Prime Minister Mark Carney recently stated that a zero-tariff regime would be the most effective outcome for the United States in ongoing trade negotiations under the United States-Mexico-Canada Agreement (CUSMA).
Carney’s emphasis on lowering tariffs reflects broader concerns about trade stability and competitiveness, especially amid persistent threats of sweeping U.S. tariffs that could disrupt integrated North American supply chains.
Context of CUSMA Negotiations and Rising U.S. Tariff Threats
Canada’s economic relationship with the United States has been strained by tariff threats and trade policy uncertainty.
Since the return of former U.S. President Donald Trump, the U.S. has repeatedly signaled intentions to impose steep tariffs on imported goods, including automobiles and other key sectors.
While CUSMA — the free-trade agreement that governs roughly 85% of trade between Canada, the U.S., and Mexico — has exempted many Canadian exports from new levies, sector-specific tariffs remain in place and continue to weigh on businesses.
Carney and his team are negotiating under this backdrop, seeking to secure a more predictable and mutually beneficial trade framework before the formal CUSMA review begins.
What Carney Meant by “Zero-Tariff Regime”
In public remarks, Carney described a zero-tariff regime as the ideal scenario for the United States — not only for Canada.
A regime without tariffs would eliminate trade barriers, reducing costs and encouraging cross-border investment and manufacturing integration.
Cuts to tariffs under CUSMA already mean that most trade flows tariff-free, but remaining duties in specific industries still create friction.
Carney’s call goes further, advocating to extend that tariff-free environment more broadly, which he argues would benefit consumers, producers, and workers across North America.
He framed the approach as economically sensible, noting that lower trade costs tend to stimulate growth and strengthen supply chains. This philosophy contrasts with protectionist impulses that rely on tariffs as a policy tool.
Trade Policy Debate: Canada’s Perspective
Ottawa has consistently defended its commitment to CUSMA and the rule-based trading system it provides.
Carney’s administration has worked to avoid retaliation that could worsen tensions, including matching U.S. tariff exemptions for CUSMA-compliant goods.
However, Canadian officials recognize that tariff uncertainty still looms large for sectors not fully covered by CUSMA.
Steel, aluminum, lumber, and automotive parts remain particularly vulnerable to duties that may not align with market expectations.
Carney has also been clear that Canada will not pursue a free trade agreement with China, despite external pressure, emphasizing that any tariff relief must align with existing commitments.
U.S. Interests in a Zero-Tariff Approach
Carney’s argument holds that a zero-tariff regime is not just beneficial for Canada but also for the United States. Lower tariffs reduce the cost of imported intermediate goods, which are essential to U.S. manufacturing that depends on cross-border supply chains.
Consumers also benefit from lower prices when tariff costs are removed from final goods.
In an economy where inflation and living costs remain significant political concerns, broad tariff cuts could ease financial pressures on households.
Furthermore, tariff barriers can prompt retaliatory measures that disrupt diplomatic and trade relations.
Carney has suggested that cooperation, rather than confrontation, serves long-term economic interests for all CUSMA members.
Challenges and Political Realities
Despite Carney’s advocacy, achieving a fully zero-tariff regime remains challenging. Tariff policy often responds to political pressures, industry lobbying, and broader geopolitical dynamics.
Some U.S. industries and lawmakers defend targeted tariffs as tools to protect domestic production. Others argue that unilateral tariff reductions could expose sensitive sectors to unfair competition.
Carney’s vision requires cross-border consensus, which may not align with current U.S. domestic politics. Trade discussions are further complicated by broader geopolitical tensions and evolving foreign policy priorities.
Importance of the 2026 CUSMA Review
The CUSMA agreement includes a mandated review in 2026, which provides a formal opportunity to reassess trade commitments and modernize provisions.
Carney’s remarks and negotiation strategy signal that Canada wants to use this review to secure greater tariff certainty. Any changes emerging from the 2026 negotiations could influence the next decade of North American trade relations.
Given the scale of commerce under CUSMA, even modest adjustments to tariff rules can have wide-ranging effects on industries and workers. For instance, the automotive sector is deeply integrated across borders, with parts and finished vehicles moving frequently between member countries.
How a Zero-Tariff Regime Could Affect Canadians
For Canadian businesses, lower tariffs can reduce production costs and expand export opportunities.
Small and medium-sized enterprises, in particular, could benefit from easier access to U.S. and Mexican markets without unexpected duties.
Consumers in Canada could also see lower prices on imported goods if tariff barriers are reduced. This outcome may help ease inflationary pressures on everyday items like food, appliances, and vehicles.
However, some industries that compete directly with U.S. producers may face increased competition if tariffs are eliminated without safeguards. Policy makers must balance the benefits of open markets with targeted supports for vulnerable sectors.
Broader Implications for North American Economic Integration
Carney’s commentary underscores the strategic importance of stable, tariff-free trade in North America. A real shift toward a zero-tariff CUSMA era could enhance economic integration and strengthen the region’s global competitiveness.
Such a regime might position North America to better compete with other large economic blocs, such as the European Union and Asia-Pacific trading networks.
In a global economy marked by shifting alliances and supply chain pressures, clear and predictable trade rules offer competitive advantages.
