The United States has declined to renew the Canada-United States-Mexico Agreement (CUSMA), pushing the trade pact into a decade of annual reviews that will keep it in force until 2036 unless either party gives six months' notice to withdraw. This precarious uncertainty weighs heavily on the Canadian economy, but as Margareta Dovgal argues in a National Post op-ed, Canada can still win by strategically conceding where its own policies make the country poorer and holding the line only where concessions would make Canada richer.
U.S. grievances and the real leverage
U.S. trade representatives cited the agreement's shortcomings and trade deficits with both Canada and Mexico. According to their figures, the goods deficit with Canada ran $46 billion last year, compared to $197 billion with Mexico. President Donald Trump framed the issue bluntly: "We don't need anything that Canada has. They need everything that we have. And they have to treat us better."
Yet the substance of the grievance suggests the opposite. The trade deficit Trump resents exists because Americans buy enormous volumes of Canadian oil and gas. At least for now, Canada's energy industry provides leverage in negotiations. Two decades of U.S. maneuvering have secured energy independence by volume—America has been a net petroleum exporter since 2020—but shale oil is a different input from Canadian heavy crude. The refineries of the American Midwest are built to run on Canadian heavy crude, which contributes to American export prowess.
Energy as a bargaining chip
The political fortunes of U.S. presidents operate in lockstep with domestic energy affordability. Trump rapidly backtracked on Iran when rising fuel prices spurred American consumer frustration. In Canada-U.S. trade, the same dynamic was evident when the U.S. granted a 10 per cent tariff carve-out for Canadian energy last year, while other goods drew 25 per cent tariffs.
Canada is just as dependent: energy is its most important export, and the U.S. is its top customer. Roughly nine in 10 barrels of Canadian oil exported go south. The Canadian government cannot forget that refinery slates and pipeline geography make Canadian heavy crude nearly irreplaceable in the Midwest—at least for now. However, Canada's strong hand will weaken as American re-sourcing efforts mature, particularly if Venezuelan heavy oil production is restored to historic levels.
Concessions that make Canada richer
Dovgal argues that each U.S. demand should be parsed on its own merits, not merely through the short time-horizon lens of trade disputes. The key question: Does resisting a demand make Canada richer, or does it feel good but make Canada poorer?
Supply management—Canada's system of dairy and poultry quotas and tariffs—is one area where conceding would make Canada richer. The system inflates consumer prices by hundreds of dollars per family annually and restricts market access. Eliminating or reducing supply management protections would lower food costs for Canadians and remove a perennial irritant in trade talks.
Similarly, Canada could concede on streaming services. U.S. demands for greater access to Canada's digital market—such as reducing Canadian content requirements for streaming platforms—would open the door to more American investment and content, benefiting Canadian consumers and potentially boosting cultural exports.
Holding the line on auto manufacturing
One area where Canada must hold firm is auto manufacturing. Washington wants a 50 per cent U.S.-content floor on North American vehicles. Conceding here would be economically devastating for Canada, because the capital is already sunk and the supply chains are continental. The auto industry represents nearly $17 billion of Canada's GDP. Such a floor would fracture integrated supply chains, raise costs, and shift production southward.
Dovgal concludes that by strategically conceding on supply management and streaming—policies that make Canada poorer—and leveraging its oil and gas exports, Canada can navigate the decade-long review period and potentially strike a new, more favorable deal with the U.S. before 2036.
