Canadian businesses should proactively review trade strategies amid CUSMA talks

Canadian businesses should carefully evaluate their cross-border trade operations and strategies after the U.S. declined to renew the Canada-United States-Mexico Free Trade Agreement (CUSMA) in its current form.

It’s important to note that CUSMA remains in effect despite this decision, meaning there is no immediate effect on trilateral free trade. However, the ensuing compulsory review of the deal could create uncertainty for Canadian importers and exporters—particularly after the U.S. indicated it would like to renegotiate the agreement.

Any changes stemming from renegotiation could affect duty exposure, supply chain planning and compliance requirements on both sides of the border. Consulting with the appropriate advisors can help businesses assess where they may be most exposed, identify available relief mechanisms and build a flexible plan that can be adjusted as the renegotiation process unfolds.

CUSMA’s review and renegotiation process

CUSMA's review and renewal mechanism sets out the process through which the three member countries will determine whether the agreement remains in force beyond its initial term expiring on July 1, 2036.

Under this mechanism, the signatories will review the agreement in 2026 and either extend CUSMA’s effective period to 2042 or—absent an agreement on an extension—conduct annual reviews for the remainder of the 16-year term. The countries could also significantly renegotiate the agreement.

It remains unclear how the annual reviews or renegotiation will proceed as this mechanism has not previously been used.

Separately, CUSMA allows the member countries to withdraw from the agreement with six months’ notice. This potential outcome adds another layer of uncertainty for businesses planning around the agreement’s terms.

Product-specific tariffs

Product-specific tariffs remain an important area to monitor, as not all measures introduced since the first batch of U.S. tariffs in early 2025 included exceptions for CUSMA-originating goods.

Both the U.S. and Canada imposed tariffs on imports of steel, aluminum and derivative products regardless of whether they originate under CUSMA; Canada’s tariffs, which it announced in response to U.S. levies, apply only to products from the U.S.

Because these measures bypass CUSMA-origin exceptions, businesses cannot rely on preferential treatment alone to manage exposure. Tariff relief measures like duty drawback and bonded warehouses are important tools for affected importers and exporters.

These measures depend on the same accurate classification, origin and valuation records that any renegotiation would likely scrutinize.

Agricultural products

Businesses dealing in agricultural products should monitor potential changes to tariff-rate quotas. These allow specified quantities of goods—such as dairy and eggs—to be imported at preferential tariff rates before higher rates apply.

Any changes to CUSMA could expand access to new customers and international market opportunities—and subsequently increase competition for domestic producers. This adds further incentive for businesses to re-evaluate how diversified their markets and suppliers are and to strategize accordingly.