By Anil Wasif

February 16, 2026

After more than a year of tariff warfare from Donald Trump and amid the more systemic threat of an end to the Canada-US-Mexico Agreement (CUSMA), the picture has shifted for Ottawa in a matter of days, with political developments in Washington, a new trade diplomacy push with Mexico, and a Canadian-led Euro-Pacific trade bloc in the works drastically shifting the landscape.

The appointment Monday of respected senior public servant and diplomat Janice Charette as Canada’s new trade negotiator with the United States further alters the playing field.

Earlier Monday, Politico reported that an idea circulating for some time as a means of further formalizing Prime Minister Mark Carney’s trade diversification strategy — an alliance among Canada, the 27-member European Union and the 12-nation Indo-Pacific bloc — is now under negotiation, with Canada spearheading the talks.

And, in the face of an apparent divide-and-conquer strategy from Washington against CUSMA’s other two signatories, the Carney government has this week deployed a 370-person business delegation to Mexico led by Canada-U.S. Trade Minister Dominic Leblanc.

If anyone thought the unveiling in Davos of “variable geometry” as the Carney doctrine was theoretical, they’ve now been schooled.

On February 11th, the U.S. House of Representatives voted 219 to 211 to repeal the tariffs on Canada that Trump imposed last year using the International Economic Emergency Powers Act (IEEPA), with six Republicans defecting despite the president’s threat on Truth Social that defectors “will seriously suffer the consequences come Election time.”

That the vote was largely symbolic pending a U. S. Supreme Court ruling on the same tariffs made the defections all the more telling.

The next day, the U.S. Senate Finance Committee held its most substantive USMCA hearing to date. And, a 40-group U.S. agricultural coalition launched a pressure campaign defending CUSMA, including ads on Truth Social urging the president to preserve his own signature deal.

The trilateral trade framework is splitting into bilateral tracks, and the February 12 Senate hearing showed why. The strongest pro-CUSMA voices were Republicans. Chairman and Republican Senator Mike Crapo praised the agreement for supporting 13 million American jobs and cautioned: “It is wise also to remember to not let the perfect become the enemy of the good.”

Ranking Democrat Ron Wyden of Oregon aimed at the agreement’s steward, not the agreement itself: “Since Trump took office last year, his U.S. Trade Representative has not begun a single enforcement case under USMCA. It hasn’t even taken a first step.”

Both parties agreed that Canada has never complied with its dairy market-access commitments. Dairy will likely present as a non-negotiable U.S. demand, a harder line than even auto rules of origin.

The Canadian grassroots boycott is hitting Republican-held districts in Kentucky, California, and Florida directly. This is variable geometry at the consumer level, a decentralized trade response that neither capital controls.

Trump has already concluded five bilateral trade deals and a dozen looser frameworks, each without congressional approval or binding enforcement. Countries with the least leverage have paid the highest price, accepting sweeping concessions, including replications of American export controls against China. Mexico’s Ebrard-Greer dialogue is advancing while U.S.-Canada talks have been largely frozen since October.

This is the paradigm shift that The Scowcroft Group’s Jennifer Lee and Jackson Mariani flagged in their February 2 Letter from Washington for Policy. What we haven’t fully gamed out yet is what happens if Mexico gets a deal first. Canada would face the U.S. without a trilateral counterweight. That said, the bipartisan consensus at the Senate hearing suggests the political floor under CUSMA is stronger than reports of Trump musing about withdrawal — which, admittedly, could be leverage leaks — would indicate.

Meanwhile, the Canadian boycott of U.S. goods has given Canada leverage that traditional retaliatory tariffs could not. The #ElbowsUp movement defied every historical precedent. This week, Dalhousie University food economist Sylvain Charlebois wrote that scanner data from major grocers shows double-digit declines in U.S.-sourced products since last March: “For the first time in years, we are observing a boycott that is measurable, not merely rhetorical.”

U.S. wine sales to Canada have collapsed, with wine down 91%  since the boycott. Spirits follow a similar pattern with U.S. distiller Brown-Forman reporting Canadian sales down 62%  in its most recent quarter and Jim Beam halting production at its flagship Kentucky distillery for all of 2026. Canadian travel to the U.S. was down 24.3% in January, extending a decline that has now lasted more than a year.

The critical distinction: what began as state action has become self-sustaining consumer behaviour. Alberta lifted its alcohol ban in June 2025. The boycott persisted. None of this has gone unnoticed across the table: USTR Greer explicitly listed “provincial bans on the distribution of U.S. alcohol beverages” as a condition for a successful CUSMA review.

The Canadian grassroots boycott is hitting Republican-held districts in Kentucky, California, and Florida directly. This is variable geometry at the consumer level, a decentralized trade response that neither capital controls.

Canada’s trilemma connects these threads. Greer is pushing for “enhanced economic security alignment on tariffs, export controls, and investment screening,” language that amounts to a common external tariff against China. Carney’s diversification strategy, 12 trade deals on four continents, the CPTPP-EU alliance now underway, and the narrow China EV-canola deal, points in the opposite direction.

The Free Trade and Labour Mobility in Canada Act, in force since January 1, removes the estimated 7% hidden internal tariff on interprovincial commerce. Canada’s tariff remission scheme, which ties duty-free vehicle imports to domestic production commitments, is the most aggressive industrial policy tool deployed since the Auto Pact. These cards also strengthen Canada’s hand, regardless of what happens in July.

The CUSMA review will force a choice: accept Fortress North America alignment or defend strategic autonomy and negotiate different terms. But that binary looks less stark than it did in January. As Carney said at Davos: “The old order is not coming back. We should not mourn it. Nostalgia is not a strategy.” Trump responded: “Canada gets a lot of freebies from us.”

The distance between those statements is the negotiating space.

June 1 is the deadline for governments to submit recommended changes to CUSMA/USMCA. July 1 triggers the formal review. If the U.S. Supreme Court strikes down IEEPA tariffs, Trump loses his primary leverage and the review dynamic shifts.

And, not to be discounted, in an international context in which domestic political strength counts as credibility cargo around the table, Mark Carney is still enjoying a net favourability rating of +22%. Donald Trump’s net approval rating is -15%.

Canada’s new ambassador, Mark Wiseman, takes office at a moment where the risks are real but the sources of leverage are more varied than at any point since this bilateral chapter began. The question is: how will Mark Carney use them?

Policy Columnist Anil Wasif is a public servant in the Ontario government. He serves on the University of Toronto’s Governing Council and the Advisory Board of McGill’s Max Bell School. Internationally, he serves on the OECD’s Infrastructure Delivery Committee. He co-owns and manages the global nonprofit BacharLorai. The views expressed are his own.