Lawrence L. Herman

December 2, 2025

It seems fair to say that in the annals of Canadian trade relations, there has rarely been as intense a flurry of activity as in the past few months, with over a dozen new agreements to begin, accelerate, or formalize trade and/or investment negotiations struck by Prime Minister Mark Carney in meetings with his counterparts, from Japan to the Asean countries to South Korea, India, South Africa and the UAE.

All this is part of the Carney government’s strategy of diversifying Canadian trade away from the U.S. in order to, as the PMO says, transform Canada’s economy “from one that is reliant on a single trade partner to one that is stronger and more resilient to global shocks”.

The agreements the PM has reached — whether formally concluded or proposed for negotiation — are not all of the same type or format. Some are the more ambitious, large scale, all-encompassing agreements, following the Canada-EU (CETA), NAFTA and CUSMA models. The ones with the UAE and ASEAN group fall into this category. Others signed by Mr. Carney are focused more narrowly on specific activities or economic sectors, like the deals with India and South Africa. There is therefore a spectrum in the scope of coverage in these recent agreements, warranting a closer look and putting them in perspective.

While there is still some steam for concluding mega trade agreements (witness the EU-Mercosur deal in 2024), finding common ground on a vast range of increasingly complex issues requires long, laborious and often contentious negotiations, taking up huge amounts of time, energy and public resources. While chasing these kinds of deals is worthwhile if they hold promise and can be done, cross-border business and commercial dealings move at a rapid pace and governments no longer have the time to hammer out these broad-based agreements.

Global Shifts

Even before the assaults on the global trading order by Donald Trump, there had been a notable shift in international trade as governments pursued narrower, often less politically contentious trade deals covering specific fields, such as pharmaceuticals, cyber-technology, critical minerals, defense and security.

Industry-focused or sector-specific agreements were once considered offside WTO non-discrimination rules, requiring that imports from all sources be treated equally and on a non-discriminatory basis by the importing country (the so-called most favoured nation or “MFN” principle), with an exception only when the two sides signed a deal that covered all or almost all the trade between them or when the agreements were approved under WTO procedures.

Among the more notable of these more specialized agreements have been those in the digital sphere, such as the 2020 Digital Economy Partnership Agreement (DEPA) among Singapore, New Zealand and Chile, an agreement Canada has sought to join. Under the Trump administration, there has been an aggressive push to conclude industry-specific trade deals, often under threat of tariff pressure, without any suggestion that these needed to comply with or be sanctioned by the WTO.

The trend toward smaller agreements reflects what Neil Shearing, in his new book The Fractured Age, describes as the fragmentation of the global economy, which in trade terms means the dividing of the world into a U.S.-centered bloc and a China-centered bloc via the splintering of existing trade blocs currently defined by megadeals. In a recent column on Shearing’s book headlined The fracturing of the world economy, the Financial Times’ Martin Wolf argued that China will come out ahead in this process because of Donald Trump’s behaviour; “that the US is mounting a suicidal assault on its principal assets,” notably its relationships with trading allies, including Canada.

So, that the world has moved on to doing more of these industry-specific trade deals is a shift that has important geopolitical implications, especially if the trend can be used as a tactical rationale against maintaining the CUSMA status quo by a Trump administration clearly determined to use smaller, more bespoke trade deals for coercion, triangulation and leverage purposes in addition to the more systemic implications Wolf describes.

Carney Pursues Sector-Specific Deals

Canada is following this trend. Examples include agreements the PM signed in November 2025: with India covering a number of specific areas, such as uranium, nuclear power technology, critical minerals and clean energy; with South Africa, where the agreement centres on trade in the nuclear field; with South Korea, where the agreement expands the existing Canada-Korea FTA to “explore opportunities to encourage trade and investment in the defence sector including by identifying mechanisms to reduce barriers to defence trade and promoting transparent, fair and competitive defence procurement practices.”; with Chile’s agreement for strengthening cooperation in critical minerals, clean energy, wildfire management, and digital technologies.

So, while Canada will be pursuing some important comprehensive deals as noted earlier, a large number of Mr. Carney’s newly concluded or proposed agreements focus on narrower but strategically important industrial and technology sectors.

What Does It All Mean?

A good question when looking at all this intense trade activity is whether and to what degree the federal government can muster the negotiating depth and resources to take on the huge tasks in negotiating some of these agreements, particularly the proposed megadeals that were launched over the last few months.

The larger and more pressing question is how all of this figures into the Canada-U.S. trade relationship, the management of which, as always, represents the major challenge in Canadian trade policy. In this respect, it seems obvious the Trump administration has no use for broad-based, comprehensive trade agreements, as already noted. Trump’s aggressive trade agenda is based on specific tariff deals where the US can exert maximum leverage, like the ones Trump concluded with the EU, the UK, Japan and others.

This not only re-sets the norms on the power dynamics of global trade agreements more broadly, it has specific implications for the future of the CUSMA, which is up for three-party review in July 2026. At least nominally, the agreement lasts until 2036 unless any of the three governments files a six-month notice of withdrawal, a right that cannot be discounted. An advance picture of how the US will approach the review, including the withdrawal element, will be known when the USTR issues a report in early January.

Even in advance of the USTR report and well before the formal review process starts, it is possible that Canada could be faced with US demands to whittle down the agreement, possibly even under threat of US withdrawal, and for concessions in specific areas in return for tariff relief in sectors of concern to Canada.

Maybe not. But indications from the White House are not terribly promising. Even if saner and more reasonable voices prevail and the Americans approach the CUSMA review constructively, Canada needs to be prepared and well-armed for a tough and bruising battle with the Trump administration as the new year dawns.

Policy contributor Lawrence Herman is an international lawyer with Herman & Associates, a senior fellow at the C.D. Howe Institute in Toronto and a member of the Expert Group on Canada-US Relations. He is a former foreign service officer, having served in Canada’s Permanent Mission to the United Nations and the GATT.