CUSMA reached a key review deadline today, July 1, with Canada still without the trade certainty Prime Minister Mark Carney promised to secure. Canada, the United States and Mexico did not agree to extend the free trade pact for another 16-year term. Instead, the agreement will now be subject to annual reviews for the remaining decade.

The Canada-United States-Mexico Agreement (CUSMA) does not automatically disappear because the three countries failed to agree on a renewal. Instead, the agreement remains in force while entering a period of annual reviews leading to its scheduled expiry in 2036 unless the three countries later agree to extend it.

Throughout the election campaign and since taking office, Carney has argued Canada must become less dependent on the United States by building "one Canadian economy," diversifying exports and protecting Canadian sovereignty. He has also said Canada is "not a supplicant" and would not allow Washington to dictate the terms of the CUSMA review.

Those remarks have framed his trade policy as a defence of Canadian sovereignty, but they have also coincided with a widening divide between Ottawa and Canada's largest trading partner. The Office of the U.S. Trade Representative says Canada-U.S. goods trade totalled US$719.5 billion in 2025, including US$336.5 billion in U.S. exports to Canada and US$383 billion in imports from Canada.

One of the most significant sticking points remains Canada's supply management system for dairy, poultry and eggs. Washington says Canada's dairy system restricts U.S. market access through production quotas and tariff rates above quota levels that can exceed 200 per cent.

The Liberal campaign platform pledged to keep supply management off the table in negotiations with the United States and continue protecting dairy, poultry and egg producers. While the policy protects a politically influential sector, it also leaves one of Washington's principal trade complaints unresolved at a time when the broader Canadian economy depends on reliable access to its largest export market.

Supply management also carries a consumer cost. A 2026 Montreal Economic Institute analysis estimated the system costs the average Canadian $244 annually through higher prices. The report found Canadians pay 171 per cent more for milk, 46 per cent more for eggs and 29 per cent more for chicken than consumers in comparable U.S. Midwest markets.

The benefits are concentrated geographically. The Canadian Dairy Commission says Ontario and Quebec account for 81 per cent of Canada's dairy farms. Federal poultry and egg data show 61 per cent of chicken production occurs in those two provinces. Of Canada's 1,295 registered egg producers, 53.2 per cent are located in Ontario and Quebec, which together produce 56.9 per cent of the country's graded eggs.

Mexico, meanwhile, appears to be moving ahead more quickly with Washington. U.S. and Mexican officials have already scheduled multiple rounds of negotiations, including a third round in Mexico City during the week of July 20. Mexican Economy Minister Marcelo Ebrard has said the continuing schedule demonstrates progress.

Canada has made some progress in reducing its reliance on the U.S. market. Global Affairs Canada reported exports to the United States fell 5.8 per cent in 2025, while exports to non-U.S. markets increased 17.2 per cent to a record level. The U.S. share of Canadian exports declined from 75.9 per cent in 2024 to 71.7 per cent in 2025.

The declining share of exports going to the United States does not necessarily mean Canada has become economically less dependent on its largest trading partner. While exports to non-U.S. markets reached a record level, overall Canadian goods exports still declined slightly in 2025 and the country's goods trade deficit widened from $7.2 billion to $31.3 billion. The figures suggest much of the shift came from weaker exports to the United States rather than sufficient growth in other markets to replace them.

The Bank of Canada has warned that an unfavourable CUSMA outcome would weaken the competitiveness of Canadian exports, reduce production, investment and hiring, spill into the service sector and place Canada's economy on a weaker long-term path.

The risk extends beyond tariffs. Businesses making long-term investment decisions now face uncertainty over whether vehicles, steel, aluminum, energy products, agricultural goods and manufactured parts will continue moving predictably across North American borders under the existing trade framework.

Politically, the July 1 deadline represents one of the first major tests of Carney's central campaign promise that he could manage the relationship with President Donald Trump while securing a stronger economic future for Canada. More than a year after winning office on that pledge, Canada remains without a renewed trade agreement, Mexico is advancing direct negotiations with Washington and the certainty promised to Canadian businesses has yet to materialize.