Midterms and tariffs: 2026 could be a critical year for Canada-U.S. relations

WASHINGTON – Donald Trump’s return to the White House brought with it a tidal wave of change that has upended global trade, rattled allies and pushed political and social boundaries in the United States.

But the U.S. president faces headwinds as he enters the second year of his second term — and Canada can expect to feel the effects.

Next year will see what’s likely to be a combative review of the Canada-U.S.-Mexico-Agreement on trade and a bitter midterm battle as Democrats try to take back control of Congress. The results of those elections could spur Congress to rein in the president’s sweeping use of executive power — or they could embolden Trump even further.

“Midterm elections are generally bad for sitting presidents,” said Matthew Lebo, a political-science professor at Western University in London, Ont.

Democrats would need to gain four seats to take over control of the Senate — difficult, not impossible. They have better chances in the House, where Republicans currently hold a narrow majority.

“If the Democrats can win the House and the Senate, then that’s a big deal,” Lebo said. “That means things like impeachment are back on the table, oversight and all sorts of things are back on the table.”

With a unified GOP controlling Congress, Trump has been largely unchecked during his second term so far. While he has sparred with individual Republicans from time to time, the threat of primary challenges has tended to bring those politicians back in line.

Now, cracks are emerging. In November, the former Trump ultra-loyalist Rep. Marjorie Taylor Greene announced she would be retiring in January after the president called her a traitor for supporting the release of files related to notorious sex trafficker Jeffrey Epstein.

There have been reports that other Republicans — frustrated by Trump’s heavy-handed control and an increasingly polarized political climate — have considered following Greene’s example. Some Republicans — including Sen. Thom Tillis, who pushed back on the health care-gutting aspects of Trump’s “One Big Beautiful Bill” — have announced they won’t be running.

Trump’s threats to withhold his endorsement from rebel Republicans may be losing their sting as his popularity plummets. An early December Gallup poll put Trump’s approval rating at 36 per cent and his disapproval rating at 60 per cent.

Lebo said Trump can no longer blame former president Joe Biden for Americans’ struggles with the cost of living, since the current economy has been thoroughly shaped by his tariff regime. If economic indicators take another downturn, it will cast a shadow over the midterms.

“Much is going to hang on the congressional elections and … where Trump’s political fortunes land,” said Fen Osler Hampson, a professor of international affairs at Carleton University in Ottawa and co-chair of the Expert Group on Canada-U.S. Relations.

Hampson cautioned that Canadians who assume protectionism will go away if Democrats get their political mojo back are indulging in wishful thinking. Neo-liberal ideas about unfettered free trade have become broadly less popular across the United States.

The November elections could, however, restore some checks on Trump’s wide-ranging use of executive powers, particularly for tariffs.

Trump boosted tariffs on Canada to 35 per cent in August. Those duties do not apply to goods compliant with the continental trade pact known as CUSMA. Canada is also being hammered by separate tariffs on steel, aluminum, automobiles, copper and lumber.

No matter what kind of political turmoil plays out in the U.S. over the coming year, Canada is unlikely to see a run-of-the-mill CUSMA review.

Trump has complained about Canada’s dairy supply management system and agriculture policies. The president has said the United States doesn’t need anything from Canada and has suggested that CUSMA is a “transitional” deal.

Hampson said long-standing trade irritants “are going to be magnified in this negotiation.”

“They come up time and time again. We’ve been able to push back to a degree,” he said. “It’s going to be a lot harder this time around, and we better be ready for it.”

The trade pact review boils down to a three-way choice that each of the partner nations must make: to renew CUSMA for another 16 years, withdraw from the trade pact, or signal both non-renewal and non-withdrawal — which essentially would trigger an annual review and keep negotiations going.

Christopher Sands, director of Johns Hopkins University’s Center for Canadian Studies, said he expects the United States to continue the negotiations.

He said the Trump administration will see it as “a chance to get more concessions out of Ottawa and Mexico City, and Canada and Mexico will stay at the table to preserve the option to renew under the next U.S. administration.”

That prolonged uncertainty would act as a drag on investment and hurt all three economies, Sands said, “making it a painful path forward.”

“My hope is for a North American truce centred on the (CUSMA) as the venue for resolving all trade issues that carries us past the midterms,” he said.

This report by The Canadian Press was first published Dec. 27, 2025.