Can Canada Rescue North America?

In a rare display of North American harmony, President Trump, Mexico’s President Claudia Sheinbaum, and Canada’s Prime Minister Mark Carney managed to rise above the FIFA 2026 World Cup draw’s cringeworthy game-show theatrics. There were no juvenile recriminations, new tariff threats, or provocations. Though the president showcased dance moves better left behind in 1978, the prime minister restrained himself. “It’s the first time I haven’t danced to the Y.M.C.A. when it came on, but there you go,” Carney confessed when he returned to Ottawa.

Sheinbaum, sometimes called the “Trump whisperer,” emerged unscathed from her first in-person meeting with the president. As for Carney, Trump has described him as “a good man” and “a tough negotiator.” Even the leaders’ short tête-à-tête minus advisers avoided drama and left the world to decode whether the short meeting offered any bankable assurances that the United States-Mexico-Canada Agreement (USMCA) will survive the Trump presidency.

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U.S. Trade Representative Jamieson Greer must deliver a report to Congress by early January that explains how the administration plans to approach the USMCA review. The three countries can stay in the agreement until 2042, or engage in yearly reviews to reconcile differences that, if addressed, allow an opt-out in 2036. There’s also a nuclear option: Any country can exit the pact with six months’ notice. The U.S. Chamber of Commerce and 500 business and agricultural groups have backed the USMCA, along with a bipartisan group of members of Congress.

Three days of hearings convened by Greer earlier this month found a wide divergence in views among more than 100 witnesses. Agricultural producers, along with auto, steel, aluminum, and lumber representatives and every other conceivable interest group testified on the pact’s compliance mechanisms, labor protections, market access, and other sector-specific issues. Many groups called for reforms or other changes, but there was widespread agreement that the pact is an essential component for a healthy North American trade zone and should be preserved instead of capriciously dismantled.

While Greer has intimated that an exit is on the table with other options, that posture could be another threat-as-bargaining-tactic, of which the administration has an inexhaustible supply. Carney has pushed back on the exit narrative.

The easy rapport Carney shared with Trump during their latest Washington encounter belies the extremely precarious position that the Canadian prime minister is in. Carney wants to salvage the agreement Canada signed in 2020 during the first Trump administration, but not at the expense of bringing home a bad deal. As a result, the path ahead for Carney and the pact Trump once called the most “modern, up-to-date, and balanced trade agreement in the history of our country” is murky.

It’s been a tumultuous eight months for a Canadian prime minister forced into a trade war energized by the White House. Carney may have believed that he could repair Canada’s ties with the United States after the departure of his disgraced predecessor Justin Trudeau. Détente was certainly on his mind after he highlighted a “30-day sprint” to a trade deal after the June G7 meeting in Alberta this past summer. That plan didn’t get out of the starting gate.

Carney’s problem goes far beyond the temperamental incompatibility between Trudeau and Trump, says Fen Osler Hampson, a professor of international affairs at Carleton University in Ontario. “The realization is that Trump isn’t looking for a partner, he’s looking for a vassal,” says Hampton, who co-chairs the Expert Group on Canada-U.S. Relations at the university. “He wants Canada to surrender its economic sovereignty in exchange for avoiding tariffs.”

Carney has quickly maneuvered to reframe Canada’s relationship with the U.S. Where Trump set out to pull apart the federal government, the prime minister has pivoted to shore up a country shattered by the swift erasure of generations of neighborly goodwill. What used to be one of the globe’s most fruitful economic partnerships now must be fortified against not only cross-border shocks, but the accompanying shifts in geopolitical dynamics.

The preliminary USMCA talks that were under way this fall were sideswiped by another sports extravaganza. The Toronto Blue Jays lost the World Series to the Los Angeles Dodgers, but not before Ontario Premier Doug Ford detonated a bombshell ad featuring President Ronald Reagan’s decades-old anti-tariff comments.

Trump claimed that the ad was “fake,” designed to influence the Supreme Court’s impending decision on the legality of his tariff regime. PolitiFact rated the Ronald Reagan Foundation’s claim that the ad “misrepresented” Reagan’s remarks as “mostly false.” Although the Ontario premier stood by the ad, he eventually yanked it. It was a face-palm moment for Carney, forcing him to apologize to Trump and otherwise mop up the mess.

Carney has been impressive in his handling of Canada’s what’s-up-is-down relationship with the president, but he has capitulated on certain issues. For example, he axed a 3 percent digital services tax on tech companies’ revenues in June, after a Trump pressure campaign on behalf of his tech oligarch allies.

An increasing portent of doom, however, hovers over Canadian officials, who are considering every USMCA possibility, from implementing a roster of technical fixes to satisfy the White House to waking up one day to no agreement at all. How the American affordability crisis influences the trade agreement’s trajectory is a mystery, since the president insists on holding up his A+++++ report card in defiance of reams of evidence.

The best-case proposition is that the USMCA, known in Canada as CUSMA and in Mexico as T-MEC, continues with adjustments. One possibility is that the Carney government would have to modify what Hampson calls one of Canada’s “cherished possessions”: supply management, a complex framework of protectionist policies mostly on the dairy industry. Canada levies high tariffs on milk and egg imports if those products exceed specific quotas, which are important to dairy farmers in Quebec and Ontario. The system is a “political third rail,” in the two vote-rich provinces, says Hampson. “The betting is Trump’s going to take another run at that, the way he did before [in 2018].” He adds that the auto industry is another major target, as the Trump administration seeks the complete reshoring of U.S. auto industry outposts now based in Canada or reliant on Canadian components.

The worst-case scenario, exiting the USMCA, is something that no one really wants to contemplate. Under the USMCA, many products are exempt from tariffs or have recently been declared exempt by the president, even as grocery prices have increased. Without the USMCA regime, prices could go haywire even more than they already have.

Carney has been scouting for new economic partners, moving toward a rapprochement with China after a tit-for-tat trade dispute whereby Canadian tariffs on EVs prompted the Chinese to levy tariffs on canola products, a multibillion-dollar export crop. Recently, however, China has relented a bit by reopening the country to Canadian tour groups.

The European Union is another key player in Carney’s high-profile quest to redefine Canada’s national-security posture, which previously had been hardwired to the U.S. defense umbrella. Carney signed a defense procurement pact with the European Union that brings Canada into the EU’s Security Action for Europe’s (SAFE) processes and enables the country to bid on EU military contracts and boost its own munitions stockpiles. As for the U.S., the administration’s 2025 National Security Strategy document only mentions Canada once, as one of several countries that should adopt trade regulations that steer China toward increased “household consumption.”

Any major USMCA concessions Carney makes could set him up for a no-confidence vote in Parliament, where he helms a minority government that must rely on the support of other parties. What ultimately saves Carney, in the medium term at least, is the unpopularity of Pierre Poilievre, the Conservative Party leader. A no-confidence motion might ultimately produce another minority government. But as of last Friday, the Liberals are now only one seat short of a parliamentary majority due to a Conservative member of parliament deciding to join the Liberals, the second person to cross over to Carney’s party this fall.

Carney’s public support going into 2026 is solid. There’s healthy enough disdain across the country for the Conservatives and their Maple MAGA strivings. Canadians continue to enthusiastically forgo vacations “down south” (of the border) and even sell off second homes in places like Florida. The boycott of American products has been effective, especially in the wine and spirts sector (it’s contributed to distillery closures and bankruptcies in Kentucky). But within Canada, the Ontario auto sector has been hard-hit, and other manufacturing plants have shut down. Although the Canadian economy added 54,000 jobs in November, a third straight month of gains, part-time employment has fueled the increases. The national unemployment rate is high though falling: 6.5 percent in November, down from 7.1 percent in September.

The prime minister’s program isn’t flawless. Environmentalists have blasted his backtracking on climate goals: nixing a consumer carbon tax on fossil fuels, partially eliminating an electric-vehicle sales mandate, and recently announcing a controversial oil pipeline agreement traversing Alberta, British Columbia, and First Nations lands to the Pacific Coast. His environment minister Steven Guilbeault, a Trudeau holdover, resigned in protest.

Hampson sees Carney, who played on Harvard’s varsity hockey team, avoiding possible USMCA missteps by Canada “ragging the puck,” that is, keeping it away from opponents to kill time and wear them out. “It’s kind of go steady, go slow and be deliberative and recognize that Trump can’t fight the laws of economics and nor can he fight the political consequences.”

“The clock is ultimately on Canada’s side,” he adds. “Inflation in the U.S. is ticking up. The submissions to USTR overwhelmingly show that American manufacturers are desperate to keep the USMCA in place because they can’t build cars or houses without Canadian aluminum, steel, and lumber. Carney is smart enough to know that the longer you wait, the stronger the domestic pressure will build to in the United States to force Trump’s hand.”

The formal USMCA review meetings are currently slated to begin on July 1, 2026, 18 days before the World Cup final match.