Washington Blames Canada’s Tariffs, Then Trump Threatens the Entire Trade Deal

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The Canada-U.S. trade fight has moved from a dispute over tariffs into something bigger and more unsettling: the future of the entire North American trade framework. Washington is now pointing to Canada’s remaining retaliatory tariffs as a reason talks are moving slowly, while President Donald Trump has raised the possibility that the United States may not renew the USMCA, known in Canada as CUSMA.

That combination has landed at a fragile moment. The agreement’s first six-year review is approaching, Canada is trying to defend key industries from U.S. sectoral tariffs, and businesses on both sides of the border are trying to plan around a political relationship that keeps shifting. What was once treated as a technical trade review is now becoming a test of whether North America’s integrated economy can survive another round of tariff-driven brinkmanship.

Washington Turns Canada’s Counter-Tariffs Into the Latest Flashpoint

U.S. Trade Representative Jamieson Greer has put Canada’s retaliatory tariffs at the centre of Washington’s frustration, saying they remain a “problem” for negotiations. His argument is that Canada is taking a different approach than Mexico, where U.S. officials say formal talks are already moving forward on rules of origin and broader revisions to the North American trade pact. For Ottawa, that framing is difficult to accept because Canada’s counter-tariffs were imposed in response to U.S. duties on Canadian steel, aluminum and automobiles.

The dispute is not over every product that was hit during the early stages of the trade war. Canada removed many of its counter-tariffs in 2025, including large packages that had applied to U.S. goods worth tens of billions of dollars. But tariffs remain on steel, aluminum and auto products because U.S. sectoral tariffs in those same areas also remain. That gives both governments a talking point: Washington says Canada is blocking momentum, while Ottawa says it is refusing to disarm while Canadian workers still face U.S. trade barriers.

Trump’s Threat Moves the Fight Beyond Tariffs

Trump’s statement that he might not renew the USMCA changed the tone of the dispute. A tariff fight can be painful, but it is usually treated as a bargaining tactic. A threat to withhold renewal of the main North American trade deal raises a much larger question: whether the rules governing hundreds of billions of dollars in trade can still be relied on. For manufacturers, farmers, retailers and investors, uncertainty itself becomes a cost.

The threat also matters because it came just as the review clock was becoming unavoidable. CUSMA is not simply a handshake deal; it has a formal review and extension process. If all three countries agree to extend it, the agreement can be renewed for another 16 years. If they do not, the pact does not instantly disappear, but it moves into a more unstable cycle of annual reviews. That may sound bureaucratic, but annual uncertainty can chill investment. A company deciding where to build a plant does not want to guess every year whether tariff-free access will still exist.

CUSMA’s Review Clock Is Doing Some of the Negotiating

The first joint review of CUSMA is scheduled for the sixth anniversary of the agreement’s entry into force. That makes the timing unusually powerful. The agreement was designed with a built-in pressure mechanism: governments must assess whether it is working and decide whether to extend it. In calmer times, that could have been a routine update. In the current climate, it has become leverage.

Canada has already signalled that it wants a 16-year renewal. Mexico has also backed an extension. Washington, however, appears to be using the review to reopen issues that go beyond housekeeping. U.S. negotiators want tougher rules of origin, especially in autos, and they have raised concerns about non-North American content entering the region through preferential trade channels. Those concerns are not new, but Trump’s threat gives them a sharper edge. The message from Washington is not just that the deal needs repairs; it is that the United States may be willing to keep the whole agreement under a cloud unless it gets more of what it wants.

Canada Has Leverage, But It Also Has Exposure

Canada is not powerless in this fight. The two countries have one of the deepest trade relationships in the world, and U.S. businesses rely heavily on Canadian customers, energy, materials and supply chains. Nearly $3.6 billion in goods and services crossed the border each day in 2024, and U.S. goods trade with Canada totalled an estimated $719.5 billion in 2025. That makes Canada far more than a small neighbour waiting for instructions from Washington.

Still, Canada’s exposure is obvious. More than 70 per cent of Canadian merchandise exports went to the United States in 2025, even after that share fell from the previous year. That is why the trade fight lands differently in Canada than in the United States. For Washington, Canada is a major partner; for Ottawa, the U.S. market is the central artery of the economy. Carney’s government has talked about diversification, and Canadian firms are trying to expand beyond the U.S., but shifting trade patterns takes years. Tariffs can arrive overnight; new export markets do not.

Steel, Aluminum and Autos Are the Political Core of the Dispute

The remaining tariff fight is concentrated in sectors that carry both economic and political weight. Steel and aluminum support manufacturing supply chains, construction, energy infrastructure and defence-adjacent production. Autos are even more sensitive because parts and vehicles move through integrated North American networks. A tariff on one side of the border can quickly become a cost problem on the other side.

Canada’s current position is that its counter-tariffs remain because the U.S. has not removed its own sectoral tariffs. The federal government has also had to create support programs for affected industries, including a C$1 billion loan program for companies tied to steel, aluminum and copper. That kind of aid shows how much damage policymakers believe the tariff environment can do. For workers in places like Hamilton, Windsor, Oshawa or parts of Quebec’s industrial corridor, this is not abstract trade language. It can affect overtime, hiring plans, supplier contracts and whether a plant manager pauses investment until the rules become clearer.

Autos Show Why This Is Not a Normal Trade Spat

The auto sector reveals why the CUSMA review is so explosive. Under the current agreement, vehicles must meet North American content rules to qualify for preferential treatment. Those rules were already tightened when NAFTA was replaced by USMCA/CUSMA. Now Washington is pushing for even more U.S.-specific content, including proposals tied to vehicles built in Mexico and discussions about stricter treatment of steel and major components.

That approach creates a problem for Canada. If rules are rewritten around U.S.-specific content rather than North American content, Canadian plants and parts suppliers could lose ground even while staying inside the regional trade bloc. The risk is not just higher tariffs; it is a gradual redesign of the supply chain around American production priorities. Automakers tend to plan years ahead, from model assignments to battery components to supplier tooling. If Ottawa is treated as a late-stage add-on to U.S.-Mexico talks, Canadian auto workers and suppliers may worry that decisions affecting them are being shaped before Canada is fully at the table.

Mexico’s Faster Track Adds Pressure on Ottawa

Mexico has moved faster in direct talks with Washington, and that has created an optics problem for Canada. Mexican officials have publicly supported a 16-year extension and have been engaged in bilateral discussions with the United States. Canada, by contrast, has spent part of the year trying to unfreeze talks, respond to U.S. complaints and argue that it should not be sidelined in a trilateral agreement.

That difference matters because trade negotiations are partly about momentum. If Washington and Mexico develop a framework first, Canada could face pressure to accept terms shaped elsewhere. Canadian officials know this, which is why Dominic LeBlanc and chief negotiator Janice Charette have tried to present proposals directly to Greer and keep the discussion focused on preserving the value of CUSMA. But the political backdrop is rough. Washington is complaining about Canadian counter-tariffs, provincial alcohol bans and broader trade positioning. Ottawa is arguing that U.S. tariffs are the original breach of trust. Each side says the other is slowing the path to certainty.

The Real Risk Is a Bruised Deal That Never Feels Settled

The most likely outcome may not be an immediate collapse. CUSMA has too much value for businesses, border communities and major industries to be discarded casually. The agreement supports a deeply integrated economy, and even the countries pressing hardest for changes still benefit from predictable regional rules. But a deal can survive on paper while becoming less useful in practice if every review becomes a new threat cycle.

That is the danger now facing Canada, the United States and Mexico. If Trump’s renewal threat becomes a recurring negotiating tool, companies may begin treating North American trade access as conditional rather than dependable. That could push some investment away from Canada, make suppliers more cautious and leave consumers exposed to higher costs. Canada’s challenge is to defend its workers without letting retaliation become the excuse Washington uses to keep the entire deal hostage. Washington’s challenge is to strengthen regional production without undermining the very agreement that made North America competitive in the first place.

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