Canada Day this year on Wednesday coincides with decision day for the Canada-U.S.-Mexico Agreement on trade, known in the U.S. as the USMCA. While it is not a deadline to reach a new deal, three options are on the table for July 1, with one scenario—dubbed the “zombie” agreement—emerging as the most likely outcome.
Three possible scenarios for July 1
The first option is for the three countries to agree to extend the deal, which came into effect on July 1, 2020, for an additional 16 years until 2042. This is considered unlikely because while Canada and Mexico favor an extension, U.S. President Donald Trump does not.
The second scenario, also improbable, involves any one of the three nations—but realistically only the U.S.—giving six months’ written notice to terminate the agreement. This can happen at any time after July 1 and is not part of the mandatory review process.
The third and most likely scenario is to subject the agreement to mandatory annual reviews until it expires a decade from now in 2036. Ian Bremmer, founder and president of the Eurasia Group, which has close ties to Prime Minister Mark Carney’s government, described this outcome earlier this year as a “Zombie USMCA.”
What a zombie agreement means
Bremmer ranked the zombie scenario as number nine in a top 10 list of global risks for 2026. He wrote: “North American trade will be stuck in limbo in 2026. The USMCA won’t be extended, updated, or killed. It will stagger on as a zombie, keeping businesses and governments guessing while President Donald Trump continues negotiations with America’s two largest trading partners … a North American trade zone buffeted by chronic uncertainty.”
If the deal remains in place, 85% of Canada’s exports to the U.S. are tariff exempt as long as they are CUSMA compliant. However, the ongoing uncertainty over the ultimate fate of CUSMA, combined with Trump’s sectoral tariffs on Canadian steel, aluminum, autos, and wood products, continues to dampen the Canadian economy, particularly in Ontario and Quebec.
Carney’s stance
Prime Minister Mark Carney has expressed confidence that the U.S. and Canada will eventually reach a new trade deal, but he has not provided a timeline for when such an agreement might be achieved.
