Looking Ahead To 2026: A New Era Of International Trade

As we head into 2026, Canadian businesses confront a new era of international trade brought about by changes in US trade policy and Canada's own protectionist response, including retaliatory tariffs and import restrictions. These rapid and significant shifts have created substantial challenges for Canadian business operations and supply chains.

Canadian businesses can continue to expect a rapidly changing trade environment and the uncertainty that it brings in 2026. To help Canadian businesses prepare for and navigate the uncertainty, we examine key international trade developments that are likely to shape the coming year.

Some of the most significant issues to watch for are:

• Ongoing tariffs and counter-tariffs
• CUSMA review
• A new era of Canadian protectionism
• Anti-dumping cases
• Trade diversification opportunities
• Trade with China

Ongoing Tariffs and Counter-Tariffs

In 2025, tariffs became a central focus of international trade. While many Canadian exports were unscathed by US tariffs, pain is being acutely felt in key export sectors including lumber, steel and aluminum, copper products, and auto parts. Canadian importers, meanwhile, have faced continuing challenges from Canadian retaliatory tariffs, which remain in place on a broad swath of US origin steel and aluminum products.

The US Supreme Court will soon issue its ruling on the legality of President Trump's use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs to address national security issues (such as purported fentanyl smuggling). The US Supreme Court's decision could undermine the ability of the US administration to impose some tariffs and therefore have significant impacts for countries impacted by the so-called "reciprocal" tariffs. However, the decision is unlikely to offer significant benefit for Canadian goods, which have benefited from an exemption under IEEPA, while the US tariffs doing the most damage to Canada will not be impacted since they are imposed pursuant to Section 232 of the Trade Expansion Act, 1962.

Key Canadian export sectors are therefore likely to continue to be challenged by ongoing and expanding US tariffs in 2026, while Canadian retaliatory tariffs are likely to remain in place as long as US tariffs remain in force. These developments require businesses to critically assess their supply chains to consider ongoing and evolving tariff liability risk as well as to take measures to protect themselves.

2026 CUSMA Review

The terms of CUSMA require that Canada, Mexico, and the US meet in 2026 to conduct a "joint review" of the agreement during which parties can make recommendations and decide on changes to the agreement. Parties will also be provided with the opportunity to extend the term of CUSMA beyond its 2036 end date, failing which they must meet on an annual basis until 2036.

The US is expected to use the joint review as an opportunity to address key trade irritants with Canada, including supply management, the Online Streaming Act and Online News Act, as well as restrictive procurement policies that they view as disadvantaging US suppliers. Canada, for its part, will be looking for concessions relating to tariffs impacting its key export sectors.

The CUSMA joint review and the ongoing renegotiation of its terms in real time will add a new element of uncertainty for Canadian businesses doing business with the US, while Canada will be forced to reckon with broader questions about the value of its trading relationship with the US in an era of renewed tariffs and begin to contemplate a "post-CUSMA" future should the US not express an intention to extend the agreement.

Canadian businesses can monitor these developments by signing up to our international trade email list.

A New Era of Canadian Protectionism

Canada has increasingly introduced its own protectionist measures to help support domestic industries that have lost access to the critical US market, as well as to address concerns about unfair trading practices. For example, in 2025, Canada announced:

• A Tariff Rate Quota on imports of steel mill products, which imposes limits on the amount of certain steel products that can be imported at a low or zero duty rate, with importations above that threshold subject to 50 per cent surtax.
• A new 25 per cent global tariff on certain steel derivative products such as wind towers, bridges and bridge-sections, cables, and screws.
• A new Federal Buy Canadian Policy, which includes measures to prioritize Canadian suppliers and Canadian materials in certain strategic procurements (several provinces also imposed similar policies).
• Measures to incentivize the use of Canadian steel and lumber, such as funding for railways to enable a 50 per cent freight rate discount on interprovincial steel and lumber shipments within Canada.

The trend towards protectionism is likely to continue in 2026 as Canada looks to further respond to a changing global trade environment.

New protectionist measures and the speed with which they are being rolled out and strengthened, can create heightened risk for Canadian supply chains, particularly those involving steel inputs, and will require businesses to carefully consider potential risks and consider mitigation strategies in product sourcing.

Increasing Anti-Dumping & Countervailing Risk

2026 will likely witness a similarly high number of trade remedy cases as 2025, which was the most active year for trade remedy cases in Canada in over two decades. The increasing number of trade remedy cases reflects concerns around global overcapacity, diversion due to tariffs, enhanced enforcement by the CBSA, and increasing pressures on Canadian industry.

The increased use of the trade remedies system and the (often) high duties resulting from successful cases increase importation risk for Canadian businesses as well as the risk that they will become implicated in trade remedies litigation. Mitigating anti-dumping and countervailing duty liability after it has been incurred can be challenging, which highlights the need for businesses to stay current with developments to do their best to minimize liability risk before it happens.

Trade Diversification & New Opportunities for Canadian Businesses

The loss of access to the critical US market has spurred renewed efforts to diversify Canada's trade relationships, including with its domestic and international partners. In 2025, for instance, federal, provincial, and territorial governments negotiated the Canadian Mutual Recognition Agreement on the Sale of Goods, which reduces barriers to the sale of goods across Canada by ensuring that covered products lawfully sold in one province/territory may be sold across Canada without having to meet further requirements.

Other efforts have focused on finding new international markets for Canadian goods. For example, in 2025 Canada:

• Signed a new trade agreement with Indonesia.
• Relaunched trade agreement negotiations with India.
• Launched trade agreement negotiations and signed a new Foreign Investment Promotion and Protection Agreement (FIPA) with the United Arab Emirates.
• Opened consultations on relaunching negotiations for a trade agreement with the Mercosur Bloc (Argentina, Brazil, Paraguay, Uruguay).
• Announced its intentions to enter into trade agreement negotiations with Thailand.

Businesses should assess new opportunities made available by trade diversification efforts as well as participating in consultations about new trade agreements. They should also consider the use of existing trade agreements such as CETA and the CPTPP to determine whether they can benefit from preferential tariff treatment or other protections.

Trade with China

Although China is Canada's second most important trading partner, recent relations have been strained by tit-for-tat tariffs, notably:

• Canadian tariffs on Chinese EVs, which were implemented in 2024 to align with identical US tariffs, as well as protect Canada's then nascent EV industry, concentrated in Ontario.
• Canadian tariffs on Chinese steel/aluminum products imposed in 2024 and expanded in 2025.
• Chinese tariffs on Canadian Canola oil and canola seeds, which have been felt most acutely in Western Canada.

Despite the recent tensions, Canada's desire to reduce its reliance on trade with the US as well as delayed or cancelled EV investments may create an opening for Canada and China to resolve their trade dispute.

A renewed Canada-China trade relationship could have significant implications for Canada. China will undoubtedly be looking for tariff relief from Canada, particularly with respect to EVs, while Canada's agri-business and energy sectors stand to benefit significantly from the easing of Chinese tariffs and improved relations.

Any compromise between Ottawa and Beijing could also have important domestic consequences—with benefits and costs being concentrated unequally among provinces—as well as Canada's negotiations with the US during the CUSMA Joint Review.

Conclusion

Heading into 2026, Canadian businesses can expect continued challenges posed by a rapidly evolving trade environment. Given the speed of new developments, it is more important than ever for businesses to monitor developments, critically assess supply chains and consider risk mitigation strategies including new opportunities for growth.