Canada and the US to launch formal talks to review their free trade agreement in mid-January

Canada and U.S. to Begin USMCA Trade Agreement Review in January

Canada and the United States are set to launch formal discussions to review their free trade agreement in mid-January, according to a statement released Thursday by Canadian Prime Minister Mark Carney’s office.

Dominic LeBlanc, Canada’s point person for U.S.-Canada trade relations, will meet with American counterparts next month to begin discussions on the United States-Mexico-Canada trade pact (USMCA), which is scheduled for a formal review in 2026. The agreement, negotiated during former President Donald Trump’s first term, includes a clause allowing for potential renegotiation at that time.

The announcement came after Carney met with Canada’s provincial leaders on Thursday to update them on the status of trade talks with the U.S. The meeting underscores the critical importance of the trade relationship to Canada’s economy, with more than 75% of Canadian exports destined for its southern neighbor.

Bilateral trade relations have faced challenges in recent months. In October, Trump suspended trade talks aimed at reducing tariffs on certain sectors after the Ontario provincial government ran an anti-tariff advertisement in the United States. This followed earlier tensions when Trump suggested Canada should become “the 51st U.S. state,” a comment that sparked controversy.

Before the suspension, Carney revealed the two nations had been close to reaching an agreement on sectoral tariff relief in several key areas, including steel and aluminum. Current tariffs are significantly impacting multiple Canadian industries, particularly aluminum, steel, automotive manufacturing, and lumber.

U.S. Trade Representative Jamieson Greer recently highlighted several specific concerns that will likely dominate the upcoming review. These include U.S. objections to Canadian policies on dairy products, alcohol, and digital services, which Carney described as elements of a “much bigger discussion” about continental trade.

The economic integration between the two countries runs deep. Nearly $2.7 billion USD ($3.6 billion CAD) worth of goods and services cross the border daily. Canada serves as the top export destination for 36 U.S. states, while providing 60% of U.S. crude oil imports and 85% of U.S. electricity imports.

Strategic resources are also a critical component of the relationship. Canada is the largest foreign supplier of steel, aluminum, and uranium to the United States. Additionally, the country possesses 34 critical minerals and metals that the Pentagon considers vital for national security and is actively investing in.

However, Carney made it clear that U.S. access to these critical minerals is not guaranteed. “It’s a potential opportunity for the United States, but it’s not an assured opportunity,” he stated earlier Thursday. “It’s part of a bigger discussion in terms of our trading relationship, because we have other partners around the world, in Europe for example, who are very interested in participating.”

Following Thursday’s discussion, Carney and the provincial premiers agreed to meet in person in Ottawa early in the new year, likely to develop a cohesive strategy ahead of the formal trade discussions.

The upcoming review carries significant implications for both economies. For Canada, maintaining favorable trade terms is crucial given its high dependency on exports to the U.S. market. For the United States, preserving stable supply chains for energy and critical materials has grown increasingly important amid global competition for resources and manufacturing capacity.

As the January meetings approach, both governments will be carefully considering their priorities and potential concessions, with the outcome likely to shape North American economic integration for years to come.