Editor’s note: This article originally appeared on Parliament Today, a Village Media newsletter devoted exclusively to covering federal politics.
Slow and steady wins the race — or at least that’s what some experts say as Canada continues to work with the White House amid rising tariffs and a free trade agreement review on the horizon.
U.S. tariffs on Canadian goods were increased to 35 per cent last week after the two countries were unable to reach a trade deal. Those tariffs do not apply to goods under the Canada-United States-Mexico Agreement (CUSMA), but they are on top of sectoral levies on steel, aluminum, copper and lumber.
The federal government’s response appears to be measured, with Prime Minister Mark Carney releasing a statement saying that Ottawa “is disappointed” in the trade aggression.
Speaking to reporters on Tuesday, days after tariffs were increased, Carney said that Canada would not “automatically adjust” its retaliatory tariffs against the United States in response.
“We have always said that we will apply tariffs where they had the maximum impact in the United States and a minimum impact in Canada,” he said. “We look at what we can do for our industry that’s most effective. In some cases, that will be to remove tariffs.”
The prime minister said he was also “very cognizant that, in about nine months from now, the first review of USMCA (the United States-Mexico-Canada Agreement), CUSMA as we call it, will begin between the three parties.”
“So there’s a bigger picture here.”
What’s being hit with tariffs?
Drew Fagan, professor at the Munk School of Global Affairs and Public Policy, told Parliament Today that the prime minister was “smart not to take whatever was on the table” as the Aug. 1 deadline to get a deal approached, and then passed.
“That’s easy to say in the context of the sectors that are being hurt, (like) steel and aluminum. But given that this is just the opening round and the big, important rounds come next year.”
A formal review of CUSMA is scheduled for July 2026, mandated to take place six years after the agreement was implemented in 2020 under Donald Trump’s first U.S. presidency.
The North American trade agreement is the latest reiteration of a deal that has existed between Canada, the United States and Mexico since 1994, allowing for certain goods to travel across the border with a reduced or null tariff. It covers a wide variety of goods across various sectors and industries, as long as those products are grown in, or mostly made or produced in those countries.
An example would be the movement of car parts, which often go back and forth between Canada and the U.S. before assembly.
“It would be nice if the United States and this administration understood better the nature of our trade, which is to say we don’t actually trade things with the United States for the most part. As the old saying goes, ‘we make things together,’” Fagan said.
As such, the majority of trade being conducted between Canada and the U.S. falls within CUSMA, with the federal government citing that number at about 85 per cent while other experts say it could be higher.
“That’s the whole point of a free trade agreement is that tariffs are supposed to go to zero between the countries,” Debra Steger, emeritus professor at the University of Ottawa’s faculty of law, told Parliament Today.
Steger added that now, companies that may have been trading using other rates under the World Trade Organization’s (WTO) Most Favoured Nation status, which were lower, may look to CUSMA to avoid tariffs.
In 2024, about 38 per cent of goods imported by the U.S. from Canada were traded under CUSMA, according to Export Development Canada, with Steger noting the administrative burden of having to make the switch.
While more companies may opt to trade under CUSMA, those in the steel, aluminum, lumber and copper sectors are still subject to separate U.S. tariffs, despite some of the products being covered under the free trade agreement.
Those tariffs are being applied to all countries globally.
Steger said it’s clear that the United States is breaking both the WTO and CUSMA trade rules.
“It’s inconsistent with both trade agreements that the U.S. has,” she said. “It’s pretty hard to make a case that it’s not.”
However, Fagan said he doesn’t see those global levies changing until they become politically unsustainable for Trump.
“We’re starting to see the impact of tariffs work their way through the economy in the United States, into consumer prices,” he said.
“The voice that will speak up for returning to the status quo … wouldn’t necessarily be ours, it will be the voice of Americans saying, ‘Wait a second, this is hurting us.’”
What happens now?
While other regions like the European Union, United Kingdom and Japan, among others, have reached their own deals with the White House, those in North America have not; although Mexico was able to get a 90-day pause on heightened tariffs.
Experts say, however, that Canada’s negotiations will be different from those of other countries, in large part because CUSMA exists.
Steger said that while opposition parties may criticize the government for not having a deal, the reality is that the other countries have been without one with the United States for much longer.
“The EU and the U.K. and the United States do not have free trade agreements to start with,” she said. “We’ve had agreements with the United States that bring our tariffs to zero on all goods. They haven’t had that. They’ve only had the WTO rates.”
“So when people say … ‘they got a better deal than us.’ No, no, they didn’t, because we’ve still got the CUSMA.”
Fagan made similar arguments, describing Canada as being in “a privileged position” when it comes to trade negotiations with the White House; although he noted this “doesn’t mean that we’re not going to have a hell of a ride in 2026.”
“It’s worth remembering that the United States doesn’t actually have many free trade agreements,” he said.
When asked if there is a possibility that CUSMA could be replaced with a tariff regime when the review happens next year, Fagan said it was unlikely, given that if the United States wanted to leave the trade deal, they could have done so with six months’ warning.
“We could end up with an entirely different regime, but I think it’s more likely that (Trump’s) going to try to drive a hard bargain.”
While Fagan is framing these early trade negotiations as a bit of a preview of what Canada could be facing in the CUSMA review, Steger describes the two agreements as completely separate processes.
With CUSMA, negotiations could take much longer — and most of the discussions will take years.
“It takes time. It’s not something that you do at the snap of a finger in six weeks like they tried when they set this Aug. 1 deadline,” she said, noting the tariffs imposed by Trump were done by executive order, but a trade agreement like CUSMA would need consultations with interest groups and congressional approval.
As such, Steger said it’s abnormal for ministers to be making such frequent trips down south to conduct trade negotiations “at a pretty high level.”
“Normally, there’s a really detailed trade negotiation taking place where they’re getting into the nitty-gritty, and where they would really be changing terms in the agreement. The ministers don’t come in until the very end,” Steger added. “So it’s not clear exactly what’s going on.”