CUSMA Talks Stall as Trump Dangles Tariff Relief to Canadian Steelmakers Who Move South

Formal bilateral talks on the future of the Canada-United States-Mexico Agreement are inching forward with Mexico but stalled with Canada, less than two months before a mandatory joint review deadline that could force major decisions on the future of North American trade. At the same time, the Trump administration has opened a back-channel front by offering tariff relief to Canadian steel and aluminum producers willing to commit to expanding production in the United States, an offer Ottawa views as both opportunity and pressure.

Where things stand

The CUSMA, signed in 2018 and in force since 2020, contains a built-in joint review provision that requires the three countries to decide by July 1, 2026, whether to extend the agreement for a further sixteen-year term. If no extension is agreed, the deal continues but enters a six-year window of annual reviews leading toward a possible 2036 expiry.

US Trade Representative Jamieson Greer has told visiting Canadian politicians and trade envoys in Washington that Canada should not attempt to use its energy and natural resources as leverage in the renegotiation. The remarks reflect a broader US administration view that bilateral engagement, rather than three-country talks, is the preferred frame for the upcoming review.

Canada-US Trade Minister Dominic LeBlanc, who has led most of Ottawa's negotiating engagement, has insisted publicly that Canada will not accept a "one-off" deal that addresses CUSMA renewal while leaving sectoral tariff irritants unresolved. Steel, aluminum, autos, dairy, and softwood lumber all sit alongside the broader review on Canada's list of issues. Mexico, by contrast, has accepted a more targeted framing.

Carney's posture

Prime Minister Mark Carney, in interviews this week marking the one-year anniversary of his electoral victory, said the talks with the Trump administration to renew CUSMA "could take some time" and that Canada will not allow its terms to be dictated by Washington. He also said Canada will not use its energy or critical minerals as explicit leverage, a comment that aligns with Greer's framing while preserving Ottawa's ability to negotiate around overall package balance.

The Prime Minister has framed the broader trade fight as part of a strategic shift away from over-reliance on the US market. The Canada Strong Fund, the SAFE defence partnership with the European Union, and the renewed posture on Asian export pipelines are all being positioned as elements of the same diversification strategy. The political logic is clear: making CUSMA renewal less of an existential question for Canada also makes it easier for Ottawa to negotiate from a position of strength.

Carney has been careful to avoid public threats. His advisory committee on Canada-US trade, which met on April 27, has been a vehicle for coordinating positions across business, labour, and provincial governments without spilling everything into public view. The Prime Minister's Office considers that disciplined messaging an advantage compared with the more freewheeling style that has characterised Mexican President Claudia Sheinbaum's approach to her own bilateral negotiations.

The aluminum and steel offer

The most concrete US move of the past week is a formal posting that creates a process for Canadian and Mexican steel and aluminum producers to receive tariff relief on shipments to the United States, in exchange for binding commitments to expand primary metals production capacity inside the US. Eligible companies could see existing 50 per cent tariffs cut roughly in half on qualifying volumes.

The framing of the offer has been controversial in Canada. Industry groups, including the Canadian Steel Producers Association, have characterised it as a thinly disguised effort to hollow out Canadian production rather than a genuine relief measure. Worker representatives in steel-producing communities such as Hamilton, Sault Ste. Marie, and Saguenay have been similarly sceptical.

From the US side, the offer is consistent with the Trump administration's broader strategy of using tariff pressure to drive direct investment into US locations. Several Canadian and Mexican producers, including some that already have US operations, are reviewing the offer's terms internally. Federal officials in Ottawa have signalled that Canada will respect the right of any individual company to evaluate its own commercial interest, while warning that long-term consequences for Canadian production capacity should be weighed carefully.

Provincial pressure

The bilateral imbalance, with talks moving with Mexico and stalling with Canada, has prompted increasingly vocal pressure from premiers. Ontario Premier Doug Ford, whose province absorbs the heaviest impact of US sectoral tariffs, has been the most public, calling for Ottawa to seek any avenue to restart talks while protecting steel and auto jobs.

Quebec Premier Christine Fréchette, sworn in last month, has framed her own intervention around aluminum, the centrepiece of the province's manufacturing economy along with the Saguenay-Lac-Saint-Jean and Côte-Nord regions. Alberta's Danielle Smith has pressed for a CUSMA package that builds in stronger commitments on energy market access. British Columbia's David Eby has focused on softwood lumber.

The result is a Council of the Federation environment in which the federal government is being pulled in multiple directions even before its negotiators sit down at the table. The political logic of an integrated package, the kind LeBlanc has been advocating, depends on those provincial concerns being absorbed into a coherent national posture rather than fragmenting it.

The economic stakes

Cumulative trade between Canada and the United States ran at roughly $1 trillion in 2024 before tariff effects began biting. Sectoral tariff impacts on steel, aluminum, and certain auto components have already reduced Canadian exports to the US, with knock-on consequences for employment in Ontario and Quebec.

Canadian inflation, currently running at about 2.4 per cent and projected to climb to 3 per cent in April, is being pushed higher in part by the cost effects of disrupted supply chains. The Bank of Canada has flagged trade uncertainty as one of two main drivers of its decision to hold the policy rate at 2.25 per cent through this spring.

For Canadian businesses, the most damaging effect of the standoff is uncertainty rather than the tariffs themselves. Capital investment decisions are being deferred, hiring is cautious, and integrated supply-chain planning has become harder. Even firms that have ridden out the tariff turbulence so far are signalling that prolonged ambiguity will eventually push them to relocate operations or reduce North American exposure.

Timeline pressure

The July 1 deadline for the joint review will be effectively impossible to meet at this point if the Canadian leg of the talks does not begin in earnest within weeks. Federal officials have acknowledged privately that an extension of the agreement for a clear 16-year window is no longer the most likely outcome by July 1, and that the more probable scenario is that CUSMA continues into its annual-review phase while bilateral negotiations carry on.

That outcome has trade-offs. It avoids any cliff-edge collapse of the agreement, but it leaves Canadian businesses operating under a permanently uncertain framework. It also creates regulatory and political space for the United States to keep tightening sectoral tariffs without facing an immediate broader trade-rule consequence.

For Mexico, the same scenario could prove more comfortable, given that bilateral talks with Washington appear closer to producing a stable framework. That asymmetry is one of the reasons Ottawa has been reluctant to allow the negotiation to fragment into purely bilateral channels.

What to watch

The next several weeks will see two important markers. First, whether the United States and Canada agree to a formal date for high-level CUSMA talks. Second, how many Canadian steel and aluminum producers, if any, take up the US tariff-relief offer in a way that meaningfully shifts production southward.

A possible third marker is congressional. The CUSMA review will play out in front of a US House and Senate that have been increasingly active on trade issues. Members of Congress representing border states have their own constituency interests that could push the Trump administration to strike a deal with Canada faster than the current pace suggests.

For Canadian businesses, the practical advice from federal officials and trade lawyers has been to plan for prolonged uncertainty rather than to bet on an early breakthrough. For Canadian workers, particularly in steel and aluminum communities, the political stakes of how Ottawa responds to the next phase of US pressure could be among the defining issues of the Carney government's second year.