Elbows up, gloves off again: A Team Canada approach to CUSMA/USMCA review

Understanding Canada’s provincial governments’ responses to the recent round of US tariffs targeting Canada highlights the different, yet unified strength of ‘Team Canada’ and shows ‘cooperative federalism’ in practice.

The CUSMA (Canada-United States-Mexico Agreement), or NAFTA 2.0, was negotiated and signed during Trump’s first term and governs the flow of trade and investment across North America. CUSMA has had significant impacts for Canada, regulating an estimated total of US $719.5 billion bilateral trade in 2026, and since it entered into force, the goods and services trade with the US has increased by more than $275 billion (27%) and with Mexico has increased by $19.7 billion (56.6%).

A key component of CUSMA is the Joint Review, which was scheduled on 1 July 2026. A critical feature of the Joint Review was that it was held under the shadow of Trump’s threat to impose tariffs on $28 billion in Canadian goods, none of which would be CUSMA-exempt. And despite negotiators signalling an agreement was imminent, Prime Minister Carney walked away from the trade negotiations at the 11^th hour. The reason? Among longstanding grievances against Trump’s tariffs, Carney stated that “the U.S. proposed new terms that were uneconomic, unfair, and undermined the net benefits to Canada, calling into question the reliability of any deal.” Later, Carney revealed that last-minute US requests related to limits on the French language and who Canada could develop future treaties with – significant constitutional and sovereignty matters.

Canada is a confederation, so the subnational governments have a stake in the CUSMA negotiation. With the collapse of CUSMA, that means that some regions have different levels of exposure to the economic impacts.

The new US 50% sector-specific tariffs on Canadian goods address this exposure. For example, Alberta’s key exports include crude oil that gets refined in the US at a discounted rate and is not likely to be hit with a tariff. But, Ontario’s aluminium, steel, and auto and British Columbia and New Brunswick’s lumber sectors, have been political touchpoints and will leave those sectors and provinces exposed. This asymmetric exposure could have led to internal fights, but it hasn’t. Rather, the provincial, territorial, and federal governments have unified.

The table below shows how, though in distinct ways, Canadian provinces have remained unified.

Chart 1: Canadian governments’ responses to US trade policies

Across Canada, each of the subnational governments has stated that they support Prime Minister Carney’s choice to cancel trade talks with the US but maintain a wide spectrum of views on next steps and how each government will advocate for their unique interests going forward. This vocalising of diversity of policy preference while towing the Team Canada line is ‘cooperative federalism’ in practice. This is not just pro-free trade, but a signal to support all Canadians while maintaining sovereignty of provincial and territorial policy areas. It is a recognition and acceptance of diversity in values and approaches.

Understanding the asymmetric impacts of US tariffs on each of the regions helps us understand why some provinces would like to see export tariffs on high-demand US goods, but also why other provinces would oppose those steps, for example. Which play to use is a negotiation, a team effort to identify the best play. All options are on the table, as (coach) Carney has said, but that doesn’t mean all options will be used. Who decides which plays to use depends on who has the competence within the Canadian Constitutional division of powers.

One play that has been working is the ban on US alcohol – a provincial and territorial competence. This remains in place for 11 of the 13 provinces and territories (outliers Alberta and Saskatchewan), many Canadians are boycotting travel to the US and supporting buy-local habits. Premiers of Ontario, Manitoba, and British Columbia have been the most outspoken, often impacting the trade relationship.

One of the most politically sensitive plays is the possibility of putting export tariffs on key energy exports – namely crude oil from Alberta and Saskatchewan. Both of these prairie provinces have spoken out against the possible tariff, but other provinces want all options on the table. Notably, tariffs are a federal competence, so the provincial governments cannot apply or halt this play, but they can advocate strongly.

These examples highlight how diversity across Canadian governments surfaces. Governments regulate within their competence and try to influence other governments when their region will be impacted by others’ decisions. Diversity in policy preferences exists and tensions develop, like with export tariffs. Federalism is built on diversity, respect for the division of powers, trust that all are working in good faith, and belief that we are all stronger together.

Here’s the rub. Some plays work. Some plays only work against some opponents. Some plays don’t work. Some plays are (necessary and) unpopular. And no team wants to win at the cost of losing a player. These are the assessments that are ongoing as the trade war continues.