This week, concerns have escalated surrounding the U.S.-Mexico-Canada Agreement (USMCA) as U.S. President Donald Trump has signaled intentions to impose tariffs on Canada and Mexico. This potential move has prompted discussions on the urgency for Canada to initiate renegotiation talks rather than resorting to retaliatory measures. Ian Lee, an associate professor at Carleton University’s Sprott School of Business, emphasized the need for proactive negotiations. "We cannot wait to be slaughtered by these tariffs, which will be destructive beyond all imagination to our economy," he stated during an interview with Financial Post’s Larysa Harapyn.
Scheduled for review in 2026, the USMCA trade agreement now hangs precariously as Trump utilizes tariff threats as leverage to pressure Canada and Mexico. His remarks have sparked considerable unease within trade circles. Lee advised Canadian leaders to appeal to Trump and propose solutions to eliminate these tariffs instead of engaging the U.S. administration from a confrontational perspective. "He sees himself as a dealmaker," Lee noted, urging Canadian officials to engage amicably with the U.S.
Reflecting on the Canadian government’s response to Trump’s tariff rhetoric, Lee criticized their approach, stating it has been disappointing as politicians seem more focused on demonstrating strength than on pragmatic dialogue. His frustration was palpable: "They see this as some kind of macho-man contest of who can show how tough they are to punch Donald Trump and his administration in the face," he lamented. Lee believes the notion of actually winning against U.S. power is overly optimistic, stating, "The idea... is truly beyond delusional." He also highlighted the experience gap, stating, "It’s embarrassing... our cabinet... does not have the depth of knowledge or experience" compared to Trump's economic advisers.
Trump’s looming tariffs have also attracted criticism from economists who caution against their inflationary potential, arguing they would generate less efficient outcomes and hinder overall U.S. economic growth. Meanwhile, the economic underpinning of these tariffs is partly upheld by Stephen Miran, who due to be prominently engaged as Trump's economic advisor, has recently pubished tariffs frameworks. Miran argues previous tariffs on Chinese imports have demonstrated effectiveness, even with visible adverse impacts.
On another front, steelmakers from Canada and Mexico have started to adjust operations due to Trump’s threats. Companies like Canada’s Stelco Holdings Inc. and various Mexican suppliers have ceased taking new orders for U.S. deliveries, signaling concern over the anticipated reimposition of tariffs. Flack Global Metals’ CEO Jeremy Flack echoed the sentiment of uncertainty: "They’ve gone from concerned to unconcerned to concerned again," indicating fluctuations lead to caution on order fulfillment due to potential tariffs.
The Canadian steel sector plays a significant role, being the top foreign supplier to the U.S. Stelco parent Cleveland-Cliffs Inc. confirmed the company’s readiness to adhere to Trump’s policies. "President Trump will do what President Trump wants to do. He has a plan, and I will play accordingly," said Cleveland-Cliffs CEO Lourenco Goncalves. His comments reflect the anticipated adjustments necessary to align with U.S. trade expectations, though they remain highly contingent upon Trump’s decisions.
Overall, the specter of tariffs looms large over U.S.-Canada-Mexico trading relationships, impacting automotive, steel, and other sectors as negotiations to amend the USMCA remain complex. Companies finding themselves at the mercy of these potential tariffs may face unprecedented challenges, emphasizing the need for coherent communication and judicious negotiation from all sides. If President Trump’s threats materialize, the retaliatory responses from both neighbors could redefine North American trade relations as they stand now.