Canada turns to Mexico as US trade deal review looms

Canada is seeking stronger ties with Mexico as the US prepares to review the Canada-United States-Mexico Agreement, in a bid to safeguard its interests amid growing uncertainty in Ottawa's relationship with Washington.

The US decision to launch the review sets the stage for a challenging year ahead for Canada, said Ron Stagg, a history professor at Toronto Metropolitan University who specializes in Canada-US ties.

"Any review will be interpreted in the manner that the American government wants, especially if questions are biased," Stagg said.

The three countries are required to conduct a joint review of the deal next year and have begun public consultations. Meanwhile, US tariffs on Canadian imports — including a 50 percent tax on steel and aluminum — remain in place.

Stagg said the lack of progress in recent US-Canada trade talks reflects a strategic pause by Washington. "I suspect the American government is in no hurry to negotiate. It is Canada that is anxious to get some issues settled before the review — steel, aluminum and others."

The Financial Accountability Office of Ontario released an outlook on Sept 17, projecting that Canada's economy will slow this year and next, with the sharpest slowdown expected in Ontario.

Trade uncertainty could weigh on investment decisions, Stagg said, even if US investment in Canada remains stable for now.

Supply chains could face particular stress, he added. "Supply chains are threatened if an American company imports from China and then sends (the products) to a Canadian subsidiary to be sold."

Stagg said he is certain that US President Donald Trump, who has repeatedly called for a "drastic renegotiation" of the pact, is looking forward to the 2026 talks. "He wants the agreement to clearly favor the United States, as he does with any agreement. Both Canada and Mexico will be threatened in the negotiations."

Canada has sought to broaden its alliances. On Sept 18, Prime Minister Mark Carney signed a comprehensive strategic partnership agreement with Mexico. "Canada and Mexico are entering a new era of cooperation," Carney said.

Stagg said the deal is not just about leverage. "Both countries are looking for ways to diversify trade," he said.

Julian Castro-Rea, a political science professor at the University of Alberta, said the pact could mark a rare moment of alignment between the two smaller North American partners and signal a shift toward more genuine cooperation.

"The government-to-government political and strategic partnership has yet to be established, firmly based on mutual trust," he said. "Both Canada and Mexico want to strengthen their negotiation positions against the unpredictable, protectionist US government."