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

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U.S. President Donald Trump's administration is opting not to extend its trade agreement with Canada and Mexico, triggering what are expected to be tough negotiations on amending the deal.

The announcement by U.S. Trade Representative Jamieson Greer followed a virtual meeting on Wednesday with Canada-U.S. Trade Minister Dominic LeBlanc and Mexico's economy secretary, Marcelo Ebrard.

The U.S. announcement does not kill the Canada-U.S.-Mexico Agreement (CUSMA), which does not expire until 2036.

Wednesday was the deadline set out in the text of the deal for each country to declare whether they want to extend it to 2042 or renegotiate its terms.

The U.S. move was widely anticipated, although the Trump administration had not made it official until now.

Mexico and Canada had previously stated they wanted CUSMA extended, and were willing to discuss amendments.

WATCH | What Mark Carney expected from Wednesday's CUSMA meeting: Carney not expecting 'any drama' at July 1 CUSMA review meeting | Duration 0:35 Prime Minister Mark Carney says he isn't expecting 'any drama' at the first trilateral CUSMA review meeting set for July 1. 'We're expecting a constructive exchange,' Carney said of the planned meeting between Canadian, American and Mexican trade representatives.

Trump signed the agreement in his first term and hailed it at the time as historic. In recent weeks, he has frequently disparaged CUSMA but has stopped short of threatening to terminate it.

Any country can withdraw from the deal – known as USMCA south of the border – with six months' notice.

U.S. will 'continue to engage' with Canada, Mexico

"The United States did not agree to renew the USMCA in its current form," said Greer in a statement. "The United States will continue to engage with Mexico and Canada to address the agreement’s shortcomings and our trade deficits with these countries."

In a conference call with reporters, a senior Trump administration official said the president reserves the right to withdraw from the agreement.

LeBlanc said the three countries agreed Wednesday on the importance of continuing their discussions.

"For Canada, this includes substantive discussions with the United States on addressing sectoral tariffs on Canadian steel, aluminum, autos and lumber," LeBlanc said in a statement.

Canada-U.S. Trade Minister Dominic LeBlanc, and Canada's chief negotiator Janice Charette held a news conference on the terrace of the Canadian Embassy in Washington, D.C. on June 2. (Mike Crawley/CBC)

Mexican ⁠President Claudia Sheinbaum was downplaying the significance of Wednesday's deadline, saying the three countries could agree to an extension at any time over the next decade.

"The joint work continues — it's not as if everything ​ends today," Sheinbaum said Wednesday during her daily news conference in ⁠Mexico ⁠City, before the U.S. decision was announced.

"If in five months or three years ​the parties say, 'We can extend it for another 16 years,' it can be extended," she added.

No dates for next Canada-U.S. talks

Mexico has a third official round of negotiations with the U.S. scheduled for the week of July 20.

Neither LeBlanc nor Greer has indicated when negotiating teams from Canada and the U.S. will meet next.

The senior Trump administration official who briefed reporters described a difference in the approach between Mexico and Canada.

"Mexico, although we have many challenges in our relationship, including on trade, they do understand the administration's tariff policies. In many ways they've been constructive in this," said the official, who spoke on the condition they not be named.

"Canada is in a different position," said the official, and accused Ottawa of not addressing "many of the non-tariff barriers and trade challenges" that the U.S. has raised.

In the six years since CUSMA took effect, replacing the North American Free Trade Agreement, the value of trade between the three countries has grown by 37 per cent, now exceeding $1.9 trillion US annually.

While each nation has benefited from the expansion of trade that CUSMA brought, Canada's and Mexico's exports of goods to the U.S. have each grown more quickly than U.S. exports of goods to its neighbours.

U.S. trade deficit at heart of decision

That shift pushed up the U.S. goods trade deficit, a particular obsession of Trump's, as demonstrated by the official's response when asked why the U.S. decided not to extend the agreement.

"The primary issue that the president's been focused on with the world and particularly with Canada and Mexico is our trade deficit," said the official.

"We believe that the USMCA did not operate to control the deficit like the president intended, so that's really the heart of it," the official said.

CUSMA is particularly valuable to the Canadian economy because it exempts nearly 90 per cent of Canada's exports to the U.S. from the tariffs Trump has imposed since his return to the White House last year.

Canada is seeking relief particularly from the tariffs on steel, aluminum, autos and softwood lumber.

"We know that's how the Canadians and the Mexicans feel, we know they want adjustments," said the official. "At the same time, they also understand that we are going to have import controls on steel, aluminum, autos in the interest of U.S. national security."