The likelihood of a trade deal between Canada and the United States by 1 August appears increasingly unlikely. Here is why: the US president, Donald Trump, may be demanding any or all of the following:

– The unencumbered sale of US agricultural and dairy products within Canada;
– Complete access for US banks to operate in Canada;
– Removal of all procurement restrictions on US companies;
– Removal of all protections to enable US companies to access to the Canadian television, streaming, cell phone, and digital connectivity markets;
– Removal of any taxes on US companies;
– Removal of any plastic or other restrictions on US products;
– Removal of all energy restrictions during times of surplus or transmission congestion;
– Removal of any restrictions on the sale of US alcohol; and
– Removal of any French language requirement on American products.

The reason these restrictions exist is to protect Canadian markets, industries and culture. Canada has enhanced safety and regulatory standards in several industries, above. Because we are a smaller country, we have protected domestic industries that do not have long production runs that the Americans have. Our input costs are higher, and we cannot compete against de-risked or de-regulated American goods.

Canada, US and Mexico

No deal on Friday 1 August may mean that the US may impose a promised 35% tariff on non-CUSMA goods, although the 35% may apply to CUSMA (Canada-United States-Mexico Agreement) goods, which would be a breach of CUSMA.

To avoid breach of CUSMA, if there were no deal, and the US wished to impose maximum harm to Canada, which President Trump has stated he wishes to do, under “Article 34.6 Withdrawal” of CUSMA, the US could withdraw from CUSMA entirely, by giving six months’ notice to Canada. “If a Party withdraws, this Agreement shall remain in force for the remaining Parties.”

In other words, if the US withdraws from CUSMA, six months after this notice, all Canadian goods may be subject to a 35% tariff upon entering the US. However, to be compliant with CUSMA, the plain meaning of Article 34.1 is that Canada must continue to abide by CUSMA, e.g., may not issue reciprocal tariffs, or take any other retaliation in respect of CUSMA-protected goods.

Canadian boards of directors’ checklist

Here are six strategies and take-aways that good boards of directors are and should be undertaking:

1. Stress test “no deal” and “permanent tariff” scenario plans.

Boards should proceed, with their management teams, to assume no deal, and a prolonged series of disputes, tariffs and uncertainty.

Boards should review forward-focused no deal scenario plans, exploring assumptions, biases, causes and Management’s ranking of the scenarios. Back-casting should include resources and action plans to achieve each plan when activated.

2. Keep up with US de-risking and Canadian diversification.

Boards should keep current with de-risking and diversification opportunities for the company, including: (i) trade corridor construction, e.g., ground (roads, railway, pipelines), water (ports and shipbuilding), electricity, and digital connectivity; (ii) streamlined of regulatory approvals (Bill C-5); (iii) productivity and investment enhancements; (iv) removal of interprovincial and territorial trade barriers; and (v) defence fortification.

3. Provide insight to management.

Each director should arrive to each meeting warmed up to advise and provide insight to Management. Management should not shield the plans for top scenarios, above, from the Board. This transparency results in cross-learning, enhanced decision quality, and optimal plan execution. To provide insight, partnering behaviours include governance agility, trust, transparency, and boundary behaviour.

4. Protect the company, forward face, and use artificial intelligence.

During volatility, there may be a tendency to be reactive because of the noise, or to decelerate because of the uncertainty. Bespoke artificial intelligence, with the right prompts, offers robust outputs, to protect, predict and plan. Enhanced macro-economic and geopolitical analysis contribute to robust scenario planning, more powerful and accurate prediction, and thinking up and forward, which Boards should be doing.

5. Internationalise the board.

Virtual and hybrid meetings means that APAC, EU and UK directors on Canadian boards may be onboarded with greater ease. Competency matrices now include growth, regulatory, trade, government relations, experience under fire, and non-English languages for overseas target market fluency.

6. Canada is not alone: Plan for a de-risking from the United States.

Gone is the previous relationship Canada—and many other countries—have had with the United States.

The United States has approximately 340 million people. APAC, the EU, and the UK offer a market of approximately 4.8 billion, 450 million, and 68 million, respectively, or almost five billion people.

Good boards are reviewing (i) supplier diversification and pivoting plans; (ii) new customer acquisition plans; and (iii) government, transportation, legal and financial reviews to transform from north-south to east-west and establish relationships with other provinces, territories, and countries. This change should be permanent, and in the company’s (and country’s) best interests.

Richard Leblanc is a professor of corporate governance, law and ethics at York University in Toronto. He is the editor of The Handbook of Board Governance. You can read his full paper on tariffs and corporate governance here.