Uncertainty over North American trade is raising concerns among Canadian business leaders, with one of the country’s leading business voices warning that companies may become more cautious about making new investments.
The warning comes as Canada and the United States remain without a new agreement following the breakdown of trade talks in August. The wider USMCA review is still in progress, leaving businesses facing questions about what future trade rules will look like.
Why the USMCA talks matter to Canadian businesses
The United States-Mexico-Canada Agreement, known as USMCA in the United States and CUSMA in Canada, is the main trade agreement linking the three North American economies. It took effect in July 2020 and replaced the earlier NAFTA agreement.
The agreement is especially important for Canada because the United States is its largest trading partner. Canadian companies depend heavily on access to American customers, while American businesses also rely on Canadian suppliers, energy, raw materials and other goods.
The first formal six-year review of the agreement began on July 1, 2026. The three countries met for the required review, but the United States did not agree to renew the agreement in its current form. The agreement remains in force while the countries continue dealing with the outstanding issues.
That distinction is important. The current situation does not mean USMCA has suddenly ended. Instead, businesses are dealing with uncertainty about how the agreement could change and what the future trading relationship between the three countries will look like.
Business Council of Canada warns about a “capital chill”
Goldy Hyder, president and CEO of the Business Council of Canada, has warned that continued uncertainty could lead to what he calls a “capital chill.”
In simple terms, a capital chill means businesses may hold back money that they would normally spend on new factories, equipment, technology, hiring or expansion because they are not sure what the rules will be in the future.
Hyder said Canadian companies still see the United States as their most important market. At the same time, Canada is trying to build stronger trade and investment relationships with Europe and other parts of the world.
He described this approach as a “U.S. Plus” strategy rather than an effort to move away from the United States. The basic idea is to keep the American market at the centre of Canada’s trade while also giving Canadian businesses more options.
Why investment decisions can be affected
Businesses usually make large investments with a long-term view. A company building a factory, expanding a mine or setting up a new supply chain may expect the project to operate for many years.
Trade uncertainty can make those decisions harder.
If a company does not know whether a product will face tariffs, what rules will apply to imported parts, or whether access to a major market will remain predictable, management may decide to wait before committing large amounts of money.
The concern is not limited to Canadian companies. Investment decisions can also involve American and international companies that are considering Canada as a place to build facilities or expand operations.
Canada and the United States have deeply connected investment markets. Canadian government figures show that U.S. investors accounted for 51% of foreign direct investment stock in Canada in 2025. Canadian investment in the United States was also very large, with more than half of Canada’s direct investment abroad going to the U.S.
This makes stability in the relationship important for companies on both sides of the border.
Trade talks have already faced a major setback
The latest warning follows the collapse of Canada-U.S. trade talks in August.
Canadian Prime Minister Mark Carney said in September that Canada remained willing to return to negotiations if the conditions were right. He also said Canada would continue developing trade relationships with other countries while keeping the door open to future talks with Washington.
The talks had covered several difficult issues, including tariffs and the treatment of important Canadian industries. Canadian officials have also been dealing with U.S. tariffs affecting sectors such as steel, aluminum, automobiles and softwood lumber.
The situation can be summarised simply:
- The USMCA review began on July 1, 2026.
- The agreement remains in force while the review and related discussions continue.
- Canada and the U.S. have not reached a new deal after their latest talks broke down.
- Businesses are facing uncertainty over future tariffs and trade rules.
Canada is looking for more markets
While the United States remains central to Canada’s economy, the Canadian government is also trying to reduce the risks that come from depending too heavily on one major market.
That means increasing trade and investment links with Europe, India and other regions. Canada has been working to expand these relationships while continuing its economic relationship with the United States.
The goal is not necessarily to replace the U.S. market. Instead, the strategy is to give Canadian companies more choices if conditions in North American trade become less predictable.
That approach also fits with the wider push to attract more investment into Canada. The government has been promoting investment in areas such as energy, natural resources, infrastructure and other major projects.
For businesses, however, diversification takes time. A new trade relationship cannot quickly replace the size and importance of the existing Canada-U.S. market.
What happens next for businesses and investors
The biggest issue for businesses is certainty.
Companies need to know what rules will apply before they commit large amounts of money to a new project. The longer uncertainty continues, the harder it can be for businesses to plan production, supply chains and investment.
The USMCA itself has not disappeared. Canada, the United States and Mexico still have a framework for trade, and Canadian officials have said they want to strengthen and renew the agreement.
At the same time, the United States has said it wants to address what it considers problems with the agreement, including trade deficits and other issues affecting American businesses and workers.
That leaves the three countries with a difficult task: finding changes that address their different concerns without creating even more uncertainty for companies that depend on North American trade.
The bigger concern is confidence
The warning about a “capital chill” is ultimately about business confidence.
Canada has strong economic ties with the United States, and companies on both sides of the border have built supply chains around those ties for years. When trade rules become uncertain, businesses have to consider risks that did not exist when the rules were more predictable.
For Canadian companies, expanding into other markets can provide another option. But the United States is still a key part of Canada’s trade and investment picture, meaning a long period of uncertainty could affect decisions far beyond the negotiating table.
For now, the USMCA remains in force and discussions can continue. The next stage will depend on whether Canada, the United States and Mexico can find enough common ground to give businesses greater confidence about the future.
The “capital chill” warning shows why the talks matter beyond tariffs and political negotiations. For companies planning to invest millions of dollars, certainty about where they can sell, how goods can cross borders and what costs they will face can be just as important as the final trade agreement itself.
