How Canadian Businesses Should Prepare for the Changing Future of CUSMA

The Canada–United States–Mexico Agreement (CUSMA) has been the backbone of Canada’s trade relationship with its largest partners since it came into force on July 1, 2020. By preserving duty‑free access and modernizing the North American trading Bloc, CUSMA has supported Canadian exporters, manufacturers, and service providers — creating economic stability and predictability across industries.

But today, with its first formal review scheduled in 2026, uncertainty is growing among Canadian businesses about what comes next and what it means for exports, tariffs, supply chains, and investment.

Here’s a practical guide to help Canadian businesses prepare strategically for what happens as CUSMA enters this critical phase.

Understanding Where CUSMA Stands Now

First, it’s important to separate media headlines from legal reality:

• CUSMA will remain in force until at least 2036, unless all parties (Canada, the U.S., and Mexico) agree to extend it in the 2026 review.

• If the three countries don’t agree to extend it in 2026, the agreement doesn’t instantly disappear. Instead, it shifts into annual joint reviews — offering repeated opportunities to extend it before 2036.

• Any country can also choose to withdraw from the agreement with six months’ notice, which would immediately shift tariff arrangements.

This structure means that CUSMA isn’t going away immediately, but its future beyond 2026 is uncertain, and businesses need to adapt.

How Businesses Should Prepare

1. Assess Your Exposure to CUSMA Preferences

Canadian companies should start by understanding how much they rely on the benefits CUSMA currently provides — especially duty‑free access to the U.S. and Mexican markets. Even if the agreement continues, rules of origin and tariff provisions could shift based on review outcomes or external pressures.

Action Steps:

• Catalog products and services shipped under CUSMA rules.

• Verify CUSMA compliance of goods (including tariff classifications and rules of origin).

• Work with a customs broker to pre‑validate qualified shipments.

This foundational understanding will reveal how vulnerable your business is to potential tariff changes or compliance challenges.

2. Scenario‑Plan for Multiple Outcomes

Because CUSMA’s future is conditional — not guaranteed — savvy companies are preparing for several plausible outcomes:

• Withdrawal or termination

• Annual joint reviews, no extension yet

Building “what‑if” models helps ensure resilience — whether CUSMA stays, evolves, or ends. Consider cost modelling for potential tariffs, supply‑chain contingencies, and alternative markets.

3. Diversify Markets and Supply Chains

Even in the best case — where CUSMA stays in place — global trade is becoming more competitive and less predictable. Many Canadian business leaders already report pauses in investment and added costs tied to tariff uncertainty.

Action Steps:

• Expand into other free trade markets (e.g., CPTPP countries).

• Explore bilateral agreements with other nations.

• Strengthen relationships with suppliers and distributors outside North America.

Having diversified options reduces risk if trading conditions change.

4. Engage in Policy and Industry Consultations

Governments are actively soliciting input from industries.

Action Steps:

• Participate in government trade policy consultations.

• Join industry associations that submit feedback.

• Share experiences on trade challenges and proposed solutions.

Influencing trade policy early can shape outcomes that affect your business margins and market access.

5. Build Strategic Tariff & Cost Planning

With tariff risk on the table, including increasing talk of U.S. tariffs applying even to some formerly duty‑free goods, firms must model tariff exposure and cost absorption.

Action Steps:

• Update pricing models with tariff scenarios.

• Evaluate how duties may affect competitiveness.

• Plan for tariff mitigation strategies (e.g., foreign trade zones, tariff engineering).

This proactively protects profitability in case trade rules shift.

Final Thoughts: Prepare to Adapt

For Canadian businesses, the upcoming CUSMA review isn’t a single event, it’s the beginning of a strategic planning horizon. Whether the deal is extended, renegotiated, reviewed annually, or eventually expires, preparation will be the difference between stagnation and growth.

Put simply:
✔ Know your reliance on CUSMA.
✔ Scenario‑plan for multiple futures.
✔ Diversify your markets.
✔ Engage in policy conversations.
✔ Stress‑test tariffs and supply chains.

By taking proactive steps today, Canadian companies can navigate uncertainty — and use it as a catalyst for smarter, more resilient growth.

Take Action Today: Don’t wait until changes take effect, evaluate your export readiness now. Our Export Readiness Assessment helps you identify gaps, uncover opportunities, and build a clear plan to navigate uncertainty in trade agreements like CUSMA.