Canada and Mexico sought a 16-year renewal, while the US had other ideas
Prime Minister Mark Carney has made clear he does not expect to sign a renewal of Canada's trade agreement with the United States and Mexico as the three countries meet Wednesday, leaving the country's mortgage sector to brace for what could be a prolonged period of economic uncertainty that has already reshaped buyer behaviour and rate expectations across the housing market.
The Canada-United States-Mexico Agreement (CUSMA) review arrived on July 1 — exactly six years since the deal replaced the North American Free Trade Agreement (NAFTA).
Both Canada and Mexico formally declared their preference for a 16-year extension, which would have kept the pact in place until 2042. The United States declined.
Carney set expectations low ahead of the virtual meeting between Intergovernmental Affairs Minister Dominic LeBlanc, United States Trade Representative Jamieson Greer, and Mexican Economy Secretary Marcelo Ebrard.
"We're expecting a constructive exchange," Carney told reporters in Kuujjuaq, Que. on Tuesday. "I wouldn't expect any drama... I'm not looking for my pen."
What no extension means for the mortgage market
With the US opting against renewal, CUSMA now enters a period of annual reviews that could run until the agreement either expires in 2036 or the three parties agree on an extension.
Any country may also exit the deal with six months' notice, though none has signalled an intention to do so.
The agreement currently shields approximately 90% of Canadian exports from US tariffs, making its continuity a core variable for lenders, builders, and brokers managing client conversations around affordability and rate timing.
As the Bank of Canada held its overnight rate at 2.25% on June 10, its fifth consecutive hold, economists at Scotiabank, RBC, and TD Economics all pointed to trade uncertainty as the main reason the central bank is unlikely to move before year-end.
Dominion Lending Centres (DLC) chief economist Sherry Cooper has said the CUSMA outcome could make or break Canada's housing market in the second half of 2026, with a sizeable pool of prospective buyers waiting for economic clarity before committing to a purchase.
Construction costs. CUSMA currently keeps softwood lumber, steel, and aluminium moving tariff-free across the border. These are critical inputs for Canadian homebuilders.
Prolonged uncertainty or any deterioration of those exemptions during annual renegotiation rounds pushes input costs higher.
The Canada Mortgage and Housing Corporation (CMHC) has already flagged that higher building costs due to tariffs are constraining new supply at precisely the moment demand is being suppressed by economic anxiety.
Less supply with compressed demand is a bad equation for affordability long-term.
Aled ab Iorwerth of CMHC highlighted uneven housing construction activity across Canada as regional differences and weaker forward indicators shaped May's results.https://t.co/EyfViWIQQf
— Canadian Mortgage Professional Magazine (@CMPmagazine) June 17, 2026
Interest rates and bond markets. The Bank of Canada cannot use monetary policy to resolve trade uncertainty — RBC Economics has said exactly that. What the BoC can do is hold rates steady while uncertainty persists, which is what it has been doing since October 2025 at 2.25%.
Annual reviews mean annual uncertainty events, which means rate cuts get deferred indefinitely.
Fixed mortgage rates are driven by bond yields, and bond markets price in risk.
Ongoing CUSMA uncertainty keeps a risk premium embedded in Canadian bond yields, which keeps fixed rates elevated even without the BoC moving.
The employment-housing link. Canada's trade exposure is deeply regional. Ontario's auto sector, British Columbia's forestry industry, and Alberta's energy sector are all sensitive to US trade conditions.
A weakening labour market in those provinces translates directly into softer housing demand, tighter mortgage qualification conditions, and higher arrears risk for lenders.
Investment and new supply. Developers making decisions about whether to break ground on a new project need a multi-year view of construction costs, financing conditions, and end-buyer demand.
Annual CUSMA reviews make that forward planning extremely difficult. The result is a chilling effect on new supply approvals, which deepens the structural affordability problem Canada already has, independent of any trade outcome.
Buyers and brokers in a holding pattern
New polling from Fidelity Investments Canada ULC, conducted June 11 with between 360 and 642 respondents, found 47% of Canadian financial advisors were now fielding client concerns about CUSMA, tariffs, and their household finance implications.
Among the most frequently cited issues: rising costs from tariffs or supply chain disruptions, flagged by 63% of advisors.
For more on how trade anxiety is shaping client conversations, the CUSMA review is now a kitchen-table issue for many Canadian clients.
Tracy Valko, founder of Valko Financial, previously told Canadian Mortgage Professional that "with US tariff risks and global economic pressures, mortgage rates may remain volatile."
Carney, speaking Tuesday, offered a clear order of preference. "We prefer the status quo over a bad deal," he said in French, before adding that securing a modernised agreement remains a priority.
Ottawa has indicated it is ready to negotiate improvements to CUSMA, but will not accept terms it considers disadvantageous.
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