Canadian businesses are delaying spending decisions as trade talks drag on
Royal Bank of Canada chief executive Dave McKay said Tuesday that the Canada-United States-Mexico Agreement (CUSMA) is too important to all three signatories for any of them to abandon, even as unresolved negotiations weigh on business confidence in Canada.
McKay characterized the ongoing trade talks as a routine part of economic adjustment rather than a sign of deepening strain in the Canada-US relationship — a position he maintained even as RBC continues to expand its operations south of the border.
"We want to maintain our $1.3 trillion relationship with the United States and grow that at the same time," McKay said of Canada's pursuit of diversified trade.
CUSMA renewal enters critical phase
The July 1 deadline requires officials in all three countries to notify their counterparts whether they want to renew CUSMA for another 16-year term or enter an annual review process. McKay noted, however, that the agreement is structured to remain in force until at least 2036 regardless of what happens at that checkpoint, a point Canada's trade negotiators have also emphasized.
Chief negotiator Janice Charette has said the July 1 date should not be viewed as a hard deadline, noting that some trade issues will not be fully resolved by then, as reported by CBC.
On June 10, 2026, US President Donald Trump said that he is "not looking to renew" CUSMA. He added that the United States does not need anything Canada or Mexico produces, while both countries depend heavily on access to the US market. The Trump administration has also signalled that it wants significant changes to the agreement's terms, including provisions related to automotive exports and access to Canada's dairy market.
Since April 2025, Canadian-made vehicles have faced a 25 percent US tariff on their non-US content, with more than 90 percent of Canadian-made vehicles and 60 percent of Canadian-made auto parts currently exported to the United States.
Prime minister Mark Carney has described those levies as a CUSMA violation. "You know what's an irritant? Fifty percent tariff on steel, 50 percent tariff on aluminum, 25 percent tariff on automobiles, all the tariffs on forest products," Carney said during an exchange with reporters in Ottawa in April.
On dairy, Washington has pressed Ottawa to open its supply-managed market further. The US International Trade Commission launched a dairy protein dumping probe against Canada in July 2025. The investigation handed Washington additional leverage ahead of the 2026 CUSMA review.
McKay expects eventual agreement
Despite that backdrop, McKay said he is confident an agreement will eventually be reached, even if the process is prolonged. He acknowledged, however, that the uncertainty is already affecting economic activity in Canada. Unresolved CUSMA negotiations are dampening business appetite for investment, he said, in contrast to the United States, which remains in a risk-on environment.
"We're certainly seeing some demand coming out of [the] Canadian economy, but I would say it's slowing," McKay said.
RBC, he added, is open to taking on more risk in the US market as that economy performs well and accounts for a growing share of the bank's balance sheet, The Canadian Press reported. McKay cited strong capital-markets activity driven by artificial intelligence investment, including debt issuance and equity offerings by AI startups and large-scale cloud operators.
That cautious mood in Canada is reflected more broadly. Data shows Canadian business investment has remained below 2015 levels, even as the federal government pitches major capital spending programs to reverse the trend.
Trump's remarks last week that he is "not looking to renew" the agreement have added to that uncertainty, though legal experts have noted the deal remains in force until 2036 and withdrawal requires six months' notice.
