Borders, business and bargains

With contributions from Noha Fazili, research analyst

Please note: All comments, information and data are as of end of day, Friday, June 19, 2026.

There have been some positive developments for Canada post-“Liberation Day” (April 2, 2025, when President Trump’s tariff announcement took effect).

Last year, Canada was able to diversify trade away from the U.S. According to RBC Economics , the U.S. share of total Canadian exports dropped to below 70 percent by the end of 2025, versus over 75 percent in 2024. Canada saw a $29-billion increase in exports to its non-U.S. trading partners, which largely offset a six-percent year-over-year decline in exports to the U.S. This diversification was largely driven by higher gold prices–in 2025, gold was Canada’s second-largest export, behind crude oil.

Canada’s gold and energy exports drove gains to non-U.S. markets in 2025

Top product exports to non-U.S. markets, change in total nominal exports 2025/2024, in $ billions

The Canada-U.S.-Mexico Agreement (CUSMA) has continued to act as an important buffer against the volatile and often heavy-handed tariff policy changes doled out by the Trump administration.

Following the U.S. Supreme Court ruling that Trump overstepped the boundaries of executive authority when he invoked the IEEPA to impose sweeping tariffs on the basis of national security risks, the U.S. Trade Representative (USTR) launched an investigation pursuant to section 301 of the Trade Act of 1974, targeting 60 countries. This led to the USTR proposing an additional 10-percent duty on goods from Canada and other countries, on the grounds that they had failed to ban imports made with forced labour.

The USTR also proposed a 12.5 percent levy for 44 additional trading partners. Importantly, however, this additional tariff would not apply to goods falling under CUSMA.

In response to the USTR’s proposal, Canada has indicated that additional measures to strengthen its prohibitions against imports of goods made from forced labour will soon be introduced before Parliament.

D-Day for CUSMA

At the time of writing, July 1 looms large in the minds of Canadians as the fateful date for the renegotiation of CUSMA. Officials from all three member countries have indicated that discussions are likely to run past that date. Three options are on the table with regard to the trade alliance governing US$2 trillion  in continental trade:

1. Reach an agreement and renew it for 16 years
2. Miss the deadline and roll it into annual reviews
3. Dissolve it completely

In the absence of a resolution on July 1, the agreement will stay in place until at least 2036—barring one of the partner nations walking away completely—and enter into rolling annual reviews. While we would argue that, for now, this is a better option than a cessation of CUSMA, uncertainty lingers. Canadian officials are reportedly bracing themselves for a scenario in which tariff negotiations drag on for years—potentially until Trump’s term concludes in early 2029.

Ottawa’s ask remains straightforward: relief on the Section 232 sectoral tariffs crushing autos, steel, aluminum and lumber. Washington’s ask is less so: higher North American content rules (specifically in autos), tighter rules of origin and a long list of policy concessions from dairy quotas to streaming regulations.

While Prime Minister Carney has spent the better part of the year appearing skeptical of Canada’s close economic integration with its southern trading partner, his perspective has recently become more conciliatory. In early May, he began to reference “Fortress North America”—a strategic trade and economic framework that emphasizes Canada’s critical value to the U.S. through entrenched integration across the continent, tightly integrated supply chains and alignment with U.S. economic and security policies. The timing of this pivot, we believe, aims (wisely) to ease the tenor of imminent negotiations with regards to CUSMA.

Still, discussions will require finesse and dexterity on the part of the Canadian government. A push toward this kind of framework to preserve the cross-continental trade alliance must be balanced with the maintenance of Canadian sovereignty and the preservation of other international trade alliances. 

Notwithstanding the concessions already made by Canada (e.g. digital services, border security, military commitments), we believe investors should expect the bellicose rhetoric from the Trump administration to escalate, thus potentially sparking some market volatility.

Over the medium to long term, we maintain our view that all parties involved will ultimately reach an agreement to forge ahead with CUSMA 2.0. However, we believe the U.S. will harness its heft as the biggest export market for Canada and Mexico to extract some concessions from both of its CUSMA partners, though we expect the broad strokes of the agreement to remain intact.

The U.S. is the biggest export market for its USMCA partners

U.S. share of total merchandise exports, 2024

The successful renegotiation of NAFTA (CUSMA’s predecessor) during Trump’s first term provides some grounds for optimism. In our view, the president’s decision to allow tariff exemptions for those goods that are CUSMA-compliant is also a positive sign.

Although the Trump administration’s posturing may suggest otherwise, it’s important to remember that this alliance is economically beneficial to the U.S.—by RBC Economics’ assessment, at least 95 percent of U.S. goods exported to Canada in 2024 had zero tariffs  thanks to the agreement. Notably, Canada is the top export market for more than 50 percent of U.S. states. Recently, U.S. Trade Representative Jamieson Greer acknowledged that negotiations for the North American trade alliance will likely spill over the July 1 deadline and that they could result in separate arrangements with Canada and Mexico built on top of the existing trilateral agreement. In other words, the core of the agreement would likely remain in place, as the U.S. seeks to address specific grievances with Canada and Mexico in separate side agreements. For Canadians, as ever, hope springs eternal.

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