Following the preliminary agreement between the European Union and the United States on trade, some Canadian influencer accounts have been claiming Canada now has a worse trade deal with the U.S. than most nations.
Here is one example:
The 35% tariff referenced in the above post is the threatened tariff rate included in a letter by the U.S. President to Prime Minister Mark Carney discussing what would happen if a deal is not reached by August 1st.
While such a tariff rate would indeed be damaging to the Canadian economy, blanket claims of 35% tariffs are false given one significant factor.
The Canada-US-Mexico Agreement (CUSMA) remains in force.
When tariffs are imposed on Canada, those tariffs generally exempt CUSMA-compliant goods. And while the U.S. has arguably violated CUSMA with their recent tariffs on Canada and Mexico, most CUSMA-compliant trade remains free, an indication that even the tariff-happy Trump Administration recognizes that wholesale abrogation of a significant trade deal would make others unwilling to negotiate in the future.
As noted by RBC in May of this year, CUSMA compliance rose, and most trade between Canada and the U.S. remains duty-free:
“U.S. tariffs were already in place for key Canadian exports in March—but the share of exports meeting CUSMA/USMCA rules of origin (and exempt from blanket tariffs imposed early in March) already showed signs of increasing, rising to 50% in March from 33% in February and 40% a year ago, according to the U.S. Census Bureau.
Tariffs on steel and aluminum products imposed from March 12 apply irrespective of the CUSMA/USMCA, but a large portion of exports still appear to have crossed the border duty free. The average U.S. tariff rate on imports from Canada rose to 1.9% in March from 0.1% in February (with larger increases on imports from China and Mexico).”
Further, while Canada faces 50% tariffs on steel and aluminum imposed by the U.S., the EU-U.S. deal keeps American tariffs on European steel in place.
Thus, Canada has – for the moment – a better ‘deal’ than most countries in the world, even countries that have signed heavily-hyped deals with the U.S.
That doesn’t mean it will remain this way indefinitely. The Trump Administration is likely to push for an early renegotiation of CUSMA and will almost certainly seek to entrench much higher tariffs. The U.S. is also pushing ahead with efforts to weaken the Canadian auto sector.
However, those who claim that Canada is worse off than other nations when it comes to trade with the U.S. are ignoring the impact of CUSMA, and are thus selling a false narrative.
Spencer Fernando
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