As Canada, the United States, and Mexico prepare to reopen negotiations on the Canada United States Mexico Agreement in 2026, trade experts warn Ottawa may be forced into difficult and politically risky compromises to keep the pact alive. The agreement, negotiated during U.S. President Donald Trump’s first term, currently governs nearly two trillion dollars in annual North American trade and shields most Canadian exports from U.S. tariffs. Despite that, Trump has repeatedly suggested he could allow the deal to expire or replace it with separate bilateral agreements.
Most analysts believe CUSMA is likely to survive the review process, but not without cost. Scott Lincicome of the Cato Institute said the agreement will probably endure, though he would not be surprised if negotiations collapse given the administration’s confrontational approach. He noted that while CUSMA still offers Canada advantages, U.S. tariffs on Canadian imports are now at their highest level in more than three decades, despite Washington’s claims of being disadvantaged by Canadian protectionism.
According to current U.S. Trade Representative Jamieson Greer, Washington wants progress on three major files. These include Canada’s dairy supply management system, the Online News Act, and the Online Streaming Act. Together, these policies have become central flashpoints in the lead up to negotiations, with U.S. officials arguing they restrict market access and discriminate against American companies.
Canada’s dairy supply management regime is expected to be one of the most contentious issues. The system limits imports and controls prices to protect domestic farmers, particularly in Quebec and parts of Ontario. While Canada has already granted limited tariff free access to U.S. dairy producers under CUSMA, American lawmakers argue the quota system unfairly favours Canadian processors. Fen Hampson of Carleton University said Canada has effectively gamed the system and could resolve the dispute through administrative reforms without dismantling supply management itself. He added that while politically sensitive, gradual changes could ease tensions without violating existing legislation.
Digital regulation may pose an even greater risk to the trade deal. The Online News Act requires large platforms to compensate Canadian news organizations for using their content, while the Online Streaming Act mandates financial contributions and promotion of Canadian programming by foreign streaming services. Critics in Washington see these measures as discriminatory and potentially censorship related. Some analysts suggest Canada could pause or modify implementation to take the issues off the CUSMA table, or offer alternative incentives such as tax credits for Canadian content investment.
Christopher Sands of Johns Hopkins University said Canada’s decision to move ahead independently on digital regulation, rather than aligning with broader OECD or allied frameworks, has left it exposed to U.S. pressure. He argued that working in coordination with Europe and other partners would make it harder for Washington to single out Canada. Hampson echoed that view, warning that unilateral action invites divide and conquer tactics from the Trump administration.
Economists note parallels between supply management and digital policy, both of which raise costs for Canadian consumers by limiting access to largely American products. Nathaniel Baum Snow of the University of Toronto said these protections may be popular with certain domestic groups but are increasingly difficult to defend in a high pressure trade environment. At the same time, analysts point out the contradiction in Washington criticizing Canadian protectionism while maintaining aggressive U.S. tariff policies.
Lincicome cautioned that survival of CUSMA may come at a steep price. He said Prime Minister Mark Carney may have to accept concessions that would have been unthinkable a decade ago, simply to preserve access to the U.S. market. Still, other experts argue Canada should not rush to give ground, noting last year’s withdrawal of a planned digital services tax delivered no clear benefit in return.
While most observers believe a negotiated outcome remains more likely than collapse, the coming talks are expected to test Canada’s political resolve. The concessions demanded may be deeply unpopular at home, but analysts agree that even a flawed CUSMA may remain preferable to facing U.S. trade policy without any agreement at all.
