What is the ‘Zombie USMCA’ scenario?

It is a state where the trade pact technically remains, but the U.S. uses tariff threats and probes as leverage. That uncertainty can raise costs and delay shipments, especially for autos, steel, and aluminum. Companies face stop-start planning as headlines drive procurement, pricing, and cross-border timing.

Which Canadian sectors face the most exposure?

Autos in Ontario, aluminum in Quebec, and steel producers are in the front line. Freight, warehousing, and parts suppliers also feel second-order effects. Firms with concentrated U.S. revenue and thin margins are most at risk, while diversified exporters with escalator clauses may defend profitability better.

How could this affect the Canadian dollar?

Tariff scares can weaken the Canadian dollar even if domestic data look stable. During political flashpoints, markets may price trade risks over rate differentials. Expect sharper intraday swings, wider bid-ask spreads, and sensitivity to U.S. headlines, trade hearings, and review milestones throughout 2026.

What can investors do right now?

Run tariff stress tests on revenue, gross margin, and working capital. Prioritize companies with contract pass-throughs and diverse end markets. Add measured CAD hedges, review supplier terms, and build scenario playbooks tied to U.S. political dates. Engage management on sourcing flexibility and inventory strategies for 2026.

Law and Government

January 11: Eurasia Warns Canada Faces ‘Zombie USMCA’ Tariffs

ByDanny Kontos January 12, 2026January 12, 2026

Eurasia Group Canada risk is rising as the firm flags a ‘Zombie USMCA’ that keeps tariff threats alive without clear resolutions. That means headline shocks on autos, steel, and aluminum, with sectoral tariffs used as bargaining tools. We see pressure on Canadian exporters, tighter margins, and currency volatility. Investors should prepare for policy noise to bleed into pricing power, delivery times, and capital plans across 2026. This is a practical guide to assess exposures and actions now.