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Scotiabank Advises Canada to Stay Calm and "Be Wary Toward The Hysteria" in CUSMA Renegotiations

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Despite flashy headlines, it should surprise no one who pays close attention to the negotiations that the July 1 CUSMA/USMCA trade deal renegotiation deadline will pass with no revised agreement, said Scotiabank.

The date that matters is January 3, 2027, when the new United States Congress convenes, noted the bank.

The Democrats are possibly going to take both chambers, stated Scotiabank. Almost certainly the House. Possibly the Senate. Not getting a trade deal through both chambers in Congress before the new Congress convenes makes the U.S. side of negotiations more complex.

The Democrats are no friends of Canada, according to the bank, as it recalled U.S. President Joe Biden shooting down Keystone XL and maintaining Trump 1.0 tariffs, while the current crop of Democrats is likely to be more agitating on labor and environmental issues.

No one realistically expected the agreement to be rolled over on July 1, Scotiabank pointed out. Mexico's issues are much more complex, which is why U.S. negotiations started with that country first . Now things start to get interesting with plenty of runway ahead and no doubt plenty of volatile headlines.

Some of the comments made in public by folks on the Canadian side who were briefed by the negotiators when they returned last week indicated commitment by the U.S. to get a deal done and keep USMCA/CUSMA, added the bank. That was the overwhelming feedback given in U.S. Trade Representative hearings on the USMCA agreement last fall.

Time and politics are on the side of the Canadians and Mexicans, according to Scotiabank. President Donald Trump "desperately" needs something to go right as his war in the Middle East flounders and popularity plummets. Waving a new trade deal and spinning it, however, would be part of that.

By contrast, the administration of Prime Minister Mark Carney has a lock on a majority government for years to come.

Scotiabank's point is to "keep calm. Trade on. Be mindful toward the risks. Be wary toward the hysteria. And ultimately, there is still a who-cares case."

Up to 90% of Canadian exports to the United States are tariff-free because of the USMCA/CUSMA compliance carve-out. The Canadian dollar at less than 1.39 USD/CAD buys a lot of price competitiveness compared with 1.20 a few years ago, said the bank. Most of the details in the negotiations sound like micro issues, not the stuff of broad trade shocks.

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