Canada's ambassador to Washington Kirsten Hillman has announced she will be stepping down in the new year - a key departure as trade talks between the US and Canada remain stalled.

In a post on X late on Monday, Hillman said there is never a "perfect time" to leave such a post but that she is grateful for the confidence that was placed in her "as the Canada-US relationship is being rewritten".

Hillman has served as ambassador since March 2020. Before that, she was part of a team that helped renegotiate a free trade agreement between Canada, the US and Mexico in 2017.

That trade pact - CUSMA - is now under a mandatory review, with President Donald Trump recently suggesting he may let it expire.

In her resignation post, Hillman said she will "remain available" to Canada's negotiating team as they navigate the months ahead.

"While there will never be a perfect time to leave, this is the right time to put a team in place that will see the CUSMA review through to its conclusion," she said.

Hillman, a trade lawyer and career diplomat, was praised by both US and Canadian officials as news broke of her departure.

"Ambassador Hillman is a class act," said United States Trade Representative Jamieson Greer said on Tuesday. He added he does not believe her exit will impact Canada-US talks, but said "she's a good actor".

Former Canadian Prime Minister Justin Trudeau called her "a real patriot who has served Canadians proudly", and credited her with resolving trade disputes and building up the economy.

In an interview with CTV on Monday, Hillman said stepping down was her decision. "It's time for me to start a new chapter," she said.

Mark Wiseman, a financier and a close friend of Canadian Prime Minister Mark Carney, has been floated as her potential successor.

Hillman's tenure included navigating the Covid-19 pandemic and working alongside US and Chinese counterparts to secure the release of Michael Kovrig and Michael Spavor, two Canadians who were detained in China.

Most recently, Hillman has been a central figure in trade negotiations between Canada and the US, after President Trump imposed tariffs on Canada and dozens of other countries.

The levies are part of a broader policy shift by Trump, who says they will increase the amount of tax raised by the government and boost investment in the US.

Trade talks were halted in late October by Trump in anger over an anti-tariff advertisement commisioned by the province of Ontario and aired in the US.

Trump has imposed sector-specific tariffs on Canadian metals, lumber and automotives. He has also imposed a sweeping tariff rate of 35% on all goods, though most have been exempt under the CUSMA - known at the USMCA in the US - trade pact.

A scheduled review of CUSMA is now underway, starting with public hearings and stakeholder consultations, after which Canada, the US and Mexico could agree to renew it, or let it expire.

Both Canada and Mexico have indicated that they would like the free trade agreement to remain in place, and US businesses shared a similar view at public hearings in December.

But Trump has indicated he is open to letting it expire, "or we'll maybe work out another deal with Mexico and Canada".