Trump's Tariff Trap: Canada's Fading US Trade Deal and the Rise of a Transatlantic Defence Network

Strategic Insights -

Canada's federal government would be foolish to assume the USMCA will survive intact until 2032, given US President Donald Trump's history of tearing up trade deals that don't serve his interests. Mr. Trump's trade policy is based on tariff and investment shakedowns, not congressionally approved deals, and certainly not multilateral deals. Ontario Premier Doug Ford has warned that the USMCA could soon vanish faster than a Trump promise, with the president potentially pulling the carpet out from underneath Canada with one signature. As a result, Canada needs to hustle to prepare a fallback strategy in case the USMCA is sent to the knacker's yard, as Switzerland, India, and Brazil are learning in a hurry.

Key Takeaways:

  • The USMCA, a tweaked successor to NAFTA, is up for review in mid-2026, but any of the three signatories can leave the agreement with six months' notice.
  • US President Donald Trump can potentially pull the USMCA out with one signature, as he has a history of tearing up trade deals that don't serve his interests.
  • Canada's federal government would be foolish to assume the USMCA will survive intact until 2032.
  • Canada needs to prepare a fallback strategy in case the USMCA is sent to the knacker's yard, which could involve forging trade agreements with other countries, such as those in the Asia-Pacific region or the European Union.
  • A hub-and-spoke arrangement, where Washington demands separate deals with Mexico and Canada, is more likely than a multilateral deal.
  • Canada has a trade agreement with almost a dozen Asia-Pacific countries, including Japan and Australia, which could be expanded.
  • Canada could embed itself fully in the EU defence pact and form a transatlantic defence supply chain with hundreds of jobs potential.
  • Canadian shipyards, such as Ontario Shipyards, could form partnerships with big name European naval companies to bash out frigates, corvettes, patrol boats, and more.

Statistics:

  • 90% of Canadian exports to the U.S. are covered by the USMCA.
  • 50% tariffs imposed on India and Brazil.
  • 39% tariffs imposed on Switzerland's exports.
  • 16 F-35 fighter jets ordered by Canada from Lockheed Martin, which could be replaced by Swedish-designed Saab Gripen fighter jets.
  • Thousands of jobs potential in a transatlantic defence supply chain.
  • 6 months notice required to leave the USMCA.
  • USMCA up for review in mid-2026.
  • USMCA signed in 2020.

Sources:

  • ERIC REGULY, Staff, Byline: ERIC REGULY
  • White House
  • Government of Canada
  • Ontario Government
  • Saab
  • Lockheed Martin
  • Fincantieri
  • Italy's Defence Ministry
  • ERIC REGULY, Staff, Byline: ERIC REGULY, "Trump's Tariff Trap: Canada's Fading US Trade Deal and the Rise of a Transatlantic Defence Network", Publication: not specified