U.S. flags concerns over Canada’s ties to China as it blocks CUSMA renewal
The United States’ top trade official is pointing to Canada’s deepening economic ties with China as one of the reasons Washington is refusing to renew the Canada-U.S.-Mexico Agreement on free trade (CUSMA) in its current form.
Speaking to Global News on Thursday, U.S. Trade Representative Jamieson Greer said the White House is concerned Beijing could use Canada as a back door into the American market.
“What I don’t want is a situation where Canada is bringing in a lot of Chinese investment and Chinese cars and sending them into America,” said Greer in Washington, D.C. “That is actually totally at odds with what we’re trying to do.”
His comments come a day after the Trump administration declined to renew the trilateral pact with Canada and Mexico for a new 16-year term over what the U.S. calls “shortcomings” and “trade deficits.” Mexico and Canada both publicly pushed for a renewal.
The agreement covers roughly $2.5 trillion in trade annually. U.S. President Donald Trump negotiated the deal himself during his first term, calling it one of the fairest and most balanced of its kind at the time.
Wednesday’s decision does not kill CUSMA — rather, it triggers a process of annual reviews until its possible expiration in 2036.
Tariff-free access remains for most Canadian exports, and the pact can still be renewed for 16 years at any time over the next decade.
After a virtual meeting Wednesday with Greer and Mexico’s Minister of Economy Marcelo Ebrard, Canada-U.S. Trade Minister Dominic LeBlanc said he “reaffirmed Canada’s unwavering support for the CUSMA and its renewal.”
“At a time of global economic uncertainty, Canada is a stable, reliable and trusted partner,” added LeBlanc in a statement.
Ever since the Trump administration launched its trade war against Canada over a year ago — including punishing tariffs on sectors like autos, steel, aluminum and lumber — Ottawa has tried to diversify markets and reduce reliance on the U.S.
As part of that effort, the Carney government has forged closer ties with China, after years of frosty relations.
Part of that rapprochement included an agreement for Beijing, signed in January, to drop tariffs on agricultural goods in exchange for Canada to allow 49,000 Chinese-made electric vehicles into the Canadian market. The first vehicle shipments began arriving in Canada in May.
Last month, Prime Minister Mark Carney was caught on a hot mic at the G7 Summit in France trying to reassure Trump that those vehicles would only account for three per cent of Canada’s auto market.
International trade lawyer John Boscariol says the U.S. is pushing “very hard” on tightening “rules of origin” under CUSMA, particularly as it relates to China. Those rules ensure a certain proportion of North American-made components in goods that are traded within the continent tariff-free.
“The U.S. wants to make sure that there are provisions (in a future agreement) that ensure that China can’t use Mexico or Canada as a back door to the U.S. marketplace,” Boscariol said in an interview.
Greer also pointed to Canada’s dairy supply management system, and attempts to tax the U.S. digital sector, as trade irritants that are “a little hard to get past.”
“We have seen the Canadians threaten some actions on digital. They’ve paused on that for a variety of reasons. Obviously that’s good, it’s good not to do something you shouldn’t have done to begin with,” he said.
The Canadian Radio-television and Telecommunications Commission (CRTC) in May tried to triple the share of revenues that U.S. streaming giants like Netflix must spend on Canadian content, from five per cent to 15 per cent.
Less than two weeks later, the federal government directed the CRTC not to go ahead, with Ottawa appearing to back down like it did on the digital services tax last year.
Boscariol says the U.S. will likely continue to push hard against any cultural measures to support Canadian content providers, and Canada’s regulated dairy sector.
Parliament passed a Bloc Quebecois private member’s bill last year confirming supply management would not be renegotiated.
Trade experts have said it’s unlikely the U.S. will use the “nuclear option,” which would allow any country to pull out of CUSMA with six months’ notice.
“We are not at the edge of a cliff here,” said Boscariol, adding Wednesday’s move is likely more “posturing” from the Trump administration to force Canada to make concessions.
“We’re really going to get into the hard discussions and the bluster,” he said. “Unfortunately, it’s going to be a period of uncertainty for Canadian business.”
—with files from Global’s Sean Boynton
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