Canada’s efforts to negotiate targeted tariff relief with the United States are being absorbed into the broader Canada – US – Mexico Agreement (CUSMA) review process, Bank of Canada Governor and former Canadian Prime Minister Mark Carney signaled on December 18, 2025. Rather than securing a standalone sectoral agreement on steel, aluminum and auto tariffs, both sides are now preparing to tackle trade issues as part of the comprehensive CUSMA renegotiation scheduled for 2026.
Carney’s remarks reflect a shift in strategy from piecemeal, industry-specific deals to a more structural approach embedded within the continent’s primary free trade framework. The earlier talks, which had shown promise in addressing US tariffs on key Canadian export sectors stalled in October after a diplomatic misstep disrupted dialogue, prompting a recalibration of negotiation sequencing.
Why Talks Are Moving Into CUSMA Review
According to Carney, the convergence of timelines and broadening US trade demands make a separate sector-based accord unlikely before CUSMA’s formal review next year. By integrating tariff relief into CUSMA discussions, Canada and Mexico aim to negotiate a territorially cohesive trade strategy with the United States on auto parts, steel and aluminum, sectors that have borne high tariff burdens throughout the 2025 trade dispute.
This realignment follows months of tariff impositions and retaliations. While many Canadian exports remain duty-free under CUSMA compliance rules, the broader trade environment has been strained by a series of US tariff actions targeting Canadian metals and manufactured goods. Canada’s approach to fold sectoral tariff discussions into the wider pact review is intended to streamline negotiations and avoid fragmentation of trade policy.
Economic and Policy Context
Trade tensions between Canada and the U.S. began intensifying early in 2025, when the U.S. administration imposed a range of tariffs under national security and trade-balancing justifications. Canada responded with its own duties and pursued negotiations to limit long-term disruption. Although more than 85% of Canada – US trade remains tariff-free under CUSMA exemptions, Canadian officials say the ongoing standoff continues to impose uncertainty on supply chains, investment and long-term planning.
By folding sectoral talks into the comprehensive CUSMA review, Canada is seeking a holistic solution that binds tariff relief to broader economic cooperation on labour mobility, regulatory alignment, and dispute settlement, aspects that will be part of CUSMA’s scheduled 2026 evaluation.
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Written for the Canadian Chamber of Commerce in Hungary News Section as part of our ongoing coverage of developments affecting Canadian trade, economy and international partnerships, December 2025