Key Takeaways:
- The Trump administration is being urged to renew the Canada-U.S.-Mexico Agreement (CUSMA) when it comes up for review in July.
- Some American industries are accusing Canadian competitors of using cheap materials from China in ways that violate free trade rules and undercut U.S. companies.
- The U.S. has imposed tariffs on imports from Canada, including a 25% tariff on cabinets and vanities, which is set to rise to 50% on January 1.
- Canadian companies are accused of exploiting CUSMA’s preferential trade terms by sending products with significant amounts of Chinese-made content into the U.S. market.
- The U.S. Trade Representative, Jamieson Greer, has announced plans to discuss the upcoming review of CUSMA with counterparts from Canada and Mexico in January.
Introduction to the Issue
The Canada-U.S.-Mexico Agreement (CUSMA) is a trade deal that has been in place for several years, and it is set to come up for review in July. The Trump administration has been imposing tariffs on imports from Canada, which has led to concerns among American industries that Canadian competitors are using cheap materials from China to undercut U.S. companies. During recent public hearings in Washington, leaders from various business sectors urged the Trump administration to renew the trade deal, but several industries expressed concerns that some Canadian and Mexican companies are exploiting CUSMA’s preferential trade terms by sending products with significant amounts of Chinese-made content into the U.S. market.
Accusations of Exploitation
The American Kitchen Cabinet Alliance has accused Canada and Mexico of becoming conduits for products from China, circumventing the hefty countervailing duties the U.S. imposed on Chinese-made cabinets and materials in 2020. Luke Meisner, counsel for the alliance, stated that "China didn’t leave the U.S. market, it just changed the return address." He argued that the U.S. should reward real manufacturing, not low-cost assembly of foreign parts. The Trump administration has slapped a 25% tariff on imports of cabinets and vanities from Canada, which is set to rise to 50% on January 1. However, the Canadian Kitchen Cabinet Association defends its products as Canadian-made and says the U.S. tariffs will result in even more foreign products being dumped into Canada.
Concerns over Steel Imports
U.S. companies that produce steel or use it in manufacturing have also accused Canadian firms of undercutting American businesses by using cheap inputs from China. Robert Wahlin, president and CEO of Stoughton Trailers, a Wisconsin manufacturer of transportation equipment, says his chief concerns are the products of a competitor that’s wholly owned by China International Marine Containers Ltd. (CIMC). Wahlin told the hearings that the current terms of CUSMA allow third countries to exploit loopholes in the agreement to target the U.S. market. However, Eric Miller, an expert on Canada-U.S. trade policy, argues that Canada is not a significant back door for Chinese steel, and that the country has been rigorous about keeping steel from China out of the Canadian market.
Calls for Stricter Terms
Several business leaders involved in the U.S. steel industry have urged the Trump administration to negotiate stricter terms in CUSMA to limit the amount of non-North American content in products to qualify for tariff-free access. They are calling for Canada and Mexico to impose tariffs on steel imports from outside North America equivalent to U.S. duties, effectively creating a common regime for steel tariffs among the CUSMA countries. Brandon Farris, vice-president of the Steel Manufacturers Association, says Canada and Mexico are too lax about allowing the glut of cheap steel produced in China and other non-market economies into their countries.
Titanium and Other Industries
Other industries, such as titanium production, have also expressed concerns about Canadian companies importing feedstock from China at far lower prices than U.S. companies can. Hank Holland, chief executive of Amaero Ltd., a Tennessee-based manufacturer of titanium products, says Canadian firms are importing feedstock from China and then selling the titanium products in the U.S. tariff-free under CUSMA. He called for changes to the trade deal to ensure that all three countries treat Chinese raw material for titanium equally.
Future of CUSMA
The complaints from various sectors have got the attention of Jamieson Greer, the Trump-appointed U.S. Trade Representative. Greer has announced plans to discuss the upcoming review of CUSMA with counterparts from Canada and Mexico in January. He told U.S. senators that one of his key considerations for the trade deal is tightening the rules of origin to ensure that the benefits of the agreement go to American producers and workers, rather than third countries in Asia. Under federal law, Greer is required to report to Congress by January 2, 2026, his recommendations on renewing the trade agreement or renegotiating its terms. All three countries must declare their position on reviewing or extending the agreement on July 1.