The United States has filed formal complaints against Canada on key trade issues, including dairy market access and digital services taxes, ahead of the scheduled 2026 review of the Canada-United States-Mexico Agreement (CUSMA). The move signals growing friction between the two allies as the trilateral trade pact comes up for its first major renegotiation since its implementation in 2020.
US Targets Canadian Dairy and Digital Tax Policies
According to sources familiar with the matter, the U.S. Trade Representative's office submitted a series of grievances focusing on Canada's protectionist dairy sector, which the U.S. argues violates CUSMA commitments. The U.S. also objects to Canada's proposed digital services tax on large technology companies, calling it discriminatory against American firms. The complaints were filed just days before the official start of the joint review process, which is expected to begin in July 2026.
Drew Fagan, a professor at the Munk School of Global Affairs and Public Policy at the University of Toronto, told BNN Bloomberg that the U.S. is taking a hard line to pressure Canada into concessions. "The U.S. is clearly using the review as an opportunity to extract maximum leverage," Fagan said. "Canada will need to decide how much it is willing to give up on dairy and tech taxes to preserve the broader agreement."
Trade Pact Remains in Place Despite Missed Deadline
Despite the tensions, the trilateral trade pact remains in effect after the U.S. missed a key deadline to trigger a formal review. Under CUSMA, any party can request a review after six years, but the U.S. did not do so by the June 30, 2026 deadline. This means the agreement will continue automatically, though the review process can still move forward at a later date.
Canada's former chief trade negotiator, who spoke on condition of anonymity, said he expects no tariff deal before the U.S. midterm elections in November 2026. "The political climate in Washington is too volatile for a comprehensive trade agreement right now," he said. "Both sides are likely to kick the can down the road."
Broader Implications for Canada's Economy
The trade disputes come at a critical time for Canada, which is also facing potential tariffs on steel and aluminum exports to the U.S. and ongoing softwood lumber disagreements. The International Energy Agency (IEA) has suggested that Canada has a 'once in a lifetime opportunity' to become an energy superpower, but trade barriers with the U.S. could hinder that potential.
Meanwhile, Canada's economy is grappling with other challenges. The Bank of Canada has warned that prolonged trade uncertainty could dampen business investment. Ontario's manufacturing sector, in particular, is vulnerable to any escalation in U.S. tariffs.
Political Reactions and Next Steps
Prime Minister Mark Carney's government has downplayed the complaints, calling them routine ahead of the review. "Canada will defend its interests vigorously," a spokesperson said. However, opposition parties have criticized the Liberal government for not doing enough to protect Canadian industries.
The next formal step is a meeting of trade ministers from all three countries, expected later this summer. Analysts say the outcome of that meeting will set the tone for the rest of the renegotiation process.
