Trump Can Pull Out of CUSMA With Six Months’ Notice as New U.S. Advisory Tells Businesses to Prepare

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A trade pact can remain alive on paper and still make boardrooms nervous. That is the position facing Canada after the United States refused to extend CUSMA in its current form and a new U.S.-based Grant Thornton briefing urged companies with North American supply chains to prepare for several possible outcomes.

The agreement has not expired, and today’s preferential rules remain in place. Yet Article 34.6 allows any member country to withdraw with six months’ written notice, creating a much faster route to disruption than the 2036 sunset process. For Canadian manufacturers, farmers, energy producers and exporters, the risk is no longer limited to one dramatic deadline. It is an extended period in which annual reviews, tariff threats and possible bilateral deals could reshape decisions about hiring, sourcing and investment.

The Six-Month Clause Is Separate From the 2036 Clock

CUSMA contains two timelines that are often confused. The first is the review-and-extension process. Because Washington declined to renew the agreement on July 1, 2026, the pact now moves into annual reviews and remains scheduled to terminate in 2036 unless all three countries later agree to extend it. Nothing about that decision immediately removed tariff preferences or customs rules.

The second timeline is far shorter. Article 34.6 says a country may leave by providing written notice, with withdrawal taking effect six months later. The agreement would remain in force between the two remaining members. In practical terms, a U.S. notice could create a half-year countdown for companies that spent decades designing continental supply chains. There is an important legal caveat: while the treaty text gives the United States a withdrawal route, whether a president can complete the process unilaterally without Congress is unsettled under U.S. law and could invite litigation.

Washington Chose Pressure, Not an Immediate Exit

The Trump administration’s July 1 decision was a refusal to renew CUSMA in its current form, not a formal withdrawal. U.S. Trade Representative Jamieson Greer said the agreement remains in force while Washington continues talks over what it describes as shortcomings and trade deficits. The result is leverage without an immediate break: current rules continue under recurring negotiations.

The next scheduled step is a U.S.-Mexico negotiating round during the week of July 20. Washington has signalled that rules of origin, economic security and the role of Chinese companies in North American supply chains will be central issues. Canada has said it will keep pressing for relief from U.S. tariffs on steel, aluminum, autos and lumber. For a Canadian plant deciding whether to add a production line, the problem is not simply whether CUSMA survives. It is whether the commercial rules will remain stable long enough to justify the investment today.

The New Advisory Is a Warning to Prepare, Not a Government Exit Order

The July 14 briefing came from Grant Thornton’s U.S. practice, not from the White House or the U.S. Trade Representative. That distinction matters. It is a business-risk advisory interpreting the new trade environment, rather than an official notice that withdrawal has begun. Its message is still significant because it translates political uncertainty into practical planning questions for importers, exporters and manufacturers across North America.

Grant Thornton advised companies with important Canadian or Mexican supply chains to prepare for outcomes ranging from continued current treatment to higher costs and further disruption. The firm highlighted autos, steel, aluminum, dairy, energy, lumber, digital trade, labour and critical minerals as areas likely to face pressure. That means preparation cannot be limited to watching headlines. A company may need to identify which products depend on CUSMA preferences, which suppliers create origin risks, and how quickly contracts or sourcing routes could be changed if duties rise.

Autos Are Emerging as the First Major Fault Line

The auto industry shows why a six-month withdrawal window would be difficult to absorb. Canada and Mexico supplied the United States with $85.5 billion in completed vehicles and auto parts in 2025, equal to 55.6% of U.S. imports in those categories, according to figures cited by Grant Thornton. Engines, transmissions, electronics and finished vehicles routinely cross borders during production.

Washington is seeking tougher content rules. Reuters reported that the administration has pushed for vehicles to contain 50% U.S. content while raising the total North American requirement to 82%. Automakers argue that existing plants and supplier networks cannot be reorganized overnight. Nissan’s chief executive warned that stricter requirements could worsen affordability because the necessary supply base does not exist entirely inside the United States. For Ontario communities tied to assembly and parts production, the debate is not abstract. A rule change can alter sourcing, vehicle production and which shift remains employed.

Energy Integration Makes a Clean Break Costly

Energy is another reason withdrawal would create consequences. Canada and Mexico supplied close to 70% of the value of U.S. energy imports in 2025, when those imports totalled about $140.3 billion, according to Grant Thornton’s review of trade data. Canadian crude oil, natural gas and electricity are tied into U.S. refineries, pipelines and power markets.

Those flows are not easily replaced by a new supplier at the same price, location or speed. A refinery configured for Canadian heavy crude cannot instantly substitute any barrel available on the world market. Electricity moving across interconnected grids also supports reliability in border regions. This does not make energy trade immune from tariffs or political bargaining, but it raises the cost of rupture. The same pressure runs northward: Statistics Canada estimated that 73.1% of jobs in oil and gas extraction were linked to U.S. export demand, leaving Canadian workers exposed when trade conditions weaken.

Canada’s Exposure Reaches Far Beyond Export Statistics

The United States remained the destination for 71.7% of Canada’s merchandise exports in 2025, even after that share fell from 75.9% a year earlier. That concentration explains why uncertainty around CUSMA can affect hiring and investment before any withdrawal notice is issued. Businesses may delay machinery purchases, postpone expansion or avoid adding workers when future market access is unclear.

Statistics Canada estimated that 1.9 million people, or 9.3% of Canadian employment, worked in industries dependent on U.S. demand for Canadian exports in 2024. Exposure was especially high in transportation equipment manufacturing, where 62.5% of jobs were linked to U.S. exports. These are often well-paid positions clustered in communities where one factory supports toolmakers, trucking firms, restaurants and local revenue. A Windsor supplier does not need CUSMA to disappear to feel pressure. Lower orders, changing origin rules or delayed model allocation can move through the local economy before a formal break.

American Exporters Also Have a Large Stake

The political argument often focuses on U.S. trade deficits, but American businesses also rely heavily on Canadian and Mexican customers. U.S. goods trade with Canada totalled $719.5 billion in 2025, including $336.5 billion in American exports. Mexico bought another $338 billion in U.S. goods that year. Those sales support producers, logistics companies and ports across many states.

Agriculture offers a clear example. Canada purchased $28.4 billion in U.S. agricultural exports in 2024 and was the second-largest foreign market for those products. Canada and Mexico together buy more than one-third of U.S. agricultural exports, making continental access especially important for farmers facing narrow margins and volatile commodity prices. A feed producer in Iowa or fruit packer in California may be far from the Canadian border, yet still depend on predictable tariff treatment. That domestic constituency is one reason farm and industry groups continue pressing Washington to preserve a workable trilateral agreement.

Withdrawal Would Create a Customs and Cost Shock

For now, qualifying goods can continue to claim CUSMA preferences under existing rules. Withdrawal would not automatically produce one tariff for every product. Depending on the legal and political outcome, some goods could fall back to World Trade Organization most-favoured-nation rates, while other treatment could depend on domestic tariff schedules, sectoral measures or a replacement bilateral arrangement.

The immediate challenge would be classification and proof. Companies would need to know the tariff code, origin status and contractual responsibility for duties on every exposed product. A Canadian manufacturer using Mexican components and shipping finished goods to the United States could face different costs. Even firms that remain tariff-free might encounter new documentation, audits or border delays. That is why customs records matter as much as political statements. A company that cannot demonstrate origin, identify alternative suppliers or calculate landed costs quickly will have less room to respond during a six-month countdown.

What Businesses Should Be Doing Now

The most practical response is scenario planning rather than predicting Trump’s final decision. Baker Tilly advised importers to review supply chains that rely on CUSMA, confirm origin documentation, monitor negotiations and estimate the duty impact of possible changes. Grant Thornton similarly urged companies to prepare for several outcomes, including higher fees and wider disruption.

A useful exercise starts with the products that generate the most revenue or cross the border often. Management can map suppliers, identify single-source components, review cancellation clauses and calculate margins under higher tariff assumptions. Companies can also test whether inventory should be increased, whether alternative suppliers qualify under different origin rules, and which customers would bear added costs. This work is not free, and stockpiling can create risks. Still, a prepared firm can make decisions in days rather than months. In a six-month withdrawal window, that difference could determine whether production continues or contracts are lost.

The Withdrawal Threat May Be More Valuable as Leverage

An outright U.S. departure remains possible, but economic analyses consider it less likely than prolonged pressure and renegotiation. Farm Credit Canada described termination as a low-probability, high-disruption outcome and viewed annual reviews combined with continuing tariffs as the likely middle path. That approach gives Washington repeated opportunities to demand changes without absorbing the full cost of ending free trade.

The threat can influence behaviour. Companies may move investment toward the United States, governments may offer concessions, and suppliers may redesign sourcing before notice is delivered. The Bank of Canada has warned that an unfavourable outcome would weaken Canadian exports and lead businesses to reduce production, investment and hiring. For Canada, the challenge is broader than preventing one withdrawal letter. Ottawa must defend market access, support exposed industries and expand trade elsewhere while recognizing that the United States remains embedded in Canadian production. CUSMA is operating, but certainty has become scarce.

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