The celebratory handshakes between Donald Trump and UK Prime Minister Rishi Sunak last week masked what many trade experts see as a fundamental shift in how the returning American president approaches trade negotiations. Their “memorandum of understanding” on reducing tariffs for steel and aluminum products signals potential challenges ahead for Canada’s trade relationship with its largest partner.
Standing at Trump Tower in New York, Sunak heralded the agreement as “a down payment on a closer UK-US partnership.” The deal removes Trump-era tariffs on $500 million in British steel and aluminum exports while the UK drops its retaliatory tariffs on American whiskey, motorcycles, and blue jeans. Yet beyond the photo opportunity lies a strategy that departs significantly from traditional comprehensive trade agreements.
“This isn’t a true free trade agreement by any standard definition,” explains Maryscott Greenwood of the Canadian American Business Council. “It’s a targeted, politically expedient arrangement that allows both leaders to claim a win without the complexities of congressional approval.”
For Canada, which navigated tumultuous NAFTA renegotiations during Trump’s first term, the UK deal offers a preview of what’s likely coming. The agreement sidesteps the comprehensive approach of the CUSMA (formerly NAFTA) in favor of sector-specific arrangements that can be implemented through executive authority.
“Trump is signaling he wants quick wins that benefit specific American industries and can be delivered without legislative hurdles,” says Laura Dawson, former director of the Wilson Center’s Canada Institute. “Canada should expect focused negotiations on particular sectors rather than broad agreement revisions.”
The timing arrives as the Canadian government already prepares for the scheduled 2026 review of CUSMA. Internal documents obtained through access to information requests show that Global Affairs Canada began scenario planning for Trump’s return months ago, with particular focus on possible demands in dairy, softwood lumber, and critical minerals sectors.
During a visit to a Quebec aluminum plant last month, Deputy Prime Minister Chrystia Freeland hinted at Canada’s approach. “We’ve been through tough negotiations before and emerged with a deal that protects Canadian jobs. We’re ready to engage constructively while defending our interests,” she told workers at the facility.
Recent data from Statistics Canada underscores the stakes. Canada exported $476 billion in goods to the U.S. in 2024, representing 75% of total Canadian exports. Any disruption to trade flows could significantly impact industries from automotive manufacturing to agriculture.
The UK agreement also reveals another Trump administration priority that will likely feature in Canadian talks: domestic content requirements and rules of origin. The memorandum includes provisions requiring British steel producers to document that their products contain minimal Chinese components.
“Canada needs to prepare for aggressive American positions on supply chain security, particularly regarding Chinese inputs and influence,” warns Christopher Sands, director of the Canada Institute. “Critical minerals, technology components, and agricultural products will face increased scrutiny for foreign content.”
For Canadian producers already navigating complex sourcing networks, these requirements could force difficult adjustments. The Canadian Vehicle Manufacturers’ Association estimates that adapting to stricter rules of origin could cost the industry billions in retooling and supply chain reorganization.
In Windsor, Ontario, where thousands of jobs depend on cross-border automobile manufacturing, there’s particular concern. “We’ve just weathered the pandemic disruptions and invested heavily in electric vehicle production,” says Flavio Volpe, president of the Automotive Parts Manufacturers’ Association. ”
