Canadian exporters from various industries can avoid the blanket tariffs imposed by U.S. President Donald Trump by adhering to the Canada-U.S.-Mexico Agreement (CUSMA). This three-way free trade deal, signed by Trump in 2018, exempts goods that comply with its terms from the potential tariffs set for August 1. Trade experts believe that the majority of Canadian exports can meet the compliance requirements, prompting a rush among companies to ensure their products qualify.
The CUSMA exemption is crucial for safeguarding Canada’s cross-border trade from Trump’s tariff threats. Trump initially imposed tariffs in March, targeting Canadian exports with a 25% tariff, except for energy and potash facing a 10% tariff. However, he later amended the tariffs to exempt products eligible for duty-free status under CUSMA, which remains in effect. An analysis by RBC Economics indicates that around 86% of Canada’s exports to the U.S. stand to qualify for this exemption.
Wolfgang Alschner, a Business and Trade Law expert, emphasizes Canada’s significant advantage over other countries due to this exemption. While some sectors remain affected, the overall impact is seen as highly beneficial compared to the tariffs imposed on other nations by the U.S.
The exemption under CUSMA applies to Canadian exports predominantly sourced or produced within North America, allowing them to enter the U.S. market without tariffs. However, products with significant non-North American content or subject to sector-specific tariffs like steel, aluminum, and non-U.S. content in automobiles are not included in the exemption.
To be considered CUSMA-compliant, exporters must adhere to specific rules of origin, with a majority of the product’s content originating from North America. While proving compliance can be challenging and time-consuming, it is becoming the new norm for Canadian exporters. Obtaining a certificate of origin is essential to facilitate tariff-free entry into the U.S.
As negotiations for the three-way trade deal are set to be renegotiated in July 2026, the CUSMA exemption plays a crucial role in trade talks. While some level of tariffs is anticipated on Canadian exports, maximizing the proportion of goods exempt from tariffs remains a priority for Canada’s trade negotiators. However, the possibility of Trump revoking the exemption adds uncertainty to the trade landscape, highlighting the importance of compliance for Canadian businesses.