Canada is unlikely to avoid an across-the-board tariff on exports into the U.S., even as the two countries, along with Mexico, ready themselves to negotiate a renewed commitment to the Canada-United States-Mexico Agreement (CUSMA) by July 1, 2026.
Speaking at the Portfolio Management Association of Canada’s 2025 conference in Toronto on Thursday, Lewis Lukens, senior partner at Signum Global Advisors, predicted a 5% baseline tariff on all products — for Canada and Mexico — as part of a renegotiated trade deal.
“My prediction is that we will revise the [CUSMA] agreement, but there will be baseline tariffs,” he said. “Can’t call it a free trade agreement anymore.”
Lukens, a retired U.S. diplomat and now consultant, said products now considered CUSMA-compliant will be included in the across-the-board levy. “It’s going to be a very difficult six months as the three countries work through these negotiations,” he predicted. “I think we see a 5% minimum on everything, with some sectors having a higher [tariff] — steel and aluminum maybe stays higher, lumber.”
Ottawa could characterize that as a win. At 5%, Canada and Mexico would face the lowest tariffs in the world. A new deal with Washington would also provide business leaders — many of whom remain in a risk-off posture on capital expenditures — greater certainty.
U.S. President Donald Trump’s tariffs are predicated on an economic emergency made up of trade imbalances, national security threats and the flow of illegal drugs. The U.S. Supreme Court is expected to rule by the end of this year on whether or not his use of the International Emergency Economic Powers Act (IEPA) was justified.
In an interview, Lukens told us the result won’t matter.
“There’s a whole arsenal of tariff authorities that the administration could use to make up a lot of the IEPA tariffs,” he said. Countries that have negotiated trade deals with Trump this year will have to abide by the tariffs in those deals, regardless of the Supreme Court’s decision.
Fed independence
Lukens told his audience that U.S. Federal Reserve Chair Jerome Powell is likely to remain in position until his term ends in May. Watch for Kevin Hassett, appointed director of the National Economic Council this year, to be Trump’s choice as Powell’s replacement.
Powell may remain on the Fed’s board of governors for the standard two years after his term as chair ends.
“Former chairs have traditionally left the board when their term is up,” Lukens told his audience. “We think there’s a good chance that Powell stays on, both to be a moderating effect on Hassett or whomever the President appoints, but also to prevent the president from filling that spot. Because if Powell resigns or retires, then that’s another vacancy that the President can fill with another loyalist.”