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Canada, the United States and Mexico are heading into talks that will shape how free trade will work between the three countries. To discuss what this could mean for Canadian C-suite leaders, Shane Dunn, EY-Parthenon Canada Managing Partner, brought together three key leaders:
Shane: The Canada-United States-Mexico Agreement (CUSMA) heads to a six-year review process starting July 1, 2026. The situation is evolving quickly. I’d love to start with one key takeaway from each of you.
Mauricio, with so much geopolitical and economic volatility, what’s one priority Canadian business leaders should focus on this summer?
Mauricio: Knowing you can’t control these external forces shaping the economic landscape, C-suite leaders should prioritize how their business is exposed to multiple possible future states and what creates an opportunity, and act decisively.
Shane: Yes, I see how the implications are going to affect a lot of decisions at the CFO level going forward. Glenn, what would you suggest for C-suite leaders across industries from the governance standpoint?
Glenn: My one takeaway: incorporate CUSMA scenarios into your near-term planning. Don’t treat it as an external issue to monitor from the sidelines.
Advantage will be with those who are able to react quickly yet have taken a clear-eyed view of tradeoffs. In practice, that means three things:
Shane: So, build agility by controlling what you can and staying on top of developments. Sylvain, what would you add from the tax perspective?
Sylvain: For companies that certify goods as CUSMA originating, I strongly recommend leaders revisit the technical, product-specific rules of origin to make sure they’re met. It’s important that the rules are interpreted properly. Qualification needs to be accurate and defensible, but it’s equally important to understand what rule is met for which product and how. This knowledge helps companies quickly assess potential impacts if, and likely when, rules of origin are modified and updated as part of the trilateral review process.
Shane: So, flexibility is going to be critical here. But what happens next? The CUSMA renewal process certainly feels different than in the past. Mauricio, can you demystify the process itself for us?
Mauricio: Because Canada, the US and Mexico haven’t agreed to automatically extend the agreement, all three will move into a review process to talk through revised terms.
From the Canadian and Mexican perspectives, both countries are looking for greater stability in traditional relationships. That’s particularly important given the dramatic changes to trade and tariffs with the US over the last 18 months. Both are seeking a more favourable trade environment. It’s unlikely we’re going back to the way things were, but I think Canada and Mexico will push for a middle-ground solution in terms of unilateral US tariffs.
Shane: Okay, and from the US side of negotiations, what are negotiators focused on within the agenda?
Sylvain: The purpose of the joint review is for parties to raise issues of disagreement. The US administration prefers a transactional approach to trade policy, and the joint review process creates an opportunity to raise and negotiate around various, priority trade irritants that have been socialized — and often publicized — over the preceding months. Select rules of origin and US content requirements, supply management programs that establish import quotas, market access items, digital services and concerns related to transshipment of Chinese exports are high on the US priority list. But there are non-trade issues at play, too.
National security spending has been a key discussion point for the US administration. That’s along with border security, labour laws and now questions about third-party supply chain and labour pools. The US is also focused on critical mineral capabilities.
Shane: Lots of different priorities from each of the three countries. How will this work, though? If you’re a Canadian business, what should you expect to happen next in the negotiation process?
Mauricio: The clock has ticked down in terms of a negotiated extension. That would have required meaningful economic and non-trade concessions by Mexico and Canada.
We’re about to pass the July 1 threshold with no extension. If the US, Canada and Mexico fail to agree to a 10-year extension during this formal review period, annual reviews will be codified. We’d see an annual review every year through 2036 until CUSMA is either extended or terminated. This scenario brings so much uncertainty.
Sylvain: Another possibility: if the parties fail to extend CUSMA, they could replace it with bilateral trade agreements instead. Or we could see an underlying trilateral agreement with bilateral agreements introduced as well. Economic disruption would follow, challenging existing business models that were built on a fundamentally integrated North American market.
Lastly, Canada, Mexico or the US could withdraw from CUSMA with six months’ notice, creating significant economic disruption and political costs for all three countries.
Shane: Without knowing how this is going to play out, how can the C-suite continue making effective, strategic decisions as the CUSMA talks take place?
Glenn: As I alluded to earlier, scenario planning is essential. Businesses in Canada need to think through more scenarios and strategic options than in the past and have action plans that support each.
This should be done in conjunction with leaders across functions and business units so it’s integrated. Running simple table-top exercises can help leaders prepare to act quickly if and when necessary, as the tough questions will have been worked through already. For example, do we absorb costs or set new prices? Should we shift sourcing? How do we fund a decision?
Shane: I think it’s important to note that we’re not only talking about CUSMA. It’s CUSMA in the context of wider G7 tensions and developments, right?
Sylvain: Great point. The recent G7 summit in France really tested whether transatlantic partners could reach common ground on key issues, particularly trade and AI governance. The UK Prime Minister recently resigned. That’s another layer of uncertainty.
Mauricio: From a macroeconomic perspective, the evolving nature of G7 relationships is going to impact Canada. The group was already trying to manage internal divisions and work more closely together. More unrest within the group as the UK chooses a successor will only create additional global uncertainty. Canadian businesses must be prepared for that and consider how to stay agile and resilient.
Shane: It’s going to be an interesting summer. Each of you works with clients navigating this in real time. Maybe to wrap up, can you share an example of a Canadian company that does this well? No need to name anyone. But what strategies are working out there?
Mauricio: Leading companies are making geopolitical risk part of how they run their business. They’re using real-time signals to strengthen enterprise risk planning and guide strategic decisions as conditions change.
Sylvain: Leading-class companies have reliable and current transaction data dashboards for imports into all countries. This includes the ability to quantify different import duty and tax spends, CUSMA-based savings and, especially important, the ability to assess financial impacts of new tariffs, CUSMA or other trade-related developments as they happen. Setting strategies or running plays without this data isn’t very effective.
Glenn: One of the more significant proactive moves we’re seeing is a re-examination of the supply base. That means finding Canadian or other international options where possible, to add flexibility and reduce exposure to the US. The same is true for export markets. That’s easier for some than others, but strategic flexibility is at a premium for Canadian businesses and is likely to stay that way for some time, regardless of the outcome of CUSMA talks this summer.
Shane: Thanks, everyone. Lots to monitor here. I look forward to connecting on this again soon.
