Trump’s Trade Envoy Says Canada’s Tariffs Are Now Blocking a CUSMA Deal

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The fight over North American trade has moved from broad threats to a more precise pressure point: Canada’s remaining counter-tariffs. U.S. Trade Representative Jamieson Greer says those measures are now a problem for negotiations over CUSMA, the continental trade pact that has anchored Canada-U.S.-Mexico commerce since 2020.

For Ottawa, the issue is more complicated. Canada has already removed most retaliatory tariffs on U.S. goods, but kept measures on steel, aluminum and autos because Washington continues to apply sector-specific tariffs of its own. That leaves both sides accusing the other of making the deal harder to save. With the formal CUSMA review deadline approaching, the dispute is no longer just about tariffs. It is about leverage, industrial policy, and who gets to define the future of North American trade.

Greer Turns Canada’s Counter-Tariffs Into a Negotiating Obstacle

Jamieson Greer’s latest comments put Canada’s retaliatory tariffs at the centre of the CUSMA dispute. Speaking as the review clock winds down, Trump’s trade envoy said Canada still has a “different approach” to the United States because some counter-tariffs remain in effect. In his framing, that makes it harder for Washington to negotiate a renewal or revised version of the trade pact. It is a pointed shift: rather than only arguing that CUSMA has loopholes, the U.S. is now saying Canada’s response to American tariffs has become part of the problem.

That argument lands awkwardly in Ottawa because Canada has already backed away from much of its retaliation. The federal government removed counter-tariffs on most U.S. imports in 2025, while keeping tariffs on steel, aluminum and automobiles. Those remaining measures were not random. They were tied directly to U.S. tariffs in the same sectors, which Canadian officials argue still hit Canadian businesses even when goods otherwise comply with CUSMA. The result is a diplomatic standoff where both countries claim to be defending the agreement while blaming the other side for weakening it.

Canada Says the Tariffs Are Defensive, Not Disruptive

Canada’s position is that its remaining countermeasures are a defensive response to U.S. sectoral tariffs, not an attempt to undermine CUSMA. Ottawa has said it removed many counter-tariffs because the United States continued allowing most CUSMA-compliant Canadian goods to enter tariff-free. But the government also made clear that steel, aluminum and auto tariffs would remain because the U.S. kept tariffs on those sectors without providing full CUSMA exemptions. That distinction matters because it allows Canada to argue that it is protecting workers while still preserving the core trade pact.

For Canadian manufacturers, the debate is not theoretical. A steel buyer in Hamilton, an auto parts supplier in Windsor, or a small fabrication shop shipping across the border can feel the tariff fight in pricing, planning and contract negotiations. The federal government has also rolled out financial support for industries affected by U.S. tariffs, including loan programs and regional funding. That support signals that Ottawa sees the dispute as an economic shock, not just a political argument. Still, the longer counter-tariffs remain, the easier it becomes for Washington to cast them as a barrier to a broader deal.

The CUSMA Review Is a Deadline, But Not a Cliff

The pressure is rising because CUSMA’s first six-year review is tied to July 1, 2026. Under the agreement’s review mechanism, the three countries can extend the pact for another 16 years if all parties confirm they want to continue. If they do not, the deal does not immediately disappear. Instead, it enters annual reviews for the remainder of its current term, creating a rolling period of uncertainty that could last for years. For businesses, that uncertainty can be almost as damaging as a tariff increase because long-term investment decisions depend on stable rules.

That is why Canada has pushed for a clean 16-year renewal. Ottawa has formally signalled that it wants the agreement extended, while business groups and investors are watching closely. The Bank of Canada has also warned that an unfavourable outcome could weaken Canadian export competitiveness, reduce investment and hiring, and weigh on economic growth. The risk is not that trucks stop crossing the border the next morning. The risk is that companies delay factory upgrades, postpone hiring, or shift future production to jurisdictions where trade rules look more predictable.

Mexico Is Moving Faster While Canada Waits

One of the most striking parts of the current CUSMA process is that the United States has already moved ahead with Mexico in formal bilateral talks. U.S. and Mexican negotiators have discussed automotive rules of origin, steel and aluminum, economic security, agriculture and questions around a level playing field. Washington says the goal is to make the pact work better for U.S. manufacturers, farmers, workers and service suppliers. Canada, meanwhile, has not moved through the process at the same pace, adding to the impression that Ottawa is on a separate track.

That matters because CUSMA is a trilateral agreement, but much of the pressure is being applied bilaterally. If the U.S. and Mexico settle on proposed changes first, Canada could face a narrower set of choices later. This would be especially sensitive in autos, where Canadian production is deeply tied to both U.S. and Mexican supply chains. A rule change negotiated without Canada at the table could still reshape costs for Canadian plants and suppliers. It also gives Washington more leverage by suggesting that progress is possible with Mexico, while Canada’s remaining tariffs are slowing movement on the northern front.

Autos Are Becoming the Real Battleground

The auto sector sits at the heart of the dispute because CUSMA’s rules of origin already require a large share of a vehicle’s value to come from North America to qualify for duty-free treatment. The current rules require 75 per cent North American content for vehicles, along with separate labour-value requirements tied to higher-wage production. These rules were designed to pull more production into the region and prevent companies from relying too heavily on lower-cost parts from outside North America. Now, Washington wants to tighten that system further.

For Canada, that creates both opportunity and risk. Stronger North American content rules could protect Canadian suppliers from overseas competition, particularly from countries Washington accuses of using unfair industrial practices. But if the new rules are written to favour U.S.-specific content rather than North American content, Canadian plants could lose ground. That is why auto workers, suppliers and foreign automakers with Canadian operations are watching the review carefully. A car assembled in Ontario may cross borders multiple times through its parts before reaching a dealer lot. Even small rule changes can ripple across a supply chain built on decades of integration.

Trade Dependence Gives Both Sides Leverage

Canada’s challenge is that the United States remains its dominant export market, even as Ottawa tries to diversify. Recent data showed the U.S. still accounted for the majority of Canadian exports, with energy, vehicles, parts and machinery playing major roles. Canada has increased trade outreach to Asia, Europe and other markets, but many foreign investors still view Canada’s value through its access to the U.S. market. In other words, Canada’s diversification strategy still depends partly on keeping North American trade access intact.

The United States has leverage too, but it is not unlimited. Canada is a major supplier of energy, vehicles, agricultural products and critical inputs to the U.S. economy. U.S. data shows goods trade with Canada remains enormous, and Canada continues to be one of America’s most important commercial partners. That is why the tariff dispute is so politically charged. Both sides can hurt the other, but both also depend on the same supply chains. The argument over counter-tariffs is therefore less about whether trade will continue and more about what kind of rules will govern it.

A Deal May Depend on Who Blinks First

Greer’s message is designed to increase pressure on Ottawa: remove the remaining counter-tariffs, and negotiations become easier. Canada’s counter-message is just as clear: remove the U.S. sectoral tariffs, and Canada can justify pulling back its retaliation. That creates a classic sequencing problem. Neither side wants to give up leverage first, especially when steel, aluminum and autos carry political weight in industrial regions on both sides of the border. The longer this continues, the more the CUSMA review becomes a test of political will rather than a technical trade exercise.

The most likely path is not a sudden collapse, but a messy extension of uncertainty. Canada wants a 16-year renewal, the U.S. wants tighter rules and lasting tariffs in some sectors, and Mexico is already negotiating detailed changes. A compromise could still emerge if Washington offers preferential treatment to Canada and Mexico while claiming it has strengthened North American production. But the immediate message from Trump’s trade envoy is unmistakable: Canada’s remaining tariffs are no longer a side issue. They are now being treated as a central obstacle to getting a CUSMA deal done.

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