CUSMA Is No Longer Just About Trade
It Is About North America's Economic Security
The United States’ decision not to automatically extend the Canada–United States–Mexico Agreement (CUSMA) for another sixteen years is being reported as a trade story. It is not. It is the first visible sign that North America is redefining trade as an instrument of geopolitical strategy within a broader framework of economic security.
For more than three decades, beginning with the Canada–United States Free Trade Agreement and later NAFTA, trade policy was built on a simple premise: reduce barriers, expand markets, improve efficiency, and prosperity would follow. The prevailing assumption was that globalization would make nations wealthier and, in doing so, more stable and cooperative.
That world no longer exists.
The geopolitical shocks of the past two decades have fundamentally altered the strategic landscape. The global financial crisis exposed weaknesses in the international economic order. The COVID-19 pandemic revealed the fragility of global supply chains. Russia’s invasion of Ukraine demonstrated how energy, food, and critical resources could become instruments of coercion. Competition over semiconductors, artificial intelligence, critical minerals, and advanced technologies has underscored that economic dependence can quickly become strategic vulnerability.
Perhaps most significantly, China’s rise as an economic superpower has challenged many of the assumptions that underpinned the post-Cold War trading system. Their framework for trade with nations is based solely on leverage as highlighted in a paper in the Journal of Geoeconomics (Countering China’s Economic Coercion: Lessons from Japan). The expectation that deeper commercial integration alone would produce greater political convergence, liberalization of human rights, and fair trade with the PRC has given way to a more complex reality, one in which trade, technology, industrial capacity, and national security are increasingly intertwined amongst allied democracies in order to complete and prosper.
Governments are responding accordingly.
Washington’s approach to CUSMA reflects this evolution. The agreement is no longer viewed simply as a mechanism to facilitate commerce across North America. Increasingly, it is becoming the economic architecture of a trusted continental security partnership–one intended to strengthen supply chains, protect advanced manufacturing, secure critical technologies, and reduce strategic dependence on geopolitical competitors.
This is not protectionism in the traditional sense. It is geoeconomics: the recognition that economic policy has become an essential instrument of national strategy.
For Canada, this presents both an opportunity and a challenge.
Canada remains one of the United States’ closest allies and its largest trading partner. Our economies are deeply integrated through manufacturing, agriculture, energy, aerospace, financial services, and increasingly through investments in electric vehicles, battery production, and critical minerals. Millions of jobs on both sides of the border depend upon this relationship.
At the same time, successive Canadian governments have sought to expand commercial engagement with China, recognizing both the scale of its economy and the opportunities it presents for Canadian exporters and investors.
That balancing act is becoming increasingly difficult.
Washington no longer views trade exclusively through the lens of comparative advantage. Investment screening, technology transfers, telecommunications infrastructure, critical minerals, digital networks, artificial intelligence, and advanced manufacturing are now considered matters of economic and national security. These issues are rapidly becoming central to America’s expectations of its closest trading partners and the reality of geoeconomics and sides need to be chosen in this highly contested hybrid war space.
The question facing Canada, therefore, is not whether it should trade with China. Canada should continue to engage internationally wherever doing so advances our national interest and remains consistent with our security obligations and democratic values. The more pressing question is whether Canada’s broader economic strategy remains aligned with the strategic direction in which North America is moving.
The timing of recent developments is instructive.
As North America begins to reassess CUSMA through the lens of economic security, China has moved further toward integrating its legal, political, and economic institutions under a unified national strategy. Its newly-enacted National Ethnic Unity Law forms part of that broader approach. The legislation has attracted criticism from democratic governments, human rights organizations, and legal scholars because of concerns that it could further erode the cultural, linguistic, and religious identities of ethnic minority communities in favour of a more centralized conception of national unity. While the law has drawn significant criticism from democratic governments, legal scholars and human rights organizations for its potential impact on the cultural, linguistic, and religious identities of China’s ethnic minorities, it also reflects Beijing’s broader approach to governance. Rather than treating economic policy, national identity, education, industrial development and security as separate policy domains, China increasingly integrates them into their comprehensive national economic strategy designed to advance long-term state objectives.
Democratic societies should reject any suggestion that national competitiveness requires sacrificing pluralism, individual liberty, or the rule of law. Those principles remain among our greatest strengths. Yet we should also recognize an important strategic reality: our principal competitors increasingly integrate economic policy, industrial planning, technology development, investment, education, and national security into a coherent long-term strategy. The lesson is not to emulate China’s political system. It is to ensure that democratic nations pursue their own economic strategies with equal clarity, consistency, and purpose.
Nowhere is this more evident than in the global competition over electric vehicles.
China’s EV industry is not simply the product of market forces. It reflects years of coordinated industrial policy, strategic investment, and deliberate efforts to establish global leadership across the automotive supply chain–from battery production and critical minerals to advanced manufacturing and software integration.
Canada, together with the United States, has committed billions of dollars to developing a North American EV ecosystem starting with the Biden administration. Those investments are intended not only to accelerate the transition to cleaner transportation but also to preserve advanced manufacturing capacity and strengthen the continent’s long-term industrial competitiveness.
This raises an important strategic question.
Can North America successfully build a resilient automotive sector if heavily subsidized Chinese manufacturers gain significant access to the Canadian market? Both renowned China expert Dr. Charles Burton and Michael Kovrig have argued that this debate extends far beyond consumer prices. It touches on industrial resilience, supply-chain security, technological leadership, and the long-term viability of Canada’s manufacturing base. These concerns deserve serious consideration as governments seek to balance the benefits of open markets with the imperative of protecting strategic industries.
The same logic applies to critical minerals.
Canada possesses many of the resources essential to the technologies that will define the twenty-first century, including lithium, graphite, nickel, cobalt, and antimony. Yet ownership, processing capacity, investment screening, and supply-chain control increasingly matter as much as the resources themselves. As Canada has learned through debates over foreign investment in strategic sectors, from telecommunications to critical minerals; economic sovereignty can no longer be separated from national security.
These are precisely the issues that will shape the next chapter of CUSMA.
The agreement’s review mechanism should not be viewed merely as an administrative exercise or a technical trade negotiation. It is an opportunity for North American partners to determine whether they are building an economic community capable of competing in an increasingly contested geopolitical environment that defends their respective
The implications extend far beyond Canada.
Around the world, governments are recognizing that trade policy can no longer be developed in isolation from broader national objectives. Agreements negotiated solely to increase exports or reduce tariffs are no longer sufficient. Nations must also ask whether their trade relationships strengthen economic resilience, protect critical industries, encourage innovation, secure trusted supply chains, and advance their long-term strategic interests. If foreign investment is involved, their objectives must be part of the risk analysis going forward.
Every government has a responsibility to create prosperity for its citizens. But in an era of intensifying geopolitical competition, there is an equally important question that policymakers can no longer afford to ignore: whose national agenda is ultimately strengthened by the wealth that trade creates?
The United States’ decision to place CUSMA under regular strategic review suggests that Washington has already begun answering that question. Canada and, indeed, every trading nation would be wise to do the same.
It is about geoeconomics, stupid.
—Dean Baxendale @ OPI