Canada and the United States will commence formal discussions to review their free trade agreement in mid-January 2024. The announcement, made by the office of Canadian Prime Minister Mark Carney, confirms that Dominic LeBlanc, the designated representative for U.S.-Canada trade relations, will engage with U.S. officials to kick off these crucial talks.
The current trade framework, known as the United States-Mexico-Canada Agreement (USMCA), is set for review in 2026. The agreement, negotiated during Donald Trump‘s presidency, includes provisions for potential renegotiation. Carney shared this update during a meeting with provincial leaders in Toronto on December 14, 2023.
Canada relies heavily on trade, with over 75% of its exports directed to the United States. Most goods exported to the U.S. enjoy exemptions under the USMCA. However, trade relations have faced challenges. In October, Trump halted negotiations aimed at reducing tariffs on certain sectors after the Ontario government launched an anti-tariff advertisement in the U.S. This followed a period of tension due to Trump’s earlier comments suggesting Canada should become the 51st state.
Carney indicated that Canada and the U.S. were nearing an agreement on tariff relief in several sectors, including steel and aluminum. The ongoing tariffs have adversely affected various industries in Canada, particularly aluminum, steel, automotive, and lumber.
Key Issues on the Table
Trade irritants highlighted this week by U.S. Trade Representative Jamieson Greer are expected to form part of a broader discussion regarding continental trade policies. Greer noted that the upcoming review of the USMCA will depend significantly on addressing U.S. concerns related to Canadian policies on dairy products, alcohol, and digital services.
Canada is the leading export destination for 36 U.S. states, facilitating nearly $3.6 billion CAD (approximately $2.7 billion USD) worth of goods and services crossing the border daily. Furthermore, approximately 60% of U.S. crude oil imports and 85% of U.S. electricity imports originate from Canada.
Canada is also a vital source of critical minerals and metals, with the Pentagon expressing interest in these resources for national security. Carney emphasized that U.S. access to Canada’s critical minerals is not guaranteed. “It’s a potential opportunity for the United States, but it’s not an assured opportunity for the United States,” he stated, pointing out that Canada has global partners, including those in Europe, eager to engage in trade discussions.
Carney and the provincial premiers plan to convene in person in Ottawa early in the new year to further discuss trade matters. As the formal discussions begin, both nations will seek to address key issues that could shape their economic relationship for years to come.
