Canada: Trade risks and persistence – RBC

FXStreet Insights Team FXStreet

Royal Bank of Canada (RBC) economists Claire Fan and Nathan Janzen assess the implications of the U.S. decision not to extend CUSMA (Canada-United States-Mexico Agreement) on July 1st. They stress that the agreement still runs to 2036 with scheduled negotiations, and see outright termination as unlikely if economic logic prevails. They note reduced tariff risks, highlight Rules of Origin as a likely focus, and flag ongoing trade uncertainty.

CUSMA longevity and trade risk outlook

"The U.S. decision on July 1st to not extend CUSMA doesn’t end the agreement."

"The deal still doesn’t expire until 2036 with pre-scheduled negotiations over the next decade designed to increase the likelihood that it lasts beyond that deadline."

"Near-term trade risks for Canada remain, but we continue to view outright termination of CUSMA as unlikely if economic reasoning holds."

"In the (unexpected) event that CUSMA were to falter, the tariff rate that would replace it and the share of exports impacted have declined."

"Trade uncertainty is likely to persist regardless of outcome."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

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