By Fen Hampson

December 4, 2025

With hearings underway in Washington regarding the future of the CUSMA, U.S. President Donald Trump’s trade representative has signaled that the administration might withdraw completely unless it secures a “good deal.”

To rattle our cages further, Trump recently reiterated his tired accusation that Canada and Mexico have taken advantage of the United States like just about every other country, threatening to let the deal expire next year.

However, we must look past the bluster. If Trump’s narrative were true, we would not see such an overwhelming majority of American cheerleaders—from the energy sector to agriculture—urging the administration not to go rogue on an agreement that has generally been to everyone’s benefit.

While Trump is driven by an insatiable ego and personal interests rather than national ones, he is not a complete fool. He knows that with midterm elections approaching next year, he must get this negotiation right if Republicans have any hope of holding onto Congress.

However, we should also expect the talks to fluctuate based on his mood and whether he is feeling receptive or hostile to Mark Carney and Claudia Sheinbaum.

Clearly, we face a range of potential scenarios, from a successful renewal with modest updates or a difficult negotiation involving major new conditions, to a complete U.S. withdrawal or an attempt to strike bilateral deals.

Regardless of which path is taken, there is a growing consensus that a smooth rollover is unlikely. There is no going back to the old model of building an integrated North American community, and Canadians must prepare for a vastly different relationship.

Panic is counterproductive, however. It connotes weakness. And like every bully, Trump (and his ambassador, Pete Hoekstra) takes special pleasure in kicking Canadians, the little kid on the block.

We must remember that although the Canada-U.S. relationship is asymmetrical in terms of power, specific structural asymmetries ultimately work in our favor. Trade is not just about volume; it is about what is bought and sold.

Canada overwhelmingly exports commodities and intermediate goods—oil, gas, minerals, and auto parts—that are foundational to American industry. Conversely, Canada imports finished consumer goods and capital equipment.

We must remember that although the Canada-U.S. relationship is asymmetrical in terms of power, specific structural asymmetries ultimately work in our favor.

This difference provides leverage because U.S. tariffs on Canadian goods strike at the heart of American economic vulnerabilities. At the same time, Canada’s retaliatory measures can be strategically calibrated to reduce domestic consumer pain.

When the United States imposes tariffs on Canadian exports, it directly fuels U.S. price inflation through three interconnected channels.

First, tariffs on intermediate goods, like auto parts, raise production costs for American manufacturers. These increased expenses cascade through supply chains, ultimately inflating prices of consumer goods.

Second, tariffs targeting Canadian energy exports elevate heating, transportation, and electricity costs for U.S. households and businesses alike.

Third, the integrated nature of cross-border industries means tariffs accumulate each time components cross the border, disrupting production and creating shortages that further push prices upward.

For President Trump, this dynamic creates a political paradox where tariffs designed to protect U.S. jobs end up triggering the very price inflation he has repeatedly vowed to combat.

We are already seeing the political consequences of this dynamic. The mid-September 2025 consultation process clearly demonstrated that American businesses do not want these disruptions to continue.

Opposition to Trump’s tariffs is widespread, ranging from airlines and manufacturers to vintners, miners, tiremakers, and hoteliers, all of whom recognize that disrupting the free movement of goods across the continent is detrimental to their survival.

And consumers are finally seeing price increases as the impact of Trump’s tariffs slowly works its way through complex economic supply chains. They, too, are restive and unhappy.

Canada’s tactical response must allow the laws of economics to do their natural work.

Despite Trump’s insistence that other countries will pay, the tariffs themselves will eventually directly impact U.S. consumers and companies. At the same time, Canada must endeavor to shield its most affected industrial sectors and its workers, in particular.

What’s the bottom line? Let’s keep our heads down and not lose our cool.

Policy Contributing Writer Fen Osler Hampson is a chancellor’s professor at Carleton University and co-chair of the Expert Group on Canada-U.S. Relations.