As the United States tariff developments continue to unfold, the first review of the CUSMA trade deal is expected in July, said TD.
With roughly a third of U.S. trade covered by the agreement, a material modification could have a significant impact on the North American economy, noted the bank.
At this point, U.S. officials have suggested that the core elements of the agreement will remain intact, but TD expects updates in areas like more stringent domestic content requirements, alignment on trade policies related to China, and stronger partnerships on areas of shared interest, such as critical minerals, energy, etc.
The U.S. Trade Representative is expected to submit its plans for review to Congress by June 1, with the formal review scheduled to follow one month later.
Although the bank's expectation is that trade policy will remain broadly stable in 2026, the numerous developments will keep policy uncertainty elevated. The CUSMA review is likely to be challenging and could weigh on business sentiment in all three countries.
While the potential threat of withdrawal from the agreement is likely a distant tail risk, mired by legal questions, threats could quickly feed through to business hiring and investment intentions, added TD.
Currently, the most probable outcome is for the core of the agreement to remain in effect, with concessions offered by Canada and Mexico in exchange for some reduction in certain Section 232 tariffs, according to the bank.