The United States is actively considering a restructured North American trade agreement that would exclude Canada entirely — a development that, if realized, would represent the most consequential rupture in the bilateral relationship since the two countries first formalized their economic partnership in 1989. The New York Times reported Thursday that Donald Trump's administration is exploring a bilateral arrangement with Mexico alone, or a substantially rewritten framework that sidelines Ottawa, as the mandatory 2026 USMCA joint review process approaches.
The report has landed in Canada like a depth charge. A trading relationship worth more than $1 trillion annually — and on which approximately 75 percent of all Canadian exports depend — is now formally in play. For an economy that has spent three decades deepening its integration with the American market through NAFTA and its successor agreement, the prospect of formal exclusion is not a theoretical risk scenario. It is an existential threat.
In Canada, as Canadians would politely insist, we're more than just America's neighbor — we're a distinct nation with our own priorities. But polite insistence counts for little when the world's largest economy is considering the institutional equivalent of closing the door.
What 75 Percent Dependency Actually Means
The phrase "75 percent of Canadian exports" is frequently cited but rarely examined for what it means in concrete terms. It means that the auto plant in Windsor, Ontario, does not merely sell finished cars to American consumers — it assembles vehicles using components that cross the Detroit-Windsor border multiple times during the manufacturing process, each crossing governed by the zero-tariff terms of a framework that Trump has publicly called "irrelevant." It means that a canola farmer in Saskatchewan whose crop is priced in US dollars and sold predominantly into American food processing supply chains has almost no structural alternative if that market closes. It means that an Alberta oil sands producer, whose export infrastructure was built specifically around American refinery demand, cannot simply redirect barrels to Asia without the pipeline capacity that successive Canadian governments have failed to build.
A US-Mexico bilateral arrangement from which Canada is excluded would not merely impose tariffs on Canadian goods. It would place Canadian exporters at a structural disadvantage against Mexican competitors who retain preferential access — effectively inverting a trading order that Canadian businesses have organized their entire capital investment strategies around.
Province by Province: The Regional Stakes
The distribution of risk is not uniform across Canada's vast geography, and in a federation as politically fractious as this one, that asymmetry matters enormously.
Ontario is ground zero. The province's automotive manufacturing sector — which includes assembly plants operated by General Motors, Ford, Stellantis, and Toyota — is built around integrated cross-border supply chains that would be fundamentally uneconomic under any tariff regime that treats Canadian production as foreign. The broader manufacturing corridor stretching from Windsor through Oshawa to Brampton has already been absorbing shockwaves from earlier rounds of American trade pressure. Ontario now accounts for 191,690 Canadians receiving Employment Insurance benefits — the largest provincial caseload in the country — with a 18.4 percent year-over-year increase in the December 2025 data released Thursday by Statistics Canada.
Nationally, 569,000 Canadians were receiving regular EI benefits in December 2025, a 16.7 percent increase from the same period in 2024, representing 81,000 additional recipients. Trades and transport workers — precisely the occupations concentrated in automotive and logistics sectors most exposed to trade disruption — recorded a 13.6 percent annual increase in claims. These are not abstract numbers. They represent the labour market already absorbing the strain of trade uncertainty, before any formal exclusion has materialized.
Alberta faces a structurally different but no less acute exposure. The province exports hundreds of billions of dollars in oil and gas annually, the overwhelming majority of it southward through pipeline infrastructure that was designed around American refinery demand and cannot be quickly redirected. Alberta recorded a 21.9 percent year-over-year increase in EI recipients in December — one of the steepest provincial rates — against a backdrop in which separation rhetoric has already, according to economic analysts, begun deterring investment and costing the province jobs. A formal trade exclusion would accelerate that dynamic considerably.
In the Prairies, agricultural exporters face the prospect of canola, wheat, pulse crops, and livestock products encountering tariff barriers or being displaced by Mexican agricultural competitors granted preferential access. Saskatchewan and Manitoba have quietly been among the provinces most vulnerable to the scenario now being discussed in Washington, precisely because their export diversification options are most constrained.
Quebec — whose aerospace, pharmaceutical, aluminum, and food processing industries depend heavily on US market access — recorded a 21.1 percent annual increase in EI beneficiaries, the second-steepest provincial increase in the country. The province's distinct political identity and the dynamics of federal coalition politics give Quebec's economic grievances particular weight in Ottawa.
Ottawa Caught Between an Election and a Crisis
The report arrives at a moment of extraordinary political fragility in Canada. The country is heading toward a federal election in which the Canada-US relationship has already become the dominant issue. Prime Minister Mark Carney, who assumed office following Justin Trudeau's resignation and has sought to project a calm but assertive posture toward Washington, faces a defining test: how to respond to a threat of this magnitude without either appearing weak or accelerating the confrontation.
Carney's government has not formally commented on the specifics of the Times report, but it has been clear in recent weeks that Ottawa is preparing counter-tariff packages and actively pursuing trade diversification with the European Union, the United Kingdom, and Indo-Pacific partners. The government has also used early CUSMA review meetings to signal that Canada regards its membership in any successor arrangement as non-negotiable — a position that, if the Times report is accurate, may now be directly at odds with what Washington is prepared to offer.
Pierre Poilievre's Conservatives have their own awkward position to navigate. The party has historically aligned itself more closely with American-style conservatism and free trade orthodoxy, but the current environment has made unambiguous defence of Canadian economic sovereignty a political imperative that transcends traditional partisan lines. Polling data — including a Nanos Research survey that found 64 percent of Canadians now view the United States as a possible threat to Canadian sovereignty — leaves little room for any political leader to be seen accommodating American demands at Canada's expense.
The Sovereignty Dimension That Cannot Be Buried
Beyond the economics, the potential exclusion carries a dimension that is explicitly political and matters to Canada in ways that pure trade analysis cannot capture. The USMCA framework is not simply a commercial arrangement. It is the institutional expression of a North American partnership — a structure through which Canada has historically exercised leverage, secured protections, and maintained standing as a co-equal participant in continental economic governance.
To be excluded from a successor arrangement is to be demoted: from partner to supplicant, from a nation that negotiates its terms to a nation that must accept them or go without. In a context where Trump has publicly and repeatedly mused about Canada becoming the 51st state of the United States — comments that Ottawa has consistently and firmly rejected — economic exclusion acquires a coercive valence that is inseparable from the broader sovereignty question.
Canada's ability to maintain the polite but firm insistence on its own distinctness that has defined its national character depends, in material terms, on its ability to participate as an equal in the continental economic order. Remove that participation, and the assertion of distinctness becomes harder to sustain.
What Comes Next
The USMCA's mandatory joint review requires all three parties to decide by the end of 2026 whether to extend the agreement for another sixteen years, renegotiate it, or allow it to expire. The scenario being discussed in Washington — a US-Mexico bilateral arrangement — would effectively convert that review into a mechanism for Canadian exclusion.
Whether Mexico would participate in such an arrangement is far from certain. Mexico City has its own complex relationship with the current American administration on migration enforcement and fentanyl interdiction, and the calculus for Mexican trade negotiators of joining an arrangement that explicitly sidelines their northern neighbour is not straightforward.
For Canada, the coming weeks will test not only its negotiating leverage — which is real, as the largest single supplier of oil to the United States and an irreplaceable partner in Arctic defence — but also its political capacity to respond to a crisis of this scale during an election campaign. The 569,000 Canadians on EI at the end of 2025, the auto workers in Windsor, the canola farmers in Saskatchewan, and the energy workers in Alberta are all waiting to see whether the country's political leadership can protect what three decades of integration were supposed to guarantee: that the Canada-US economic relationship is a partnership too valuable, and too deeply embedded, for either party to simply walk away from.
