The USMCA is facing a major test! Businesses are hesitant to invest, is the Canadian dollar about to collapse?
2026-02-27 10:30:07
Canadian Trade Minister LeBlanc warned that the uncertainty surrounding the USMCA, which may trigger its annual review in July, is causing stagnation in Canadian business investment and a decline in net business investment.
Although the US retained tariff exemptions for Canada for economic reasons, industries such as aluminum, steel, and automobiles have already been impacted. This chill is expected to directly weaken the Canadian dollar's attractiveness, providing a floor for the USD/CAD pair. The market will closely watch the Washington talks next weekend, and the Canadian dollar may enter a period of high volatility.
Dominic LeBlanc, Canada's Minister for Trade with the United States, told business leaders in Toronto on Thursday (February 26) that the USMCA (United States-Mexico-Canada Agreement) may be entering its annual review phase, and this continued uncertainty may be one of the goals pursued by the Trump administration. This statement highlights a new test for the North American Free Trade Agreement (NAFTA) framework and could further dampen confidence in cross-border investment .
LeBron James revealed that he will meet with U.S. Trade Representative Jamison Greer in Washington next weekend to prepare for the mandatory review of the USMCA scheduled for July. According to the agreement's terms, if the three parties cannot reach a consensus to extend the agreement during the July 2026 review, the agreement will remain in effect, but will trigger an annual review mechanism .
LeBron noted, "If there is no consensus on the review, the agreement will continue to operate as usual, and the annual review mechanism will then be activated. If one of our partners (referring to the United States) makes creating uncertainty one of its objectives, then all sorts of scenarios are possible."
He emphasized that the current uncertainty surrounding the future direction of the USMCA has directly led to a standstill in Canadian business investment decisions. LeBron said, "Net business investment is declining, which is one of our biggest challenges. We must take control of what we can control."
Canadian Prime Minister Mark Carney has set a clear goal of doubling Canada's exports to non-US countries within the next decade. He believes that US tariff policies are creating a "chill" on the investment environment .
The USMCA was negotiated and reached under Trump's leadership during his first term, with a specific clause allowing for review in 2026. Trump has publicly stated his desire for American automakers to close their Canadian factories and relocate them back to the United States; Greer has repeatedly mentioned the "manufacturing reshoring" of industrial production.
Nevertheless, LeBron remains cautiously optimistic about the prospects of a trade agreement. He pointed out that when the Trump administration recently announced a new round of tariffs, it retained the USMCA exemptions for Canada and Mexico, "They did this because it is in the economic interest of the United States."
Currently, most categories of Canadian exports to the US remain protected by the USMCA's zero-tariff policy. However, certain industries have been severely impacted by tariffs, particularly aluminum, steel, automobiles, and timber. LeBlanc recalled that last fall, Canada was close to reaching an agreement on industry tariffs, but Trump abruptly halted negotiations due to an anti-tariff television ad from the Ontario government.
LeBron distinguished between the U.S.'s public "political debates" and its pragmatic approach to private intergovernmental dialogue: "There are public political debates in the United States, but private government-to-government communication is not frustrating."
Uncertainty surrounding the agreement's prospects has led to stagnant Canadian business investment and a decline in net business investment. This negative economic fundamental will be directly reflected in the exchange rate, weakening the Canadian dollar's attractiveness and thus providing a floor for USD/CAD. During Friday's Asian session, USD/CAD traded in a narrow range around 1.3675.
LeBron's mention of both "political debate" and "pragmatic communication" suggests the Canadian dollar will enter a period of volatility. Markets may react sharply to every public speech and every private meeting (such as the Washington talks this weekend).
(USD/CAD daily chart, source: EasyForex)
Against the backdrop of a tightening geoeconomic environment, the outcome of the USMCA review will profoundly impact the stability of North American supply chains and investment flows. The Canadian government is seeking to maintain the trilateral framework while simultaneously accelerating export diversification to reduce dependence on a single market.
Market participants need to pay close attention to the Washington meeting and its follow-up developments, as uncertainty may continue to dominate the North American trade narrative.
At 10:30 Beijing time, the US dollar was trading at 1.3675/76 against the Canadian dollar.
Although the US retained tariff exemptions for Canada for economic reasons, industries such as aluminum, steel, and automobiles have already been impacted. This chill is expected to directly weaken the Canadian dollar's attractiveness, providing a floor for the USD/CAD pair. The market will closely watch the Washington talks next weekend, and the Canadian dollar may enter a period of high volatility.
LeBron warns: Annual review mechanism may be triggered
Dominic LeBlanc, Canada's Minister for Trade with the United States, told business leaders in Toronto on Thursday (February 26) that the USMCA (United States-Mexico-Canada Agreement) may be entering its annual review phase, and this continued uncertainty may be one of the goals pursued by the Trump administration. This statement highlights a new test for the North American Free Trade Agreement (NAFTA) framework and could further dampen confidence in cross-border investment .
LeBron James revealed that he will meet with U.S. Trade Representative Jamison Greer in Washington next weekend to prepare for the mandatory review of the USMCA scheduled for July. According to the agreement's terms, if the three parties cannot reach a consensus to extend the agreement during the July 2026 review, the agreement will remain in effect, but will trigger an annual review mechanism .
LeBron noted, "If there is no consensus on the review, the agreement will continue to operate as usual, and the annual review mechanism will then be activated. If one of our partners (referring to the United States) makes creating uncertainty one of its objectives, then all sorts of scenarios are possible."
Uncertainty has led to a standstill in investment decisions.
He emphasized that the current uncertainty surrounding the future direction of the USMCA has directly led to a standstill in Canadian business investment decisions. LeBron said, "Net business investment is declining, which is one of our biggest challenges. We must take control of what we can control."
Canadian Prime Minister Mark Carney has set a clear goal of doubling Canada's exports to non-US countries within the next decade. He believes that US tariff policies are creating a "chill" on the investment environment .
USMCA Background and the US's Intention to Bring Manufacturing Back to the US
The USMCA was negotiated and reached under Trump's leadership during his first term, with a specific clause allowing for review in 2026. Trump has publicly stated his desire for American automakers to close their Canadian factories and relocate them back to the United States; Greer has repeatedly mentioned the "manufacturing reshoring" of industrial production.
Nevertheless, LeBron remains cautiously optimistic about the prospects of a trade agreement. He pointed out that when the Trump administration recently announced a new round of tariffs, it retained the USMCA exemptions for Canada and Mexico, "They did this because it is in the economic interest of the United States."
Tariff shocks and pragmatic intergovernmental dialogue
Currently, most categories of Canadian exports to the US remain protected by the USMCA's zero-tariff policy. However, certain industries have been severely impacted by tariffs, particularly aluminum, steel, automobiles, and timber. LeBlanc recalled that last fall, Canada was close to reaching an agreement on industry tariffs, but Trump abruptly halted negotiations due to an anti-tariff television ad from the Ontario government.
LeBron distinguished between the U.S.'s public "political debates" and its pragmatic approach to private intergovernmental dialogue: "There are public political debates in the United States, but private government-to-government communication is not frustrating."
Analysis of the impact on the foreign exchange market
Uncertainty surrounding the agreement's prospects has led to stagnant Canadian business investment and a decline in net business investment. This negative economic fundamental will be directly reflected in the exchange rate, weakening the Canadian dollar's attractiveness and thus providing a floor for USD/CAD. During Friday's Asian session, USD/CAD traded in a narrow range around 1.3675.
LeBron's mention of both "political debate" and "pragmatic communication" suggests the Canadian dollar will enter a period of volatility. Markets may react sharply to every public speech and every private meeting (such as the Washington talks this weekend).
(USD/CAD daily chart, source: EasyForex)
Outlook: Supply Chain Stability and Export Diversification
Against the backdrop of a tightening geoeconomic environment, the outcome of the USMCA review will profoundly impact the stability of North American supply chains and investment flows. The Canadian government is seeking to maintain the trilateral framework while simultaneously accelerating export diversification to reduce dependence on a single market.
Market participants need to pay close attention to the Washington meeting and its follow-up developments, as uncertainty may continue to dominate the North American trade narrative.
At 10:30 Beijing time, the US dollar was trading at 1.3675/76 against the Canadian dollar.
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