Losing the deal could triple Canada's tariffs as the July 1 review looms
Business investment in Canada has not budged since tariffs hit, and the chief culprit is the cloud hanging over CUSMA, David-Alexandre Brassard, chief economist at CPA Canada
"If you look at the investment level, it hasn't moved or contracted ever since tariffs were implemented," Brassard told BNN Bloomberg, calling the uncertainty around the trade pact one of the biggest headwinds facing the economy.
According to the same interview, the economy has contracted in three of the last four quarters, two of them consecutive, while Canada has barely added jobs in 14 months and created none in 2026 despite a strong May reading.
The stakes sharpen as Canada, the US and Mexico approach a July 1 review.
Brassard said CUSMA has kept Canada's effective tariff rate, the share of tariffs paid on goods sent south, two and a half to three times lower than the rest of the world.
Exporters that meet the agreement's rules of origin enter the US free of countrywide tariffs, he noted, leaving levies on steel, aluminum, lumber and autos as the main pain.
The rush to qualify shows how much those carve-outs matter: per Brassard, the share of compliant Canadian exports has jumped from 35 to 40 percent before the tariffs to 80 to 90 percent now.
Without CUSMA, he said, tariffs would run two and a half to three times higher.
Canada and Mexico are pushing to renew the deal for another 16 years, to 2042, with little success so far, Brassard told the broadcaster.
Failure to agree triggers an annual review, which he said would crystallize current uncertainty through yearly negotiation and likely concessions.
He questioned whether a 16-year extension is realistic, arguing the US administration has reshaped free trade into what he described as "pay-to-play agreements."
Deloitte Canada frames continued US market access as the linchpin of its outlook.
As reported by BNN Bloomberg, the firm expects growth of 0.7 percent in 2026 and 2 percent in 2027, with chief economist Dawn Desjardins calling CUSMA uncertainty the biggest challenge for any forecast.
Losing tariff-free access would leave "a much more difficult road ahead," she said, and internal Deloitte modelling shows such a loss would substantially hurt the economy despite diversification efforts.
Desjardins said business investment stays subdued as firms wait for trade certainty, though they hold ample liquidity and have lifted software spending to boost productivity.
She expects capital to flow once trade clarity arrives and hurdles like interprovincial barriers and permit delays ease.
Desjardins pushed back on recession talk even though Statistics Canada reported a second straight quarterly GDP decline, meeting the technical definition.
"In fact, beyond the headline numbers, there's little evidence that a recession is underway," she said in the Deloitte report, noting only tariff-hit sectors are contracting.
She expects the Bank of Canada to hold its policy rate through 2026, with inflation driven by energy rather than broad pressure; Statistics Canada said annual inflation reached 3.2 percent in May.
Diversifying beyond the US remains a long game, Brassard said.
Over the past 14 months, he noted, the trade balance turned positive only when US activity improved, with higher oil prices recently lifting export values to 2024 levels.
Ideally, he said, Canada wants to mend the relationship with the US.
In Washington, the agriculture lobby expects CUSMA to survive Donald Trump's criticism, CBC News reported.
Darci Vetter, a former US chief agricultural negotiator now at Driscoll's, said she is "quite confident and very optimistic" the deal endures but warned, "I think it could be a bumpy ride."
CUSMA stays in force until 2036 unless a country gives six months' notice, and it is unclear whether Trump can withdraw without Congress, according to the broadcaster.
The US has held two rounds of talks with Mexico and scheduled another for mid-July, while Canada's negotiations lag, though Trade Minister Dominic LeBlanc has met twice this month with US Trade Representative Jamieson Greer.
Prime Minister Mark Carney said Canada will "modernize" the pact but reject a bad one.
"We're not going to sign a bad deal, so it has to be a real deal," he said Thursday in Ottawa, as reported by CTV News.
He said Canada holds the best deal of any major US trading partner, with 85 percent of trade tariff-free, and that a breakthrough would come at the leader level.
