BMO likes the odds the deal survives but warns growth has stalled
Canada's economy has gone essentially nowhere over the past year as US tariffs hit exports, BMO chief economist Doug Porter said.
He sees little chance the deal underpinning much of that commerce gets torn up as the Canada-US-Mexico Agreement (CUSMA) review formally opens Wednesday, July 1.
According to BNN Bloomberg, Porter put “a very low probability” on the US scrapping the pact, and said he would not consider Canada to be in a recession despite the flat growth.
Negotiators have been clear that July 1 is a checkpoint rather than a hard deadline, CBC News reported.
The deal’s text sets the date for the three countries to approve a renewal or signal an intention to exit, a process that can run up to 10 years.
Canada and Mexico have both signalled they want a 16-year extension, while the US has leaned toward rolling annual reviews, and US President Donald Trump could trigger a clause to exit at any point with six months’ notice, as per BNN Bloomberg.
A deal is unlikely before the US midterm elections, Canada’s former chief trade negotiator, Steve Verheul, told an online business audience Monday.
Verheul, who led Canada’s talks during Trump’s first term and is now principal at GT & Co, said a window could open if Trump’s administration seeks a political win before voters head to the polls in the fall.
A deal "could come together" if that happens, he said, but he sees talks "more likely" stretching beyond the midterms and possibly into next year.
BMO’s forecast sees the economy struggling to grow in 2026 before rebounding in 2027, assuming the US tariff stance holds broadly unchanged over the coming year.
For Canada, the steep US sectoral tariffs on steel, aluminum, autos and some other commodities matter more than the review itself, Verheul said at the event for Bank of Montreal clients.
Those tariffs are holding back manufacturing on both sides of the border, and he expects some eventual easing, though uncertainty will persist.
“I think we’ll likely see some kind of adjustment over time but it may be a bumpy road until we get there,” he said.
Verheul questioned how long the tariff deals other countries cut with Trump will last, saying Canada has seen nothing "close to a good deal" and that those agreements are "not particularly solid."
Verheul and Porter both noted the US now stands largely alone in protectionism, while Canada and others diversify trade to reduce American dependence, BNN Bloomberg reported.
The real winner is China, Verheul said, which is advancing in world trade as the US falls behind.
Talks remain far from a resolution, US Ambassador to Canada Pete Hoekstra told CTV News last week, saying officials were “not anywhere close to announcing any type of a framework or an interim agreement.”
He said the next step rested with Trump and Prime Minister Mark Carney, and that any move could come before the deadline or in July, adding, “I don’t think it will go into August.”
According to BNN Bloomberg, Carney said earlier this month it is “no secret” that Trump is not the biggest fan of CUSMA but stressed that Canada keeps pressing on specific sectors.
Hoekstra cited a deal from Carney's October Washington trip covering oil, uranium, auto parts, steel, and aluminum, calling it one that "would have been awesome," according to CTV News.
He linked its collapse to "what happened in October and November," which CTV News reported seemingly pointed to an Ontario government anti-tariff ad voiced by former Republican US president Ronald Reagan.
The ad prompted the US to indefinitely terminate talks, though informal discussions have since resumed.
Business groups have framed Wednesday as a milestone rather than a cliff.
“We look at next week with some anxiety, but also hope, because the deal will continue. This is a checkpoint, not a cliff,” Ontario Chamber of Commerce CEO Daniel Tisch told CBC News, calling for an outcome that is “stable,” “trilateral” and “rules-based.”
He described the goal as “a renewal, not a re-do of CUSMA.”
The window opens as Premier Doug Ford prepares to lobby American lawmakers and business groups on his third trip in less than a month, attending the Western Governors’ Association conference in Utah on Monday and Tuesday, CBC News reported.
Canada-US Trade Minister Dominic LeBlanc is looking forward to meeting his US and Mexican counterparts on July 1, a spokesperson told CTV News.
