Canada Falls Behind as Mexico Advances in U.S. Trade Talks, Testing CUSMA Unity

Canada risks losing its equal footing within North America’s free trade framework as the United States pursues separate negotiations with Ottawa and Mexico City, creating two tracks moving at markedly different speeds and raising concerns about the future of the trilateral CUSMA agreement.

Mexico has already entered a third formal round of negotiations with Washington, while Canada has yet to begin comparable official talks over the agreement’s future. Communications continue between Canada-U.S. Trade Minister Dominic LeBlanc and U.S. Trade Representative Jamieson Greer, but a Mexican official familiar with the discussions said the U.S.-Mexico process is approximately six months ahead of Canada’s informal negotiations.

The latest U.S.-Mexico round covers several sensitive sectors, including automobiles, steel, aluminum, agriculture, labour standards, economic security and electronic payments. Washington has also said Mexico has taken steps to address American concerns by strengthening customs enforcement, improving intellectual property protections and aligning controls on dual-use exports more closely with U.S. standards.

Pressure on Ottawa has intensified following the Trump administration’s announcement of 50 per cent tariffs on a broad range of Canadian products, representing nearly US$20 billion in trade. The measures are scheduled to take effect on August 19 and include dairy products, cement, furniture, wine, hockey equipment, clothing and other goods.

Business groups fear that any agreement reached between the United States and Mexico could become a ready-made model that Canada would later be asked to accept or challenge. Such an outcome could weaken the trilateral character of CUSMA, despite public commitments from all three governments to preserve the agreement.

Washington and Mexico City largely agree on increasing North American-made content, reducing reliance on Asian components and tightening scrutiny of Chinese investment and supply chains. Canada, however, continues to demand the removal of tariffs on steel, aluminum, automobiles and lumber, while resisting concessions it considers unbalanced simply to secure a faster deal.

The Canadian government says it has submitted proposals it considers fair and balanced and remains prepared to accelerate the negotiations. Prime Minister Mark Carney is also facing domestic political pressure to maintain a firm position against the Trump administration, particularly after making the defence of Canada’s economic interests and sovereignty a central part of his political message.

Adding to the uncertainty, U.S. Trade Representative Jamieson Greer said Washington hopes to reach separate interim trade arrangements with Canada and Mexico before the end of 2026. More complex negotiations involving automotive rules of origin, labour provisions and environmental standards could continue into 2027.

The United States declined on July 1 to immediately extend CUSMA for another 16 years, but the decision did not terminate the agreement. CUSMA remains in force until 2036 and will now face annual reviews until the three countries agree to renew or revise it.

The agreement supports approximately US$1.6 trillion in annual regional trade, making any serious division a direct threat to investment, manufacturing supply chains and millions of jobs across North America.

Canada is now racing against the clock before the new U.S. tariffs take effect. If Mexico secures an early agreement, it could gain advantages in key industries such as automobiles, steel and investment. Ottawa may then face two difficult choices: offer concessions to speed up a deal or endure prolonged negotiations while economic costs continue to rise.