In January, while touring a Ford Motor Plant, President Donald Trump claimed that “there’s no real advantage” to CUMSA or the Canada-United States-Mexico Agreement, adding, “it’s irrelevant,” but “Canada would love it. Canada wants it. They need it.”
The U.S. president implied that the U.S has nothing to gain from the nearly 30-year-old free trade agreement
CUSMA, or the Canadian-United States Mexico Agreement, is the second iteration of NAFTA, the North American Free Trade Agreement.
The newest deal was signed in 2017 after President Trump, in his first term, sought to modernize the agreement.
The three North American nations signed a tentative agreement in 2018, revised the deal in December 2019, and ratified it in March 2020.
While constantly controversial, NAFTA had significant impacts on supply chains and manufacturing, particularly in the automotive industry, where car parts were produced across the continent before arriving in the Detroit-Windsor region for final assembly, enabling cheaper car production.
So the question is: in 2026, when the automotive industry is overseas, as are many other industries, what benefits does CUSMA provide, or is the President correct that it is irrelevant?
CUSMA remains relevant, according to Eugene Beaulieu, an economics professor at the University of Calgary.
“I would disagree with it 100 per cent,” said Beaulieu in an interview with the Calgary Journal. “I mean, U.S. businesses, U.S. industry, U.S. states that do so much trade and investment and two-way trade. I mean, trade with Canada and Mexico is, we’re the largest trading partners with the United States,” added Beaulieu, the program director of international economics at the University of Calgary’s School of Public Policy.
Imports
An RBC analysis from September of last year concluded that CUSMA primarily provides “duty-free access for the vast majority of U.S exports,” meaning that the trade agreement protects both Canadian and U.S exports from tariffs.
Ninety-five per cent of U.S. goods exports to Canada in 2024 were not subject to duties under the 2020 CUSMA, the RBC report notes.
“We’ve really created an integrated North American economy, right, right from the first bilateral free trade agreement between the United States and Canada. But even preceding that. Certainly, since then, our economies have become deeply integrated. So to say it’s not relevant or it’s irrelevant is just wrong,” said Beaulieu.
So if not for CUSMA, the U.S. and Canada would have to pay more to import their respective goods, which importers would likely pass on to consumers, resulting in higher grocery prices.
Manufacturing
As for manufacturing, RBC’s analysis determined that U.S. manufacturing would be hit hard should CUSMA dissolve, as it imports more Canadian and Mexican industrial goods than consumer goods.
Earlier this year, The New York Times also reported that ending CUSMA would be “catastrophic” to the companies that have structured their businesses around the trade deal.
In an interview with The New York Times, Trump’s trade representative, Jamieson Greer, said that there was no natural reason for CUSMA to be a single pact and that the US can deal with Mexico and Canada separately on various deals
To dissolve CUSMA and institute tariffs would impede that and create trade disruptions as well as dent U.S economic growth, which sees trillions of dollars under the trade agreement.
This was further supported by an article released by Fan and Jansen in the wake of the U.S. Supreme Court’s ruling against the tariffs created by the International Emergency Economic Powers Act, which accounted for 60 per cent of the tariff income, of which Canada was broadly protected under CUSMA.
Beaulieu, however, issued a correction to the President’s statement that it was being renewed.
“First of all, just a slight correction, it doesn’t have to be renewed, it has to be reviewed. So, I think maybe the president doesn’t understand that, but the original agreement that started in July of 2020 called for a review after 6 years,’ said Beaulieu. “July 1st is scheduled for a review, it’s not meant to be a renewal or a renegotiation, it is an opportunity to maybe address challenges or problems. One possible outcome. would be a renewal or an extension.”
Beaulieu said that any party can leave the agreement with six months’ notice. July 1st is the deadline to begin reviewing the trade deal.
“So to say we’re irrelevant or unimportant, to say the agreement is irrelevant or unimportant is at a minimum, it’s just a lie,” stressed Beaulieu.
Is CUMSA really ‘irrelevant’?
The U.S. president is incorrect. CUSMA is, in fact, remains relevant.
The current trade deal, as reflected in the current trade and import numbers between Canada and the U.S., remains deeply important for both countries, as it was under the previous NAFTA.
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