USMCA zombie: Canada's trade, security, trust unravel
The USMCA's non-renewal has plunged North American relations into a 'zombie' state, triggering a collapse in Canadian trust in the U.S. and forcing a strategic recalibration. While experts warn Ottawa against rushing a deal, tensions emerge between those who see Canada's 'elbows up' posture as a misdiagnosis (Leuprecht/Hataley) and federal moves to diversify via critical minerals investments (Teck, Sovereign) and quantum collaboration (Bell-UdeS). The through-line is a nation grappling with how to rebuild leverage and self-reliance when its primary partner is no longer reliable.
Thursday, Jul 9, 2026
Tracking: US Canada relations · cross-border trade · North American security · innovation policy · global technology competition · cybersecurity · defense cooperation · trade agreements · critical minerals · border security
Geography: United States, Canada, North America, US-Canada border
1. USMCA left in 'zombie' state as Trump declines to renew; experts urge Canada to avoid rushed deal
The USMCA entered a period of uncertainty after President Donald Trump declined to renew the agreement on July 1, leaving it neither extended nor terminated but subject to annual reviews for the next decade.
A Canadian expert group, including former minister Perrin Beatty, warned in a July 3 report that Ottawa should not be rushed into a quick deal, arguing that speed will not guarantee stability and that Trump has treated past agreements as starting points for further demands.
The group recommends Canada preserve tariff-free access for as many products as possible, secure rollbacks on U.S. tariffs for steel, aluminum and autos, and insist on a credible dispute settlement mechanism.
It argues the "zombie" USMCA is not disastrous because much damage from tariffs has already occurred, and notes that U.S. business opposition to tariffs could increase pressure on Washington as talks drag on, while Canada should deepen cooperation with Mexico for leverage.
Key facts:
- USMCA not renewed on July 1; enters annual reviews until 2036.
- Expert group warns against rushing into a bad deal with U.S.
- Recommendations: tariff-free access, tariff rollbacks, strong dispute settlement.
Why it matters: Canada faces prolonged trade uncertainty but the report suggests Washington’s weakening political capital and domestic business pressure may shift the negotiating balance.
A rushed deal could lock in concessions without enforceable protections, while deeper Canada-Mexico alignment could strengthen regional bargaining power. The zombie agreement buys time, but the risk of a separate U.S.-Mexico bilateral deal persists.
2. Leuprecht and Hataley argue Canada has unilaterally reneged on North American security bargain
In a Macdonald-Laurier Institute analysis, Christian Leuprecht and Todd Hataley argue Canada has undermined the historic Kingston Dispensation—the WWII-era grand bargain pledging mutual defense and continental threat containment.
The authors claim Canada unilaterally reneged on that deal "by design and by consequence" over time.
Prime Minister Mark Carney's "elbows up" posture and his framing of U.S. interdependence as a weakness misdiagnose Canada's economic problems, the authors contend, warning that if Canada fails to close the North American security gap, the U.S. will act unilaterally—a scenario that "never ends well for Canada."
Carney recently offered "forward guidance" in a video asserting interdependence with the U.S. is a weakness "we must correct," but Leuprecht and Hataley call that a homemade problem.
They emphasize that Canada fares best when engaging constructively with U.S. federal leadership and poorly when forced to react.
The authors caution that accelerating change to placate President Trump risks domestic backlash, while refusing further erodes U.S. trust.
Key facts:
- Leuprecht and Hataley say Canada unilaterally reneged on the Kingston Dispensation security bargain.
- The Kingston Dispensation pledged mutual aid, non-threat, and a rim strategy for continental defense.
- Carney framed U.S.-Canada interdependence as a weakness "we must correct" in a forward guidance video.
- Authors warn if Canada fails on hemispheric security, the U.S. will proceed unilaterally.
- Carney initially chose an "elbows up" approach to dealing with the Trump administration.
Why it matters: This analysis signals growing pressure on the Carney government to shift from a nationalist posture to proactive security cooperation with the Trump administration.
Failure to deliver could trigger unilateral U.S. border and defense actions that bypass Canadian sovereignty, reshaping NORAD, critical mineral supply chains, and bilateral trade negotiations.
The stakes are highest for defense procurement, border management, and intelligence sharing, where Canadian credibility is now explicitly questioned.
3. Canada invests up to $400M in Teck smelter for critical minerals expansion
The federal government announced up to $400 million in equity-like financing from the Canada Growth Fund for Teck Resources' Trail smelter in British Columbia, the first deal under the new Canada Critical Minerals Accelerator.
The investment could double production of germanium and antimony and add new gallium capacity, metals essential for fiber optics, semiconductors, and defense.
The agreement also includes a framework for Ottawa to purchase a portion of future output, building domestic stockpiles.
The province of British Columbia has designated the project a priority resource project under its 'Look West' strategy, streamlining regulatory reviews.
Key facts:
- Canada Growth Fund invests up to $400 million in Teck's Trail smelter.
- First transaction under the Canada Critical Minerals Accelerator, announced July 7, 2026.
- Expansion could double germanium and antimony production and add gallium capacity.
- Project is a priority resource project under British Columbia's Look West strategy.
Why it matters: This investment directly reduces North American dependence on Chinese-controlled critical mineral supply chains for defense and advanced technology.
By leveraging existing infrastructure and providing a financing model that reduces private-sector risk, Ottawa aims to accelerate similar projects across Canada.
The offtake framework also gives the government strategic stockpiles, strengthening NATO allies' resilience amid trade tensions and geopolitical volatility.
4. Sovereign Metals goes solo on Malawi critical minerals after Rio Tinto exit
Sovereign Metals is now advancing its Kasiya Rutile-Graphite Project directly after Rio Tinto declined to exercise its option to become operator.
The company is pivoting toward a US-focused strategy, aiming to supply natural rutile, graphite, and heavy rare earths to reduce reliance on Chinese supply chains.
Sovereign intends to turn existing offtake MoUs with Mitsui and Traxys into binding agreements and pursue financing with US-aligned development institutions.
Rio Tinto’s decision stemmed from a corporate strategy shift, not from doubts about Kasiya’s fundamentals. The project holds three US-designated critical minerals and has already received over A$60 million in Rio Tinto investment since 2023.
Sovereign is now free to pursue partnerships and financing on its own terms, with support from the International Finance Corporation.
Key facts:
- Rio Tinto will not exercise its option to operate Kasiya.
- Sovereign targets US and allied supply chains for rutile, graphite, and rare earths.
- Rio Tinto invested over A$60 million in the project since 2023.
Why it matters: Sovereign’s shift strengthens US and allied efforts to secure non-Chinese critical mineral feedstocks for titanium, batteries, and advanced manufacturing. Rio Tinto’s exit removes a major backer but gives Sovereign more control over offtake and financing.
Watch for binding agreements with Mitsui and Traxys, and engagement with US government stakeholders—these could accelerate Kasiya’s path to becoming a key supplier in a geopolitically tense market.
5. Bell and Université de Sherbrooke partner on quantum and cybersecurity MOU
Bell Canada and Université de Sherbrooke (UdeS) signed a memorandum of understanding on July 8, 2026, to collaborate on quantum technologies, post-quantum cybersecurity, and sustainable data centre infrastructure.
The partnership aims to connect Bell's network and AI Fabric platform with UdeS's quantum research and cybersecurity expertise to develop and test next-generation computing environments.
Bell and UdeS will also work with Queen's University to link Canada's national high-performance computing environment with quantum capabilities, keeping sensitive data and innovation within Canada.
The collaboration is designed to bridge the gap between research and large-scale deployment for enterprise, government, and industry applications.
Key facts:
- MOU signed July 8, 2026, between Bell Canada and Université de Sherbrooke.
- Focus areas: quantum technologies, post-quantum cybersecurity, and sustainable data centres.
- Partnership includes Queen's University to connect HPC with quantum computing.
- Aims to keep sensitive data and innovation within Canada.
- Bell AI Fabric platform provides fibre network, data centre, and cloud infrastructure.
Why it matters: This MOU directly boosts Canada's sovereign capacity in advanced computing and post-quantum cybersecurity, critical as quantum threats emerge and AI infrastructure demands grow.
By linking national HPC with frontier quantum systems, the collaboration creates a domestic pathway for research to reach operational use, reducing reliance on foreign technology.
For Canadian enterprises and government, this means more secure data handling and faster adoption of next-generation computing.
Watch for concrete testbeds and infrastructure investments that could reshape Canada's position in quantum and AI innovation ecosystems.
6. Canadian trust in US collapses as CUSMA renewal fails
A new Pew Research poll shows only 35% of Canadians now view the United States as a reliable partner, down from over 80% in 2022. Favorable views of the U.S. have fallen to 33%, a steep decline from 54% in 2024.
The Trump administration has decided not to renew the Canada-United States-Mexico Agreement (CUSMA), leaving trade negotiations in limbo.
Trade Minister Dominic LeBlanc has asked U.S. Trade Representative Jamieson Greer to clarify how discussions will be structured under the annual review.
Canadians are feeling the impact of tariffs, with grocery prices rising and reliance on U.S. brands persisting.
University of Alberta professor Andy Knight warns the U.S. is no longer a trustworthy ally, pushing Canada to consider diversifying its international partnerships.
Key facts:
- Only 35% of Canadians view the U.S. as a reliable partner, down from 80% in 2022.
- U.S. favorability among Canadians dropped to 33% in 2026 from 54% in 2024.
- The Trump administration decided not to renew the Canada-United States-Mexico Agreement (CUSMA).
Why it matters: The collapse in trust and the end of CUSMA as currently structured threaten the core of the U.S.-Canada economic relationship, which is worth hundreds of billions annually.
Canada, the second-largest U.S. trading partner, may be forced to accelerate trade diversification toward Europe and Asia.
For the United States, losing a reliable partner undermines its supply chain stability, especially in critical minerals and energy, and weakens its competitive position against China.
The next step to watch is whether Canada can secure a revised agreement or will begin pursuing alternative trade frameworks.
Generated by newsltr · 2026-07-09T13:03:04.318Z