Ottawa-Preparing for the next round of negotiations on the CUSMA trade agreement in just over a year requires careful thinking and working closely with Mexico, says the C.D. Howe Institute.

Its Trade Crisis Working Group has been studying the landscape and issues that will likely come into play in the trade talks. The goal is to achieve a renewal of CUSMA that works for all three countries and does not isolate Canada and Mexico from trade with the rest of the world.

While Canada must keep in mind all that has happened since President Trump came into office as well as its trade with China, the Group has concluded that it is important for Canada and Mexico “to work together to avoid the United States isolating itself in a Fortress USA.” Preserving the trilateral structure of CUSMA is necessary to maintain the current and future competitiveness of North America.

The Group also expressed support for exercising caution or suspension of retaliatory action and for maintaining a constructive tone ahead of substantive talks on the broader Canada-U.S. relationship and CUSMA negotiations.

It is also important for Canada “to continue emphasizing to U.S. stakeholders – especially ahead of the November 2026 mid-term elections – the multiple ways open trade and investment between Canada and the United States benefit U.S. industry, contrary to the White House narrative.”

Canada should soon propose an overarching framework for a new partnership between Canada and the U.S. that interlocks trade in an updated CUSMA, including border and economic security and defence.

“The US narrative presents all three as being interrelated, which means it is very unlikely Canada will achieve trade peace without offering a compelling vision about the other two pieces.

“A serious Canadian proposal on defence and security needs to be met by a positive response by the United States regarding the removal of the 25 percent tariff imposed on Canadian products on the grounds of emergencies at the border or on the grounds of national security, such as on autos, steel, and aluminum, before Canada can consider trade concessions in response to U.S. complaints. Otherwise, Canada would give up something in exchange for nothing.”

Canada must look seriously at U.S. complaints about access to the market for supply-managed products or about the digital services tax.

The Group noted that many U.S. national security concerns centre on Chinese investment, influence, and unfair trade practices. Canada faces a continued balancing act for Canada between maintaining market access to any Fortress North America and facing the consequences of retaliatory Chinese actions against Canadian products, notably agricultural products.

Canada could leverage this tension to advance its own security and economic interests, firmly linking such discussions to the lifting of tariffs the U.S. has imposed on Canada on the grounds of national emergencies or security.

Canada should seek a revival of standards harmonization or mutual recognition efforts for all North America, begun a decade or so ago but since abandoned. The Group said this approach could greatly facilitate trade within North America while helping square the circle with respect to China.

This news item prepared for National Newswatch