Trump isn't extending CUSMA trade deal, so what happens now?

What’s next for CUSMA after U.S. Declines file name extension

The ruff governance surprised no ace with its long-expected announcement Wednesday that the U.S. Would not join Canada and Mexico in extending the free trade deal between the three countries.

Where things go from here, however, with renegotiating the Canada-United States-Mexico Agreement (CUSMA) is anyone's guess.

One thing is certain: the deal remains in effect while the negotiations happen, as it doesn't expire for another 10 years.

The only circumstance that would change that is an official six-month notice of withdrawal, something U.S. President Donald Trump has stopped short of threatening to do.

Domestic political concerns keep the White House from scrapping the trade agreement, according to Simon Lester, a trade expert and non-resident fellow of the Baker Institute at Rice University in Houston, Texas. He says CUSMA has broad support from Republicans in Congress, particularly those from agricultural states.

U.S. Declines CUSMA extension. What does it mean for Canada?

Rather than ripping up the agreement, the Trump administration signalled Wednesday that it wants to renegotiate some of its terms.

"The United States will continue to engage with Mexico and Canada to address the agreement’s shortcomings and our trade deficits with these countries," said U.S. Trade Representative Jamieson Greer in a statement.

"The agreement remains in force pending resolution of these issues or until the agreement’s termination," Greer said.

The U.S. Could reach what the official described as "protocols" with each country that would — in the White House's view — improve CUSMA.

U.S. Declines to extend CUSMA trade deal with Canada, Mexico

"I could see a world where we have, you know, a protocol with Mexico or a protocol with Canada within President Trump's term," the official said, speaking on condition they not be named.

"I think that's definitely possible if those protocols, or if those agreements, are really geared to and have the outcome of reducing our [trade] deficits with those countries."

The official said Trump "remains skeptical" that such side deals can be reached with Canada and Mexico.

"But I think it's in the interest of our countries to keep negotiating to see if there's a good landing zone," the official said.

Canada-U.S. Trade Minister Dominic LeBlanc is open to this path.

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While everyone's still willing to talk, it's less than clear there's willingness to compromise on the thorniest trade irritants.

The Trump administration has signalled its priorities include more U.S.-made content in automobiles and greater access to Canada's dairy market.

But is the White House in turn willing to discuss Canada's top demand, a reduction in U.S. Tariffs on steel, aluminum and autos?

"It's a little hard to see how the president's goals would coincide with an adjustment," the official said. "But we know that they're interested in this, and obviously, it's going to be up to President Trump to decide whether or not any kind of adjustment's warranted."

That's not a flat-out no.

Lester, the trade expert, questions whether it's realistic for the U.S. To expect significant concessions from Canada and Mexico.

"I'm not sure that what they're looking for is achievable," he said. "Can they get these concessions, given the fact that they're probably not willing to give much in return?"

Now that the July 1 milestone has passed, the timeline for talks on revising CUSMA is unknown.

Some observers have suggested the Republicans likely want a deal by Labour Day to give the U.S. Economy a shot in the arm before November's crucial midterm elections.

Carney not expecting 'any drama' at July 1 CUSMA review meeting

Others are skeptical that a new U.S. Trade agreement with Mexico and/or Canada would be much of a sell on the campaign trail, and they believe the negotiations could well continue into 2027.

"Normal politicians do see trade deals as a win that can help them politically. I think that Trump is a little different in that he sees tariffs as a win that can help him politically," said Lester.

"I think the most likely scenario is they just keep talking and nothing gets decided before the midterms. After the midterms, everything's up in the air."

Tariff deal with Trump unlikely before U.S. Midterms, says Canada's former trade chief

On paper, according to the text of CUSMA, the three sides could now enter a perpetual series of renegotiations every year until the agreement expires in 2036.

In reality, they could reach a deal to extend the agreement at any time.

The Trump administration official said it's not in the interests of the U.S. To drag the talks on for a decade. "I think we need to come to a conclusion quickly if possible."

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