USMCA Review in 2026: Canada Faces 7%+ Tariff Hike on Exports Amid Trump’s Threats
- Why Is Trump Threatening Canada Over the USMCA?
- How Are Canadian Officials Responding?
- What’s at Stake in the 2026 USMCA Review?
- How Are Businesses Reacting?
- Could Canada’s China Deal Backfire?
- What’s Next for USMCA Negotiations?
- Expert Take: Is This Just Political Theater?
- Bottom Line for Investors
- USMCA 2026 Review: Your Questions Answered
The upcoming USMCA review is heating up, with former President Donald TRUMP threatening 100% tariffs on Canadian exports if Prime Minister Mark Carney proceeds with a trade deal with China. Economists warn that failure to renew the agreement could push average Canadian export tariffs to the U.S. above 7%, destabilizing key industries like steel, autos, and lumber. While officials downplay tensions, businesses are already pausing growth plans. Here’s a deep dive into the stakes, the politics, and what’s next for North American trade.
Why Is Trump Threatening Canada Over the USMCA?
Former U.S. President Donald Trump has reignited trade tensions by warning Canada against deepening ties with China. In a fiery statement, Trump accused Prime Minister Mark Carney of turning Canada into a "dumping ground" for Chinese electric vehicles (EVs) under a January 2026 deal allowing up to 49,000 Chinese EVs annual entry (under 3% of Canada’s auto market). Trump’s 100% tariff threat targets Canada’s reliance on U.S. trade—77% of Canadian exports go south. "If Carney thinks we’ll ignore this, he’s gravely mistaken," Trump said, despite initially calling the China deal "fine" in January.
How Are Canadian Officials Responding?
Trade Minister Dominic LeBlanc insists the China agreement is narrowly focused on resolving tariff disputes, not a free-trade pact. "Our partnership with the U.S. remains remarkable," he told reporters, downplaying Trump’s rhetoric. Meanwhile, Carney framed the EV quota as a "Back to the Future" move, rolling tariffs to 2023 levels while protecting agriculture. Both stress compliance with USMCA rules, but Trump’s team argues the deal undermines American auto jobs.
What’s at Stake in the 2026 USMCA Review?
The treaty’s six-year review kicks off July 1, 2026. If the U.S., Canada, and Mexico fail to extend it for another 16 years, annual renegotiations loom until 2036. Economists like Dominique Lapointe (Manulife Investment Management) warn Trump’s threats add "negative risks" to talks. Key vulnerabilities:
- Steel/Aluminum: Already under Trump-era tariffs (25% and 10%, respectively).
- Autos: 7.5% average tariff could spike without USMCA protections.
- Lumber: 20% duties possible, per Scotiabank analysis.
Bloomberg estimates a worst-case 7.3% average tariff on Canadian exports, up from 0.35% under USMCA.
How Are Businesses Reacting?
Canadian firms are freezing expansion plans amid uncertainty. A Bank of Canada survey found 62% of companies are "holding cash for operations, not growth." Matthew Holmes of the Canadian Chamber of Commerce urged swift resolution: "Every month of delay hurts supply chains." Conversely, U.S. industries largely support USMCA—85% of testimonies in 2025 USTR hearings backed the deal, notes Derek Holt (Scotiabank).
Could Canada’s China Deal Backfire?
Trump’s reversal—from praising Carney’s deal in January to threatening tariffs—highlights volatile politics. Randall Bartlett (Desjardins) suggests diversification could help Canada: "Other trade partners want our goods." But with 72% of Canada’s $537B exports tied to the U.S., abrupt USMCA collapse WOULD be seismic. Case in point: When Trump briefly imposed auto tariffs in 2025, Ontario lost 8,000 jobs in three months.
What’s Next for USMCA Negotiations?
Behind closed doors, officials aim to avoid a public blowup. LeBlanc hinted at "creative solutions" on EVs, while Mexico pushes to keep labor provisions intact. The BTCC team notes: "Markets hate uncertainty—expect CAD volatility until July." Key dates:
| Date | Milestone |
|---|---|
| June 2026 | Draft review terms due |
| July 1, 2026 | USMCA anniversary/formal talks begin |
| October 2026 | Deadline to avoid annual reviews |
Expert Take: Is This Just Political Theater?
Trump’s threats may be posturing—USMCA was his signature trade win. But with U.S. elections looming, anti-China rhetoric sells. "He’s playing 4D chess with Carney," quipped a BTCC analyst. Still, the risks are real: A 2025 USTR report flagged Canada’s "overreliance" on Chinese EV parts, giving Trump ammunition.
Bottom Line for Investors
Watch for:
- Auto sector stocks (especially Canadian suppliers)
- CAD/USD exchange rate swings
- U.S. midterm election polls
As Bartlett puts it: "Buckle up—this’ll be a bumpy NAFTA 2.0 sequel."
USMCA 2026 Review: Your Questions Answered
What happens if USMCA isn’t renewed?
The deal reverts to annual reviews, creating perpetual uncertainty. Tariffs could rise incrementally, with sectors like autos hit first.
How likely is a full USMCA collapse?
Unlikely (20% odds per Bloomberg Economics), but Trump’s threats raise short-term risks. Most analysts expect an 11th-hour extension.
Can Canada replace U.S. trade with China?
Not quickly. China accounts for just 5% of Canadian exports vs. 77% for the U.S. Infrastructure isn’t in place for a pivot.
