After trade talks collapse, CUSMA review won’t ‘happen anytime soon,’ says former top negotiator

OTTAWA – Canada’s former chief trade negotiator Steve Verheul doesn’t expect formal negotiations on the review of the Canada-United States-Mexico-Agreement (CUSMA) between Canada and the U.S. to happen anytime soon, following the collapse of trade talks between the two countries last week.

“I think that the discussions between Canada and the U.S. on the CUSMA review have now been put into some question,” said Verheul, who now serves as a principal at GT and Company, during a webcast hosted by BMO Capital Markets on Wednesday.

Verheul said the expectation coming out of negotiations for an interim deal on Section 338 and Section 232 tariffs between the two countries, would be a commitment for both parties to enter the formal process of reviewing the North American trade pact.

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“I expect at some point we will get back to that kind of discussion, but I don’t think it will happen anytime soon,” he added.

Verheul was the chief negotiator who led Canada’s role in the creation of CUSMA. The trade pact is now subject to annual reviews, after the U.S. decided in July not to renew it for another 16 years.

Mexico and the U.S. just completed the third formal bilateral negotiation round under the joint review of CUSMA last month in Mexico City. On Monday, Mexican President Claudia Sheinbaum said she was optimistic that Mexico and the U.S. could reach a deal on Section 232 tariffs.

The collapse of negotiations between Canada the U.S. last Friday has led to a tit-for-tat escalation in the trade conflict between the two countries.

The U.S. has applied 50 per-cent tariffs under the Smoot-Hawley Tariff Act on nearly $28 billion worth of Canadian goods. In return, Canada has applied retaliatory tariffs ranging from 15 to 50 per cent on $27.6 billion worth of U.S. imports, effective Sept. 8. Canada has also doubled tariffs on U.S. steel and aluminum.

U.S. President Donald Trump has also threatened to double tariffs to 50 per cent on Canadian autos and trucks and put a levy on auto parts, effective Jan. 1.

After weeks of negotiations for interim agreement, Prime Minister Mark Carney said ultimately several last-minute demands from the U.S. side led to his government having to walk away from the agreement that was offered.

Carney said those demands included Canadian trucks not receiving the same tariff relief treatment as Canadian autos, language in the deal around restricting Canada’s ability to make trade deals with other countries, and “efforts to restrict our protections of our language, our culture, and in effect, our sovereignty.”

On Wednesday, Verheul cited those reasons for the breakdown in talks as well, adding that U.S. negotiators also wanted Canada to match U.S. tariffs on steel and aluminum from other countries and would not include aluminum-containing products as part of the reduction in tariffs.

When asked what it would take to get back to the negotiating table, Verheul said he expects Trump’s tariff policy to become progressively more unpopular domestically.