Uncertainty surrounding the future of CUSMA is becoming a growing economic risk as Canada, the United States and Mexico approach a key review of the trade agreement. Economists say prolonged uncertainty could weigh on investment and slow business activity.
BNN Bloomberg spoke with David-Alexandre Brassard, chief economist at CPA Canada, about why long-term certainty under CUSMA remains critical for investment, trade and Canada’s economic growth.
Key Takeaways
- Uncertainty surrounding CUSMA is discouraging business investment, making it one of the biggest economic headwinds facing Canada.
- A 16-year extension would provide long-term certainty, while annual reviews could prolong negotiations and increase uncertainty for businesses.
- Diversifying exports beyond the United States remains a long-term strategy, but Canada’s economy continues to rely heavily on U.S. trade.
- CUSMA has significantly reduced Canada’s effective tariff burden by allowing compliant exporters to avoid many countrywide U.S. tariffs.
- Without CUSMA, Canadian exporters would face substantially higher tariffs, increasing costs and creating additional pressure on the economy.
Read the full transcript below:
ROGER: As Canada, the United States and Mexico approach the July 1 review deadline for CUSMA, questions are growing about what comes next for North America’s most important trade agreement. While the deal has helped limit the impact of tariffs and provided a degree of stability for exporters, uncertainty surrounding its future is emerging as a new economic risk. Joining us now is David-Alexandre Brassard, chief economist at CPA Canada. David-Alexandre, thank you very much for joining us.
DAVID-ALEXANDRE: Thanks for the invitation, Roger.
ROGER: Where are we right now with it, with the negotiations? How important is it for Canada that we, that we see something come out of it July 1, or close to?
DAVID-ALEXANDRE: Well, first off, as you know, and probably most of your audience knows, Canada and Mexico have made it well known that they want to renew for another 16 years, which would bring us to 2042. They’re negotiating very hard for that very outcome. We’ve seen little success on that front so far. The deadline, as you said, is very close. It would be very important in the sense that the reason why trade agreements are negotiated with a long time spent is that they set the rules of the game for businesses for a number of years. So, if you again, if you extend and you maintain the rules of the game, businesses that invest millions, billions are a bit comforted, and it would decrease the level of uncertainty that they would face right now.
ROGER: Is a 16-year extension, is that realistic?
DAVID-ALEXANDRE: It’s what’s built into the agreement. So, if they review again, if they agree, they extend for another 16 years. If they don’t agree, what it does is it triggers an annual review of the agreement. So, in other words, we would be crystallizing the level of uncertainty that we have right now. We’d have ongoing negotiation, probably concession every year, and it would spark a bit of uncertainty into the thing. Is it realistic? To be honest with you, the concept of a free-trade agreement has been moved around by the new U.S. administration. To be polite, it seems more like pay-to-play agreements or trade that we’re facing with the U.S. right now.
ROGER: And, of course, depending on what happens in two years at the next election, even if we do go to year to year, we could see then another, a new one created, right, that could go for 16 years. If we do get into this uncertainty, does that force Canadian companies to look at alternatives? Could they? I mean, they obviously want to move forward and expand. Could they look at other countries and other potential business?
DAVID-ALEXANDRE: So, of course, diversifying trade outside of the U.S. is a very long game. It’s a game that the federal government in Canada has been working hard at. I think it’s a... personally, I like the fact that we have government expertise trying to help, or de-risk it, for businesses because, as most would guess, if you’re trading outside the U.S., you have higher transport costs. You need to determine which good and industry have the sufficient margin in order to be competitive with other businesses. So, we’ve seen some results in the numbers. I will be honest and say that higher commodity prices did help having trade outside of the U.S., but if you look at our trade balance over the last 14 months, what we’ve seen is the only time that the trade balance was positive was when the trade activities with the U.S. were better. So, the last two months, for example, of data, oil prices were higher. It brought export value back to 2024 levels with the U.S., bringing the trade balance positive. So, it’s really a long game, diversifying, and ideally we want to mend the trading relationship with the U.S. as much as possible, of course.
ROGER: Do we know what kind of an impact the uncertainty that we’ve seen already is having on our economy?
DAVID-ALEXANDRE: Yes, the biggest impact, Roger, is on the investment level. If you look at the growth of our economy and break it down by component, consumption has done relatively well, although there are some consumer indicators that are worse off than they were a year ago. If you look at the investment level, it hasn’t moved or contracted ever since tariffs were implemented. So, there’s really, again, the uncertainty is really pushing on investments. And when you have, in combination, a housing market that’s a bit more struggling, that investment level is getting hit, not only on the business side but also on the housing side. So, it’s impacting. And, of course, I would be remiss not to mention that ever since we’ve had tariffs, we’ve had three quarters out of four where we saw the economy contract, with two of them being consecutive ones, and job growth has not exactly been stellar. We barely have more jobs than we had 14 months ago, and 2026, even though the monthly reading of May was good, we haven’t created jobs in 2026. So, there is indeed... tariffs are one part of the equation, demographics are another one, but I think tariffs have a big role to play in weighing down our economy right now.
ROGER: And would it be better in some ways if CUSMA was gone completely? Would that clear up some of the doubt, or do we... can we survive without CUSMA?
DAVID-ALEXANDRE: Yeah, the truth is, Roger, you mentioned that CUSMA allowed us to have fewer tariffs than we’ve had. If you compare another country, the effective tariff rate, which is essentially the percentage of tariffs that we’re paying on all of our goods that we’re sending to the U.S., were two and a half to three times lower than the rest of the world, and that’s because of CUSMA. Essentially, if you comply with the rules of origin in the agreement, you can enter the U.S. tariff-free from countrywide tariffs. So, in other words, almost the only pain that we feel comes from sectoral tariffs. That’s tariffs on steel, aluminum, lumber, that sort of thing, automobiles, of course. So, the carveouts under CUSMA are very important, and I think the rush to complying with CUSMA really illustrates how important they are. If you look at Canada and Mexico, Canada had 35 to 40 per cent of our exports that were compliant under the rules of origin before the tariffs. It’s now 80 to 90 per cent. Mexico was closer to 50 per cent. They’re closer to 90 per cent. So, in other words, businesses rushed to comply, indicating the importance of CUSMA. And, of course, if CUSMA is not there, we don’t have those carveouts. Imagine tariffs that are two and a half to three times higher and the impact that it would have.
ROGER: Okay, we have to wrap it up there. But thank you very much for joining us.
DAVID-ALEXANDRE: Thanks.
ROGER: David-Alexandre Brassard, chief economist at CPA Canada.
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This BNN Bloomberg summary and transcript of the June 25, 2026 interview with David-Alexandre Brassard are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
