By John M. Weekes

December 18, 2025

As Canada prepares to enter its second year navigating the aggressive trade policies of Donald Trump, it’s worth pausing a moment to take stock and remind ourselves of what will and won’t work as the focus shifts to the future of the Canada-US-Mexico Agreement (CUSMA).

While most Canadians would agree that the tariff policies of Donald Trump have created challenges for the Carney government, that is where agreement ends, beyond which there are far too many conflicting suggestions as to what should be done.

In my view, the Carney government should focus on two key strategic considerations as the bedrock of Canada’s approach to dealing with Trump in 2026.

The biggest problems Canadians face are the unpredictability of the current situation and the uncertainty about when or how this period of unpredictability will end.

As the Prime Minister has said, Canadians cannot control what the Americans do, but we can control what we do. There is no direct way the Canadian government can force the Americans to back down on their imposition of tariffs on Canadian producers of automobiles, steel, aluminum, and other products.

Indeed, this situation has sent the Canadian investment climate into a deep chill. It is next-to-impossible to imagine that at any time in the foreseeable future any board of directors of a major company would give the go ahead to a manufacturing plant in Canada if success of the business would require that a substantial proportion of the production be exported to the United States free of duty, or even at low but stable rates of duty.

There is just too much uncertainly to take the chance. And yet, we are also told that new investment is an essential prerequisite for boosting productivity and increasing the incomes of Canadians.

Again, as the Prime Minister has said, Canada must focus on doing things that are within our control. That is why the government has focused on removing internal barriers to trade and establishing conditions for the development of new industries that will produce goods that foreigners want to buy.

This is why there is such a significant focus on the development and processing of natural resources and the infrastructure needed to support such development and to bring product to market. This is critical for the diversification of Canadian exports.

To summarize, the first strategic challenge is this unpredictability and the only way for Canadians to respond to this is to reform our domestic economy to give Canadians a realistic chance of doubling our exports to non-U.S. markets over the next ten years. The Carney government has already made this a priority.

The second strategic consideration concerns the timing of when to strike a deal with the Americans. Obviously, American trade policy is going through a turbulent period. The key question is whether and when Americans themselves may determine that Trump’s trade policy is no longer in America’s interest.

Clearly, Trump is less popular today then he was in January, and it is also true that many Americans are beginning to realize that Trump’s tariffs are damaging the American economy by contributing to inflation and reducing the export prospects of major American companies and agricultural producers.

Pressures are developing for change in the U.S. and they will intensify as we get closer to the 2026 midterm elections.

Pressures are developing for change in the U.S. and they will intensify as we get closer to the 2026 midterm elections. The conclusion that Canada should take from this is that we should not be in a hurry to negotiate a new deal with the Americans, particularly if that deal were to be less favourable than what we have under the CUSMA and the WTO. It is not a good strategy to get rid of uncertainty if we have to replace it with new conditions of trade inferior to those to which Canadians are now entitled.

The review of the CUSMA is set to take place next July. There is a prospect that this review will lead to a renegotiation of the current agreement. If so, one of Trump’s objectives will be to rebalance the agreement to make it more favorable to the United States without offering any offsetting benefits to Canada.

Obviously, such a development would not be in Canada’s interest. Canada should avoid any temptation to accelerate the review process and any possible subsequent renegotiation. However, Canada should be ready to engage in constructive discussion and should be busy developing its own approach to the review and considering possible objectives for a potential negotiation.

This seems to be the approach the government has taken, and there is a likelihood that American trade policy will evolve in a direction more favourable to Canada as these political events unfold.

Of course, the government cannot ignore the damage Trump’s tariffs are already inflicting on certain Canadian sectors. And it is natural for the government to be talking with the Americans about removing those illegal tariffs and alleviating that damage. But we should weigh carefully the balance of benefits if such a pre-emptive deal would involve new costs for Canadians.

To reach such deals with Trump, other countries have accepted the imposition of new tariffs by the Americans and have extended preferential concessions to the U.S.. Canada, with our pre-existing free trade agreement with the U.S., is in a very different situation and the Americans are still allowing duty free access to most Canadian goods because of the exemption they created for so-called CUSMA-compliant imports.

There are voices suggesting that Canada should play tough with the Americans – a more “elbows up” style of play. But before going down that road, we should think carefully about the relative balance of power. Fully 20% of Canada’s GDP is exported to the U.S. in the form of goods, whereas only 1.4% of American GDP is exported to Canada in the form of goods. The Canadian economy would be the clear loser in an all-out trade war.

However, many American businesses will be more productive with duty-free access to Canadian inputs like steel, aluminum, and lumber. That is why Canada needs to show some patience in waiting for the Americans to realize what is in their own interest. And, since the U.S. will probably always be our largest trading partner, Canada should be working to ensure a continuation of our North American free trade relationship.

Given the reality of long-term uncertainty we need to be moving now, as argued earlier, to strengthen our economy and diversify our exports over the coming decade.

A stronger and more productive economy combined with strategic patience will put Canadians in a much more favourable position than they are in right now. That should be the government’s objective in dealing with the current situation.

John M. Weekes, who was Canada’s chief negotiator for the original NAFTA and ambassador to the WTO, is a member of the Expert Group on Canada-U.S. Relations, and a fellow of the Canadian Global Affairs Institute.