CIBC Research discusses the scope of the coming review of the USMCA trade agreement.

"Our base case assumes that the US remains in an amended USMCA trade agreement after this year’s review, with Canadian exporters retaining tariff free access to the US market for goods that currently are excluded from sectoral tariffs and qualify under the agreement. There is scope for a reduction in aluminum tariffs given the lack of domestic supply stateside, but we are less optimistic on tariff reductions for other sectors," CIBC notes.

"Progress on renewing the USMCA trade agreement ahead, combined with measures aimed at boosting domestic demand for tariff-impacted sectors, will help drive an acceleration in the Canadian economy later in the year. Until then, however, the CAD will remain under pressure, with USDCAD expected to be 1.39 at mid-year. An appreciation is likely thereafter on an improvement in the economy which could coincide with the Fed cutting rates if the oil shock is behind us, and we look for USDCAD to end the year at 1.35," CIBC adds.