-- Renegotiation of the CUSMA trade deal is returning to the forefront of minds given comments in recent weeks from key United States administration officials and others in Canada and Mexico, said David Doyle, head of economics at Macquarie Group, in a note published Tuesday.
Doyle is optimistic the agreement will "continue in force", although he said a finalized deal to renew it, including any changes, doesn't appear likely before the July 1 deadline. Should this delay occur, it would trigger the sunset clause and a 10-year countdown clock on the existing agreement, he added.
The U.S.-Mexico negotiation appears to be "proceeding well", with U.S. Trade Representative Jamieson Greer striking an "optimistic tone" in recent public comments, Doyle said. In contrast, the U.S.-Canada negotiation has had a "frostier tone" so far, but it's possible this may thaw ahead, Doyle added, while noting by-elections and floor crossings in Canada have led to a majority government for Prime Minister Mark Carney, providing him with greater flexibility to reach a potential deal.
A substantial amount of trade is governed by the USMCA. Goods trade with Canada and Mexico accounts for about 29% of U.S. goods trade and amounts to 5% of U.S. gross domestic product. These figures change to around the 24% of U.S. total trade and 6% of U.S. GDP if services are included along with goods, Doyle noted.
The numbers are more substantial for Canada and Mexico, said Doyle. He noted both economies are significantly intertwined with the U.S. -- Canada's total goods trade with the U.S. amounts to 29% of Canada's GDP, while goods exports to the U.S. are 17% of Canada's GDP. Mexico's total goods trade with the U.S. amounts to 49% of Mexico's GDP and goods exports to the U.S. are roughly 28% of Mexico's GDP.
The agreement is enshrined in U.S. law through the USMCA Implementation Act. This has helped partially insulate both Canada and Mexico from the shift in U.S. trade policy since early 2025, Doyle said.
While Macquarie anticipates a renewal ahead, it appears unlikely that this will occur ahead of the triggering of the sunset clause on July 1. Despite this, Macquarie's baseline case is that progress will be made towards an agreement in the coming months and that an eventual renewal occurs in late 2026 or early 2027.