After trade talks collapse, CUSMA review won’t 'happen anytime soon,' says former top negotiator
The trade pact is now subject to annual reviews, after the U.S. decided in July not to renew it for another 16 years
OTTAWA – Canada’s former chief trade negotiator Steve Verheul doesn’t expect formal negotiations on the review of the Canada-United States-Mexico-Agreement (CUSMA) between Canada and the U.S. to happen anytime soon, following the collapse of trade talks between the two countries last week.
“I think that the discussions between Canada and the U.S. on the CUSMA review have now been put into some question,” said Verheul, who now serves as a principal at GT and Company, during a webcast hosted by BMO Capital Markets on Wednesday.
Verheul said the expectation coming out of negotiations for an interim deal on Section 338 and Section 232 tariffs between the two countries, would be a commitment for both parties to enter the formal process of reviewing the North American trade pact.
“I expect at some point we will get back to that kind of discussion, but I don’t think it will happen anytime soon,” he added.
Verheul was the chief negotiator who led Canada’s role in the creation of CUSMA. The trade pact is now subject to annual reviews, after the U.S. decided in July not to renew it for another 16 years.
Mexico and the U.S. just completed the third formal bilateral negotiation round under the joint review of CUSMA last month in Mexico City. On Monday, Mexican President Claudia Sheinbaum said she was optimistic that Mexico and the U.S. could reach a deal on Section 232 tariffs.
The collapse of negotiations between Canada the U.S. last Friday has led to a tit-for-tat escalation in the trade conflict between the two countries.
The U.S. has applied 50 per-cent tariffs under the Smoot-Hawley Tariff Act on nearly $28 billion worth of Canadian goods. In return, Canada has applied retaliatory tariffs ranging from 15 to 50 per cent on $27.6 billion worth of U.S. imports, effective Sept. 8. Canada has also doubled tariffs on U.S. steel and aluminum.
U.S. President Donald Trump has also threatened to double tariffs to 50 per cent on Canadian autos and trucks and put a levy on auto parts, effective Jan. 1.
After weeks of negotiations for interim agreement, Prime Minister Mark Carney said ultimately several last-minute demands from the U.S. side led to his government having to walk away from the agreement that was offered.
Carney said those demands included Canadian trucks not receiving the same tariff relief treatment as Canadian autos, language in the deal around restricting Canada’s ability to make trade deals with other countries, and “efforts to restrict our protections of our language, our culture, and in effect, our sovereignty.”
On Wednesday, Verheul cited those reasons for the breakdown in talks as well, adding that U.S. negotiators also wanted Canada to match U.S. tariffs on steel and aluminum from other countries and would not include aluminum-containing products as part of the reduction in tariffs.
When asked what it would take to get back to the negotiating table, Verheul said he expects Trump’s tariff policy to become progressively more unpopular domestically.
Verheul noted the U.S. business community is virtually unanimous in its support for the extension of the North American trade pact, and the American public is not in favour of tariffs. He also said manufacturing starts and jobs are down in the U.S.
“I think those kinds of pressures will come to bear, and I hope sooner rather than later,” he said.
National Post
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Facts Only
* Canada’s former chief trade negotiator is Steve Verheul.
* Formal negotiations for the CUSMA review are not expected anytime soon following collapsed trade talks between Canada and the U.S.
* The trade pact is now subject to annual reviews after the U.S. decided not to renew it for another 16 years in July.
* Mexico and the U.S. completed a third formal bilateral negotiation round under CUSMA last month in Mexico City.
* The collapse of negotiations led to retaliatory tariffs: the U.S. applied 50 percent tariffs on nearly $28 billion worth of Canadian goods, and Canada applied retaliatory tariffs ranging from 15 to 50 percent on $27.6 billion worth of U.S. imports starting September 8.
* Canada doubled tariffs on U.S. steel and aluminum.
* U.S. President Donald Trump threatened to double tariffs to 50 percent on Canadian autos and trucks and imposed a levy on auto parts, effective January 1.
* Prime Minister Mark Carney walked away from an interim agreement due to last-minute demands regarding tariff treatment for trucks, restrictions on trade deals, and sovereignty concerns.
* Verheul cited the U.S. negotiators' desire for Canada to match U.S. tariffs on steel and aluminum as a reason for the breakdown.
Executive Summary
Full Take
The narrative surrounding the collapse of CUSMA negotiations illustrates how transactional deadlock can stall long-term structural reviews. The process moved from seeking an interim deal—a potential stepping stone to formal review—to outright conflict, demonstrating that short-term tariff disputes quickly escalate into broader sovereignty and market access disagreements. Verheul’s expectation for a return to substantive talks contingent on domestic political shifts reveals that the framework of the trade agreement is less about fixed terms and more about prevailing domestic political and economic sentiment. This suggests that achieving agreements requires managing external pressures (like domestic public opinion regarding tariffs) alongside negotiating specific sectoral concessions. The pattern here suggests that when high-stakes negotiations fail, the focus shifts from legalistic compliance to leveraging domestic political vulnerability as a mechanism for future change. The implication is that momentum for systemic review relies heavily on shifting internal political landscapes rather than solely on external bargaining positions.
What factors beyond immediate tariff demands determine the trajectory of complex multilateral reviews? How does the dynamic between stated agreements and demonstrated political flexibility influence long-term institutional stability in trade pacts? What alternatives exist if domestic political alignment remains fractured during periods of international negotiation deadlock?