Canada’s Minister for US-Canada Trade, Dominic LeBlanc, traveled to Washington on a recent Friday to engage in high-level discussions with officials from the Trump administration. This marked the first significant dialogue between the two nations since formal trade negotiations stalled late last year. A key focus of LeBlanc’s meetings was the US-Canada-Mexico free trade agreement, commonly known as the USMCA, which is undergoing a mandatory review this year.
The USMCA, the successor to the North American Free Trade Agreement (NAFTA), has been a cornerstone of North American trade, facilitating the movement of goods and services between the three countries. However, relations soured late last year when President Donald Trump suspended trade talks in October. The suspension was triggered by an anti-tariff advertising campaign launched by Ontario, a Canadian province, which the White House viewed as provocative. Since then, Trump has considered drastically altering the agreement, including the possibility of scrapping the USMCA entirely or negotiating separate bilateral deals with Canada and Mexico.
Despite the US administration’s stance, both Canada and Mexico have expressed a strong preference for maintaining the trilateral trade agreement. Canadian Prime Minister Mark Carney voiced serious concerns about the future of the bilateral relationship with the United States, particularly warning against the consequences of what he described as a “zombie CUSMA” — the Canadian term for USMCA — or the complete dismantling of the agreement. Carney emphasized that recent US actions have effectively broken the free trade pact in the short term, undermining the framework that has long underpinned economic cooperation across North America.
The USMCA has played a critical role in shielding most Canadian exports from the broader tariffs imposed by the Trump administration. For instance, a new global 10% tariff was introduced under a rarely used legal provision known as Section 122, following a US Supreme Court ruling that invalidated certain duties previously imposed under presidential emergency powers. While this tariff broadly affects various sectors, Canadian goods have largely been exempted thanks to the protections of the USMCA.
Nonetheless, Canada continues to face sector-specific tariffs that have caused significant economic pain. Tariffs on Canadian steel, aluminum, and automobiles remain in place, despite Ottawa’s efforts before the talks broke down to secure some form of relief. These tariffs have inflicted substantial damage, especially in Ontario, where the automotive industry is a major employer and economic driver. US officials have indicated that some baseline tariffs are likely to stay regardless of the outcome of the ongoing USMCA review.
In parallel to the US-Canada discussions, the US and Mexico are preparing to hold bilateral talks on the USMCA review starting later in March, according to the office of US Trade Representative Jamieson Greer, who is also meeting with LeBlanc. The trilateral nature of the agreement means that the fate of USMCA depends heavily on the ability of all three countries to reconcile their interests.
While LeBlanc was engaged in talks in Washington, Prime Minister Mark Carney was concluding a diplomatic tour of the Indo-Pacific region. During his trip, Carney met with trade and investment counterparts in India, Australia, and Japan, countries that have become increasingly important to Canada’s efforts to diversify its economic partnerships beyond the United States.
In Tokyo, Carney and Japanese Prime Minister Sanae Takaichi signed a new strategic partnership aimed at deepening collaboration in defense, energy, and technology sectors. Japan’s support is particularly crucial for Canada’s automotive industry because Japanese car manufacturers produce about 70% of the vehicles made in Canada, many of which are exported to the US market. Japan’s ambassador to Canada, Kanji Yamanouchi, highlighted the interconnected nature of North American auto manufacturing by noting that these vehicles are both sold domestically in Canada and shipped across the border to the United States.
The automotive sector remains a contentious issue in the trade relationship with the US. US officials have voiced a desire for car manufacturing to be concentrated entirely within the United States — a shift that would disrupt the highly integrated supply chains that characterize the North American auto industry. Under the USMCA, vehicle production is spread across Canada, the US, and Mexico, with parts and partially assembled vehicles crossing borders multiple times before the final product reaches consumers. The tariffs imposed on Canada’s auto sector, concentrated in Ontario, have already resulted in thousands of job losses, underscoring the human cost of the trade tensions.
Prime Minister Carney, elected last year on