The Canada USMCA Trade Deal is facing a new wave of uncertainty after the United States declined to renew the North American trade pact in its current form, leaving Canada with what experts are calling a “zombie” agreement that remains alive but unstable.
The warning comes as Canadian trade experts urge Ottawa not to rush into a new deal simply to end uncertainty. Instead, they argue Canada should stay firm, protect its leverage, and avoid making concessions from a position of fear.
Canada USMCA Trade Deal Enters Uncertain Phase
The United States-Mexico-Canada Agreement, known as USMCA in the U.S. and CUSMA in Canada, officially came into force in 2020 as the replacement for NAFTA. Under the agreement’s review clause, the three countries were required to hold a joint review on July 1, 2026.
After that review, U.S. Trade Representative Jamieson Greer said the United States “did not agree to renew the USMCA in its current form.” That decision does not immediately end the pact, but it triggers a more uncertain annual review process.
Trade law analysis from White & Case says the agreement can now be reviewed every year until the countries agree to extend it or until it expires on July 1, 2036.
Why Experts Call It A ‘Zombie’ Trade Pact
The term “zombie” trade pact describes an agreement that is neither fully dead nor fully secure. It continues to operate, but businesses, investors and governments cannot be confident about its long-term future.
Eurasia Group warned earlier this year that North American trade could get stuck in limbo, with USMCA not fully renewed, not fully updated and not fully terminated.
That risk now appears more serious after Washington’s refusal to extend the deal as it stands. The result is a trade pact that remains legally active but politically fragile.
For Canada, this creates a difficult situation. The agreement still protects a large share of Canada-U.S. trade, but the uncertainty can affect investment decisions, supply chains, manufacturing planning and business confidence.
Report Urges Canada Not To Negotiate From Fear
A new report from the Expert Group on Canada-U.S. Relations has drawn attention for warning that Canada must live with the unstable trade pact while resisting pressure to rush into a new agreement. Public posts from members of the group say the report was sponsored by Carleton University’s Norman Paterson School of International Affairs, the Canadian Global Affairs Institute and the University of Calgary’s School of Public Policy.
Perrin Beatty, one of the group’s leading voices, said the U.S. decision leaves CUSMA in limbo and is designed to force unilateral concessions from Canada. He argued that Canada should not fear negotiations, but should also not negotiate from fear.
That message is important because a rushed deal could give Washington more leverage. Canada may want stability, but accepting weak terms could create long-term damage for key sectors such as autos, steel, aluminum, agriculture, energy and digital trade.
Why The U.S. Wants Changes
The Trump administration has argued that USMCA has not done enough to address trade imbalances or strengthen American manufacturing. Reuters reported that Washington wants revisions aimed at reshoring jobs, reducing deficits and tightening rules of origin for North American manufacturing.
U.S. complaints against Canada include dairy market access, Buy Canadian policies, digital services tax concerns, alcohol distribution rules, agricultural regulations and pharmaceutical pricing issues.
For Canada, many of these issues are politically sensitive. Supply management, for example, is strongly defended by Canadian leaders and farm groups. Any major concession could create domestic backlash.
Canada Faces A Strategic Choice
Prime Minister Mark Carney has already signaled that Canada will not rush into a bad deal. Global News reported that Carney said Canada would take the time needed to ensure any renegotiated CUSMA deal benefits all sides.
That approach reflects the central challenge for Ottawa. Canada needs access to the U.S. market, but it also needs to show that it cannot be pressured into one-sided terms.
A cautious strategy may involve keeping the existing agreement alive, working with Mexico where interests align, supporting affected industries, challenging unfair tariffs when possible, and expanding trade relationships beyond the United States.
Business Uncertainty Could Grow
The biggest negative effect of a “zombie” trade pact is uncertainty. Companies that build vehicles, machinery, food products or industrial goods across North American borders need predictable rules. If businesses believe trade rules could change every year, they may delay investment or shift production plans.
Barron’s reported that the U.S. decision creates uncertainty around a trade relationship worth about $1.6 trillion and could affect investment across North America.
That uncertainty does not mean trade stops. Goods will still move across borders. But the lack of long-term certainty could make Canada less attractive for some investment decisions.
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