Canada’s Retaliation Has Become Part of the U.S. Argument

Canada responded to U.S. tariffs with countermeasures, including tariffs on steel, aluminum, and automobiles. Ottawa later removed many counter-tariffs on U.S. goods, but kept measures in place for the sectors where U.S. tariffs remained. The Canadian government framed that move as a way to align with CUSMA while still responding to sectors where Washington had not offered relief.

Greer’s comments show that Washington sees Canada’s retaliation as a political dividing line. Countries that accept U.S. tariff rates are being treated differently from countries that push back. That creates a difficult choice for Ottawa. Backing down could be seen domestically as weakness, especially in tariff-hit industries. Pushing back could harden the U.S. position. For Canadian negotiators, the challenge is to defend key industries without allowing the fight to spiral into a broader breakdown of trust.

The Economic Damage Is Already Showing Up

The Bank of Canada has warned that U.S. tariffs and trade uncertainty are disrupting the Canadian economy. Its April 2026 Monetary Policy Report said economic activity is on a lower path than before the tariffs were imposed, while growth remains modest. That is exactly the kind of slow-burn damage tariffs can create: not always a dramatic collapse, but delayed investment, reduced confidence, and weaker hiring in exposed sectors.

Trade uncertainty also changes behaviour before tariffs even hit a final invoice. A buyer may delay a contract. A supplier may hold off on new equipment. A company may shift production to avoid future border friction. Those individual decisions add up. The risk for Canada is that a prolonged tariff environment makes the country look less predictable as a production base, even for companies that still want access to the North American market.

Mexico Is Being Treated Differently Than Canada

The United States has already moved ahead with formal talks involving Mexico, while Canada has been left in a more strained position. Greer has emphasized rules of origin, economic security, and Mexico’s tariff treatment of non-North American imports. He has also pushed the idea that trade benefits inside the region should come with stronger regional sourcing and more U.S. content.

That matters because CUSMA is a three-country agreement, but the Trump administration appears increasingly willing to manage Canada and Mexico through separate tracks. Greer has previously said there may need to be different U.S. protocols for Canada and Mexico because their trade issues are different. For Canada, that raises a strategic concern: Mexico may reach understandings with Washington earlier, while Canada remains stuck in a more political fight over retaliation, autos, and broader economic alignment.

The Legal Logic Is National Security, Not Classic Free Trade

Much of the tariff architecture sits outside the normal free-trade logic that Canadians associate with CUSMA. Section 232 tariffs are justified by Washington on national security grounds, which allows the U.S. to argue that certain imports threaten critical domestic industries. That is why steel, aluminum, autos, copper, lumber, and other strategic sectors can be treated differently from ordinary CUSMA-covered trade.

This is the core tension. CUSMA is built around preferential access when goods meet regional rules. Trump’s tariff strategy is built around industrial policy, reshoring, and national-security claims. Those two systems can coexist, but awkwardly. A company can follow CUSMA paperwork perfectly and still face a tariff if its product falls into one of the targeted sectors. That is why Greer’s message matters: the U.S. is not merely renegotiating fine print. It is redefining what free trade means.

The July Deadline May Not Resolve the Fight

The July 1, 2026 review date is important, but it may not deliver a clean ending. Greer has already suggested that the talks may run past the deadline. He has also said the U.S. needs to notify Congress of its intentions toward the agreement. That gives the coming weeks political weight, but not necessarily finality.

The most likely outcome may be a messy middle ground: CUSMA survives, but with more uncertainty, tougher origin rules, and continued sector tariffs. That would leave Canadian exporters in a difficult position. The deal would still exist, but the old assumption that North American trade is largely protected from tariff shocks would be weaker. Canada’s task is now bigger than defending CUSMA. It must defend the value of CUSMA in a Washington where tariffs are no longer treated as an emergency tool, but as the new baseline.

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