Canada-US Trade Talks Are Back On — But the US Is Already Negotiating With Mexico First

Canada-US trade talks officially resumed on March 6, 2026, after a five-month freeze — but business owners hoping for a clear path forward should temper their optimism. Trade Minister Dominic LeBlanc, Prime Minister Mark Carney's point man on the file, travelled to Washington this week for meetings with his US counterpart. It's the first face-to-face negotiation since President Trump called off discussions last October. The problem: the US is playing Canada and Mexico against each other ahead of a July 1 CUSMA review deadline, and Washington's own trade representative has said Canada's talks are 'lagging behind' Mexico's.

The Leverage Problem

The optics of resumed talks are better than the underlying mechanics. Trump continues to impose punishing tariffs on a wide range of Canadian goods — 25% on steel and aluminum, 50% on copper, 10% on softwood lumber, plus duties on automobiles, kitchen cabinets, and more. These tariffs haven't been suspended as a gesture of goodwill heading into negotiations. They're the negotiating instrument. With the CUSMA renegotiation deadline on the calendar, the US holds structural leverage: Canada needs a deal more visibly than Washington does, at least in the short term. Economists estimate the current tariff cycle has already trimmed Canadian GDP by 1.5 to 2%, and Canadian households are absorbing an estimated $1,700 to $2,000 in higher annual costs. That pain is translating into political pressure on Ottawa — which is exactly how Trump prefers to negotiate.

Mexico Moves Faster, Canada Waits

US Trade Representative Greer confirmed in mid-March that Canada's talks are trailing Mexico's as the administration prepares for this year's CUSMA review. That sequencing matters. If the US secures a framework agreement with Mexico first, it establishes the template — and the precedents — that Canada will then be asked to accept. Trump has also floated breaking CUSMA into separate bilateral agreements, which would strip away the multilateral protections Canadian businesses have relied on since NAFTA. None of this is a done deal, but it signals how Washington is thinking about the negotiation.

The July 1 Deadline — and Why It May Not Be a Hard Cliff

July 1 is the formal deadline for the three countries to complete their CUSMA review. But Canada does not technically need to make a renewal announcement on that date. Departing Canadian Ambassador Kirsten Hillman noted in late January that if consensus isn't reached, the agreement doesn't simply expire — it shifts into a rolling annual review process. In other words, a missed deadline extends uncertainty rather than triggering a collapse. That's marginally less catastrophic than a hard cliff, but it also means the current environment of unpredictability could stretch well into 2027.

The China Wildcard

Adding further risk to the picture: in January 2026, Trump announced the possibility of 100% tariffs on all Canadian imports should Canada finalize a trade agreement with China. That threat targets Ottawa's ongoing effort to diversify trade relationships in response to US tariff pressure — the very strategy Canadian policymakers have been pursuing as a hedge. It creates a bind: Canada needs alternative markets but faces punishing consequences for pursuing them too visibly. For small businesses that export or depend on imported inputs, this geopolitical dynamic is not abstract. It shapes the cost environment they'll be operating in for the next 12 to 18 months.

One Potential Opening

There is at least one pressure point working in Canada's favour. US Senate Republicans are increasingly sensitive to tariff-driven cost increases as the 2026 midterms approach. Consumer price pain in swing states creates political incentive for deals rather than escalation. That's a narrow but real opening — and Canada's negotiators are aware of it. Whether LeBlanc's Washington meetings this week translated into substantive movement isn't yet clear, and officials on both sides have been cautious about characterizing the talks publicly.

What This Means for Your Business

The honest planning scenario for Canadian small business owners right now is a four-month window of high uncertainty, not an imminent resolution. If you're making investment decisions — equipment, hiring, capacity expansion — that depend on stable cross-border costs, build in a margin for tariff persistence or further escalation rather than betting on a deal. Review your supply chain for any inputs subject to existing tariffs and model what a 10 to 25% increase looks like on your margins if the current duties become permanent. If you haven't already, document your US-sourced inputs and Canadian-exported goods as part of a tariff impact audit — this is the kind of preparation your accountant or business advisor can help you structure now.

The CUSMA annual review fallback means a missed July 1 deadline won't necessarily trigger an overnight crisis, but it will extend the grey zone that's already costing Canadian businesses in lost contracts, deferred orders, and pricing volatility. Keep an eye on how Mexico's negotiations develop over the next six to eight weeks — if a bilateral framework emerges there, it will tell you a great deal about what Canada will be asked to sign. For now, the advice is to plan for duration rather than resolution.