At a glance
- CUSMA is the foundation of North American trade, enabling tariff-free movement of qualifying goods across Canada, the U.S., and Mexico.
- The 2026 review is already underway, with formal negotiations set to begin July 1 and continue over several months.
- Significant changes are expected, particularly to rules of origin.
- Businesses should prepare now by assessing their exposure, evaluating supply chain flexibility, and planning for multiple scenarios.
Upcoming July 1, 2026, review
The upcoming CUSMA review is not a single event; it’s a process that is already underway. The U.S., Canada, and Mexico have each completed public consultations, gathering input from trade communities, the public, and other interested stakeholders on how the first six years of CUSMA went and what changes they would like to see.
That feedback is now being used by each country to define its position before going to the negotiating table.
It’s expected that the Canadian government will share their formal recommendations with the public, and what they are hoping to see out of the review before the negotiations kick-off.
On July 1, the three countries will come together for formal negotiations. However, it is unlikely to be a quick or straightforward process. Given the current environment, negotiations could take several months.
Potential outcomes of the CUSMA review
Recent comments from U.S. trade representatives suggest that there could be separate bilateral agreements with Canada and Mexico to address unique trade irritants with each.
While the outcome of the upcoming review remains uncertain, one thing is clear—significant change is expected. At a high level, there are a few potential scenarios that could emerge from the review:
CUSMA includes a withdrawal clause that allows any of the three member countries to withdraw from the agreement at any time, provided they give six months’ notice.
While this is considered an unlikely outcome, it would have the most significant impact. Termination would mean the loss of preferential tariff treatment under CUSMA, with trade potentially reverting to standard most-favoured-nation (MFN) duty rates or alternative agreements where available.
The more likely scenario is that the review results in a revised version of CUSMA. This would involve updates to key provisions and potentially stricter requirements in certain areas.
Rather than minor adjustments, businesses should be prepared for meaningful changes that could alter how the agreement is applied in practice—particularly in areas like rules of origin, compliance, and market access.
A scenario where the agreement continues largely unchanged is also considered unlikely. Given current economic, political, and trade dynamics, all three countries are expected to push for updates that better align with their evolving priorities.
Key issues on the table
Several key issues are expected to be central during negotiations. While the full scope of proposed changes will become clearer as each country outlines its position, current signals point to a few priority issues that could see meaningful revision.
Rules of origin
The current rules of origin, agreed upon during the original 2020 negotiations, have already been a point of contention—particularly for the automotive sector. As a result, revisions in this area are widely expected as part of the upcoming review.
Even small changes to thresholds or calculation methodologies could have significant implications. Any tightening of requirements could impact supply chains, sourcing strategies, and overall cost structures for companies operating across North America.
Canada’s supply management
Canada’s supply management system for dairy and poultry is based on a quota system that limits imports entering the Canadian market. This is designed to protect domestic producers by restricting foreign access.
The U.S. has consistently pushed for greater access to Canada’s dairy market, making this a key area of focus in the upcoming review, with potential pressure to further open the market to foreign competition.
Forced labour in supply chains
Forced and child labour in global supply chains is an up-and-coming issue expected to play a more prominent role in this review. The U.S. has taken a more aggressive stance on preventing goods produced with forced labour—especially those linked to certain regions of China—from entering its market.
Under CUSMA, Canada committed to prohibiting the importation of goods produced using forced labour. Since then, this has been further reinforced through legislation such as Bill S-211, The Fighting Against Forced Labour and Child Labour in Supply Chains Act.
However, Canada’s enforcement of its import ban has historically been limited compared to the U.S. As geopolitical dynamics continue to evolve and scrutiny on supply chains increases, forced labour is expected to become a key point of negotiation. This could result in stronger enforcement expectations, enhanced due diligence requirements, and greater compliance obligations for businesses.
Tariffs and trade tensions
Ongoing tariff disputes and broader trade tensions are also expected to influence negotiations. While CUSMA has provided some protection from certain tariffs when goods qualify under the agreement, the broader trade environment remains unpredictable.
Recently, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs, invalidating certain emergency tariffs introduced in 2025.
However, this does not eliminate tariff risk. Other U.S. trade measures, including those under Sections 122, 232, and 301, remain fully in force. As a result, tariff uncertainty is expected to remain a key factor shaping the negotiation landscape.
CUSMA’s impact on industries
Industries with highly integrated North American supply chains or strict rules of origin requirements, like the automotive sector, are the most affected by CUSMA today and are also the most exposed to potential changes coming out of the review.
According to the Canadian Vehicle Manufacturers Association, auto parts and components may cross Canadian-U.S.-Mexican borders as many as eight times before being installed in a final assembly. This integration makes the sector particularly vulnerable to changes in trade policy.
Automotive sector
The automotive industry is one of the most heavily impacted sectors under CUSMA due to its reliance on complex, cross-border supply chains and detailed rules of origin requirements.
Two key provisions define how vehicles and parts qualify for duty-free treatment:
Trade treaties often set minimum regional content thresholds for vehicles or their components to qualify as ‘made in' the region—and therefore exempt from duty when crossing the border. Treaties express these thresholds as percentages of the total vehicle that must be produced in treaty countries.
Under NAFTA, that regional value content requirement was 62.5%. CUSMA raised it to 75%. This means that 75% of the inputs used to manufacture an automobile or other automobile components must be manufactured either in Canada, U.S., or Mexico.
CUSMA also added a requirement that automobiles be manufactured using at least 70% of North American steel and aluminum.
To remain compliant, automotive manufacturers must closely monitor sourcing, production, and cost structures to ensure they meet qualification thresholds.
General manufacturing
CUSMA has a broad impact across the manufacturing sector. Like automotive, many manufacturers rely on highly integrated North American supply chains.
This integration also creates exposure. If goods no longer meet rules of origin requirements—whether due to changes in thresholds, sourcing, or production processes—businesses could face new costs in the form of duties.
In this environment, visibility and data-driven decision-making are key. “Manufacturers can’t afford to make decisions in the dark as CUSMA negotiations evolve. Visibility across the supply chain—enabled by sound analytics—is essential to understanding impacts quickly and making confident decisions. The businesses that can turn insight into action fastest will be best positioned to stay competitive,” shared Paul Dostaler, Partner, National Manufacturing and Distribution Industry Leader, Technology Consulting.
Agriculture
CUSMA also has significant implications for agriculture, particularly in Canada’s supply-managed dairy industry. While the agreement maintains Canada’s quota-based system, it introduced expanded market access for U.S. producers.
These sectors remain highly sensitive in ongoing trade discussions and are expected to face continued pressure in future negotiations.
How to build CUSMA into procurement decisions
As businesses review their supply chains, they may notice some of their suppliers can no longer qualify their goods as duty-free under the new agreement.
However, while trade treaties are a key factor to consider when reviewing the procurement decision tree, they are just one of several. Considering the total cost of potential items, quality, and logistics, the non-CUSMA items may still present the best option. Businesses will need to decide whether to prioritize sourcing from the U.S. and Mexico over offshore suppliers that will cost them duties.
And some businesses may take the opposite approach. With their legacy input no longer exempt from duties, they may explore procurement routes in other countries worldwide. As a result, the new sourcing model may not qualify as duty-free.
Then again, Canada has diversified its trade agreements in recent years. As a result, importers and exporters should remember the duty-free opportunities offered by newer treaties. Chief among them: the Comprehensive Economic and Trade Agreement, or CETA, which covers the European Union; the Canada-UK Trade Continuity Agreement, crafted on the heels of Brexit; and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the CPTPP, primarily with important trading partners in Asia.
How businesses can prepare now for CUSMA changes
“CUSMA isn’t likely to disappear overnight, but the uncertainty is here now,” said Charmaine Goddeeris. “The businesses that prepare early will have a clear advantage.”
Here are a few ways your business can prepare now:
Start by understanding where and how your business relies on CUSMA today. Which goods qualify for preferential tariff treatment, and how close are they to meeting current rules of origin thresholds?
This is critical for identifying risk. If your products only narrowly qualify today, even small changes to requirements could result in goods losing duty-free status. Depending on the outcome, businesses could face standard duty rates, averaging around 6.5%, which can have a significant impact on margins. It’s important to ask if your bottom-line can withstand this increase.
There will be pressure from U.S. to bring more manufacturing back to North America, which contrasts with the Canadian approach of diversifying trade relationships globally.
Future changes may require greater regional sourcing. Businesses should evaluate how flexible their supply chains are and whether they can adapt if requirements shift. Can you pivot within your supply chain to onshore or source domestically?
In an environment of uncertainty, having a single plan is not enough. Businesses should be developing multiple scenarios. “Businesses don’t just need a plan B, they also need a plan C and plan D. We have no idea what’s coming down the pipe,” Charmaine added.
Organizations that take this approach, learning from past disruptions and applying those lessons forward, will be better positioned to navigate change and identify opportunities.
How BDO can help you prepare
Navigating potential changes to CUSMA requires a proactive, informed approach. BDO helps businesses assess their exposure, plan for multiple scenarios, and strengthen their position in an evolving trade environment.
- CUSMA analysis & impact assessment
We assess where your business stands today—reviewing CUSMA qualification, rules of origin, and how much flexibility exists if requirements change. This includes modelling the financial impact of different outcomes, such as increased thresholds or loss of duty-free treatment.
- Scenario & contingency planning
With uncertainty ahead, we help organizations build practical contingency plans. This includes scenario planning and identifying actions that can be taken now to reduce risk and maintain operational continuity.
- Compliance & supply chain readiness
We support businesses in strengthening compliance processes, including rules of origin documentation and broader supply chain considerations such as Bill S-211 requirements. This ensures organizations have the systems and visibility needed to respond quickly as expectations evolve.
BDO helps businesses move beyond uncertainty, equipping them with the strategies and confidence needed to navigate what comes next.
Connect with our team to discuss how CUSMA changes could impact your business and how to prepare
The information in this publication is current as of April 27, 2026.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.