Tax Insights: Preparing for the CUSMA 2026 review ─ US trade concerns and implications for Canadian businesses

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Issue 2026-16

In brief

What happened?

The Canada‑United States‑Mexico Agreement (CUSMA) will have its first mandatory joint review on July 1, 2026, six years after its entry into force. While the review is not a comprehensive renegotiation of the agreement, it provides an opportunity for the parties to assess how CUSMA is functioning, consider recommendations for potential updates and influence how the agreement is administered and enforced, including whether targeted changes or commitments are pursued.

On March 31, 2026, the Office of the United States Trade Representative (USTR) released its 2026 National Trade Estimate report, which outlines trade concerns that the US has with Canada — both market access barriers and non‑market practices. These concerns could play a significant role in the review’s priorities.

Why is it relevant?

The joint review presents both significant risks and potential opportunities for Canadian companies doing business with the US. Specific grievances between the parties can translate into negotiating leverage, focused enforcement, or changes that affect day‑to‑day compliance. Even small, focused changes in trade policy (e.g. how tariff‑rate quotas (TRQs) are administered, border procedures, government procurement rules, digital measures) can affect Canadian, US and Mexican supply chains, affecting product eligibility, total import costs, contract terms and documentation.

Actions to consider

To prepare for the CUSMA joint review, businesses should stress‑test their dependency on the agreement and identify key exposures. Companies in the dairy and agri‑food sector should quantify tariff and TRQ impacts on costs and firms with digital operations should assess exposure to US trade concerns around streaming and platform rules and user data and advertising constraints. Businesses should also review procurement eligibility under evolving "Buy Canadian" rules and ensure transfer pricing and customs valuation are aligned ahead of potential increased scrutiny.

In detail

Background

When CUSMA entered into force on July 1, 2020, it introduced a novel "sunset clause," which mandated a joint review every six years. This provision, originally proposed by the US, requires the three countries to confirm whether they wish to extend the agreement for an additional 16 years. If all parties unanimously agree, the agreement will be extended until 2042, with subsequent reviews occurring every six years. However, if one or more parties do not confirm a desire to extend the agreement, joint reviews will be held on an annual basis for the remainder of the agreement's term, which would expire on July 1, 2036.

US trade concerns with Canada

On March 31, 2026, the USTR submitted the 2026 National Trade Estimate (NTE) to President Trump and Congress. The NTE is an annual report detailing foreign trade barriers faced by US exporters and USTR’s efforts to reduce those barriers. Highlights from the NTE report as it relates to foreign trade barriers with Canada follow:

• Canada’s supply management system – Canada regulates its dairy and poultry through a supply management system involving production quotas, producer-marketing boards and TRQs for imports. This has been an ongoing irritant for the US, and the US has concerns that Canada is administrating the dairy TRQs unfairly. This is a potential pressure point in the joint review. 
• Customs and trade facilitation issues – The implementation of the Canada Border Services Agency Assessment and Revenue Management (CARM) system and its mandatory participation has created access issues for some US importers. US concerns about delays at the border and disruptions to business operations could lead to agreements aimed at keeping trade processes stable and running smoothly.
• Provincial liquor control board practices – Many provincial liquor control boards have rules that affect alcohol market access (e.g. cost‑of‑service mark‑ups, restrictions on listings, distribution policies). In addition, many provinces have stopped purchasing, selling or distributing US alcoholic beverages. This will likely be raised in the review but is a politically difficult issue to resolve.
• Government procurement (federal and provincial) and data residency/“sovereign cloud” concepts – Canadian federal and some provincial governments have implemented “Buy Canadian” policies or restricted procurement access for US businesses. The federal government is also considering purchasing cloud services, in which data would be processed, transmitted and stored exclusively in Canada. These reciprocity and eligibility concerns could affect a company’s tendering for contract strategy, information technology and cloud design, and corporate footprint.
• Digital regulation and digital services tax (DST) developments – The US views Canada’s streaming and platform obligations, including the Online Streaming Act, as restrictive, and although Canada has repealed its DST, digital regulation and taxation are framed as competitiveness issues that can become bargaining chips in the joint review.
• Non-market policies and practices – The US has signaled increased concern over supply‑chain integrity, overcapacity spillovers and investment from non‑market economies. In practice, this is less about new treaty rules and more likely to result in heightened enforcement and verification, including additional origin checks, supplier scrutiny, and documentation requests for goods moving through Canada to the US.

Transfer pricing and related structuring

Although the joint review of CUSMA is a trade process, the outcome of this review will affect business operations with respect to customs and origin checks — areas where intercompany pricing and documentation matter. Businesses should consider the following:

• Customs valuation vs. transfer pricing – Be ready to explain related‑party pricing, royalties/assists, and any post‑import adjustments consistently across customs and tax.
• Origin and verification pressure – Expect tighter administration of the origin of goods, which can force supply‑chain or functional changes that might require the transfer pricing to be recalibrated.
• Digital measures and value chain implications – Ensure the value chain narrative that is reflected in the company’s transfer pricing documentation remains accurate as policy developments arising from the review could drive changes to functions, risks and assets across the business (e.g. platform governance, marketing intangibles and data‑related activities).

Who is most affected by the CUSMA joint review?

Businesses whose access to the US market depends on CUSMA preferences, stable administration of the agreement, or regulatory reciprocity are most affected by the CUSMA joint review (in contrast to those trading primarily on Most Favoured Nation terms). In practice, this includes companies operating in highly integrated Canadian, US and Mexican supply chains where changes in enforcement, verification, or administration can have material commercial and operational impacts.

These typically include:

• agri‑food and supply‑managed or TRQ‑adjacent sector businesses, where market access and cost competitiveness depend on how TRQs are administered
• businesses in the automotive industry, including original equipment manufacturers and suppliers, with highly integrated North American production models that rely on compliance with complex rules of origin, consistent customs treatment and predictable cross‑border flows; even without changes to the CUSMA text, increased origin verification, supplier scrutiny or customs enforcement could materially affect eligibility, compliance costs and supply‑chain resilience
• consumer products and beverage alcohol sector businesses, where provincial distribution, listing practices and market access rules remain politically sensitive and a recurring source of US concern
• digital, media, advertising and platform‑based businesses, where regulatory compliance, data governance and market access policies may be used as leverage in broader trade discussions
• businesses dependent on public procurement, including federal and provincial tenders, where “Buy Canadian” policies, reciprocity concerns and data residency requirements may affect eligibility and operating models
• multinational groups with complex related‑party cross‑border flows, where customs valuation, origin determinations and transfer pricing alignment are critical and more likely to face heightened scrutiny

Overall, the joint review is most relevant for businesses where the certainty of CUSMA underpins pricing, sourcing decisions, contract terms and compliance positions, and especially when targeted enforcement or administrative shifts could disrupt day‑to‑day operations.

How businesses can prepare for the CUSMA joint review

To prepare for the CUSMA joint review, businesses should: 

•  stress‑test their CUSMA dependency and contingencies by:
  • mapping products, services and contracts that rely on CUSMA preferences or stability (e.g. TRQ‑dependent agri‑food, cross‑border digital revenue, procurement eligibility), and
  • identifying single‑point exposures (i.e. clearance holds, labeling and marketing limits, platform compliance costs)
• prepare for dairy and agri‑food readiness by:
  • quantifying TRQ administration and over‑quota tariff impacts on landed cost and supply commitments, and
  • refreshing commercial terms (incoterms, price‑adjustment clauses, sourcing flexibility) to manage volatility
• assess their digital policy exposure to US trade concerns (such as streaming and platform rules, and user data and advertising constraints) and model compliance costs and revenue impacts, as well as confirming cross‑border governance and contracting readiness
• review their procurement strategy and confirm eligibility and structure for public tenders, including “Buy Canadian” thresholds, provincial exclusions, and any data residency and sovereign cloud requirements that may affect operating models
• ensure transfer pricing and customs are aligned by:
  • identifying related‑party cross‑border flows relevant to origin and customs valuation (goods, components, royalties, services), and
  • ensuring pricing policies and documentation reconcile across tax and customs if scrutiny of these concerns increases

Practical steps that businesses can take in the next 60 to 120 days

Businesses should consider:

• building an issue register (i.e. a structured list of potential policy issues and their effect on the business) that links revenue and cost exposure to each key theme (dairy/TRQs, customs facilitation, procurement/data, digital)
• assembling a readiness pack that includes origin support, customs value support, and key compliance artefacts (especially for related‑party pricing)
• reviewing contracts and intercompany agreements (goods, services, royalties) for auditability, adjustment mechanics and flexibility if policies tighten

The takeaway

Recent US trade policy communications indicate a consistent set of Canadian related issues — dairy/TRQs, customs facilitation, procurement and data residency, digital measures and non‑market practice concerns — that may serve as points of leverage in the July 1, 2026 CUSMA joint review.

Canadian businesses should approach the review by assessing areas of exposure, strengthening supporting documentation (origin, valuation, and transfer pricing) and ensuring commercial and supply‑chain arrangements can accommodate heightened scrutiny.