Canada and the United States are preparing to enter a critical new phase in their trade relationship, with formal talks scheduled to begin in mid-January that could shape the future of the USMCA ahead of its 2026 review. While the agreement remains intact for now, the timing and tone of these discussions reflect rising strategic, economic, and political stakes on both sides of the border, particularly as global trade becomes more fragmented and security-driven.

Setting the Stage for the USMCA Review

The United States–Mexico–Canada Agreement, negotiated during President Donald Trump’s first term, includes a built-in review clause that allows for renegotiation in 2026. The upcoming January talks are not a formal renegotiation, but they represent an early attempt to frame priorities and resolve pressure points before the process becomes more contentious.

For Canada, the stakes are especially high. More than 75% of Canadian exports flow to the U.S., making it one of the most trade-dependent advanced economies in the world. While USMCA currently shields most Canadian exports from tariffs, recent frictions underscore how quickly trade stability can be tested by political dynamics.

Tariffs, Sectors, and Unfinished Business

Prime Minister Mark Carney has indicated that talks earlier this year were close to delivering sectoral tariff relief, particularly for aluminum, steel, autos, and lumber. Those industries remain sensitive pressure points in Canada’s economy, where tariffs have weighed on margins, employment, and investment decisions.

Trade tensions flared again in October after Ontario ran an anti-tariff advertising campaign in the U.S., prompting Washington to halt discussions temporarily. Although relations have since stabilized, the episode highlighted how domestic politics on either side of the border can quickly spill into trade policy.

U.S. Trade Representative Jamieson Greer has also signaled that American concerns around Canadian dairy protections, alcohol distribution rules, and digital services taxes will feature prominently in the broader review. These issues, while narrow in isolation, speak to deeper disagreements over market access and regulatory sovereignty.

Critical Minerals and Strategic Leverage

Beyond tariffs, Canada enters these talks with a growing strategic asset: critical minerals. Canada supplies the U.S. with steel, aluminum, uranium, and roughly 60% of its crude oil imports, alongside 85% of imported electricity. It also holds 34 critical minerals that are increasingly central to U.S. defense and industrial policy.

Carney has been explicit that U.S. access to these resources is not guaranteed. By signaling openness to European and other partners, Canada is positioning critical minerals not just as an economic export, but as a geopolitical bargaining chip. This reflects a broader shift in global trade, where national security considerations are increasingly intertwined with commercial agreements.

What Markets and Businesses Will Watch

For investors and businesses in both countries, the January talks will be closely scrutinized for signals on continuity versus confrontation. While a full renegotiation is still more than a year away, early rhetoric and concessions can shape expectations, investment flows, and currency dynamics well in advance.

The risk is not necessarily an abrupt breakdown of USMCA, but a gradual increase in uncertainty that could delay cross-border investment, particularly in capital-intensive sectors such as manufacturing, energy, and mining. At the same time, the talks offer an opportunity to modernize aspects of the agreement to reflect supply-chain resilience, energy security, and digital trade realities.