The Trade Deal That Didn't Get Renewed and its Consequences

The mandatory joint review of the Canada-United States-Mexico Agreement arrived on July 1 without a renewal, a headline that on its face sounds like the kind of trade-policy failure that ripples quickly into hiring plans. It isn't, according to a new analysis from RBC Economics, and the distinction matters for anyone staffing Canada's export-facing manufacturing sector.

CUSMA does not expire until 2036. Tariff rates do not change because the review concluded without an extension. What began this week, economists Claire Fan and Nathan Janzen wrote, is simply the start of the decade-long negotiating window the agreement itself built in, anticipating that renewal would be politically difficult. Any party can still walk away with six months' notice under the deal's Article 34.6, but RBC continues to view an outright termination as unlikely given how deeply integrated industrial supply chains have become across the three countries.

What Actually Changed This Week: Very Little

The practical case for calm is bolstered by parallel developments in Washington. As Section 122 tariffs expire later this month, they are set to be replaced by Section 301 measures that preserve CUSMA exemptions, RBC noted, meaning the trade architecture Canadian exporters have operated under stays intact regardless of how the review proceeds.

That continuity is the reason RBC's base case assumes the review proceeds with CUSMA and its exemptions continuing to function largely as is, rather than any near-term shock to trade flows or the hiring decisions built on top of them.

The Number Worth Watching If Things Go Wrong

Still, RBC ran the numbers on the scenario staffing firms with manufacturing exposure would feel most acutely: an unexpected CUSMA lapse. Roughly 90 percent of Canadian exports to the United States currently cross the border duty-free under the agreement. If CUSMA were to end, about half of Canadian exports would still be protected by a separate exemption list that applies to all U.S. trading partners, along with goods already carved out under Section 232 tariffs. That leaves roughly one-third of currently CUSMA-exempted exports, not the full 90 percent, actually exposed to a new 10 percent tariff.

Run through the full economy, RBC calculates the average effective U.S. tariff rate on Canadian exports would roughly double, to 6.6 percent from 3.2 percent today, in the event of termination. That is a meaningfully smaller shock than Canadian exporters would have faced under the tariff regime that predated CUSMA's current exemptions, when duty-free goods would have fallen back to a 35 percent rate rather than 10 percent.

Which Staffing Verticals Sit Closest to the Exposure

The sectors RBC identifies as facing the largest dollar-value tariff increases under a termination scenario are not evenly distributed across the economy. Auto parts would see the largest increase, followed by machinery and parts, plastics and articles, aluminum and articles, and wood products. Staffing agencies with concentrated placements in those verticals, industrial and skilled-trades roles tied to auto parts manufacturing or machinery production in particular, carry more direct exposure to the review's outcome than firms focused on services or the broader economy.

RBC also points out that some of these sectors already have significant production subject to separate Section 232 tariffs, meaning a share of the exposure already exists independent of what happens with CUSMA. The incremental risk from the review itself is narrower than the sector names alone might suggest.