With 2025 behind us, we’re now seeing Canadian businesses move out of crisis mode and back into longer-term strategic thinking. From our offices in Toronto, Vancouver, Calgary, Montreal, and right across the country, BDO Canada’s Customs and International Trade Services team spent the entire year working shoulder to shoulder with businesses (exporters, importers, manufacturers, agri-food producers, and energy companies) offering solutions and guiding them through decisions that will shape their supply chains, market strategies, and growth plans for 2026 and beyond.
Here are some predictions for 2026 and what it all means for Canadian companies.
Carney says diversifying trade relationships with Europe, Asia among key fall objectives, CBC News, Sep 10, 2025.
The year in review: Shock, response, and pragmatic de-escalation
The U.S. America First Trade Policy memorandum in January 2025 set the stage for what was to come. By early March, 25% tariffs were imposed on virtually all Canadian goods (and Mexican goods) under the U.S. emergency powers, with the stated link to border security and fentanyl issues. Canada took measured steps to address the situation, implementing temporary tariffs while remaining open to dialogue and seeking solutions that support both Canadian and U.S. interests. Canada’s response included a 25% tariff on C$30 billion worth of U.S. imports effective March 4, followed by an additional C$29.8 billion effective March 13. The government also published a list that would have taken the total to C$155 billion if no early resolution materialized, with a view to mirroring the financial impact that the U.S. tariffs would have on Canadian businesses and consumers.
That impact landed immediately in Canada’s most integrated sectors: autos, steel, energy, lumber and dairy. For several months, the uncertainty itself was often as disruptive as the duties.
By late summer, the U.S. adjusted the tariff rate to 35% on products not compliant with the Canada-U.S.-Mexico Agreement (CUSMA). In September, Canada chose pragmatism, suspending many of its retaliatory tariffs (retaining them only on steel, aluminum, and finished vehicles) to maintain North American supply chain stability and foster ongoing negotiations. The U.S. continued to honour CUSMA rules of origin treatment in practice for qualifying goods, meaning the effective tariff bite remained limited to non-compliant products. Canada’s 2025 federal budget included a C$30 billion support package, C$25 billion in targeted relief for affected sectors, and C$5 billion for new trade diversification corridors. This is giving many companies the breathing room they needed to adapt rather than simply absorb the costs.
Looking ahead: Three plausible scenarios into 2026–2027
Status quo with high headline pressure
The U.S. maintains the 35% tariff rate on CUSMA non-compliant goods as ongoing leverage. But as the two countries align through ongoing bilateral talks, the rate on non-compliant goods is gradually lowered. In practice, goods that meet CUSMA rules of origin continue to enter the U.S. at low or zero duty. Some further Canadian concessions on dairy and softwood lumber are probable, but day-to-day trade remains manageable. Canada keeps pushing hard on diversification, building deeper trade volumes under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Comprehensive Economic Trade Agreement (CETA), and new Indo-Pacific agreements.
Escalation
The CUSMA review breaks down or is allowed to lapse. The U.S. starts applying the 35% (or higher) rate more broadly, with fewer practical exemptions. Canada would likely consider bringing back full retaliatory tariffs. The potential economic hit would be sharp for 12–18 months, though many clients now have financing and contingency plans in place.
Broader North American accord
The upside scenario: a new economic-and-security pact (energy integration, critical minerals, border efficiency) leads to a modernized CUSMA and a meaningful rollback of tariffs. This would be a clear positive surprise resulting in unpredicted Canadian growth.
What it means for Canadian businesses
The events of 2025 have left a lasting imprint, but they have also sharpened thinking in ways that will serve businesses well in the years ahead. From our day-to-day work across the country, four clear patterns have emerged in how Canadian businesses are responding:
- Many are establishing U.S. subsidiaries so they can sell into the American market as a U.S. entity, following a practical response. When structured correctly, this can also lower the value on which tariffs are applied; however, it exposes businesses to a myriad of tax compliance, human resources, legal, regulatory, real estate, and other considerations that can outweigh the benefits of tariff reduction and should be carefully evaluated prior to making changes.
- Companies are actively pursuing remission and refund opportunities, both through Canada’s own surtax remission orders, Canada Border Services Agency (CBSA) duty-relief and drawback programs, and by reviewing the import entries prepared by customs brokers on the U.S. side, wherever possible, to recover duties already paid where errors have been made, or to structure future flows more efficiently.
- There has been a noticeable step up in engagement with industry associations and advocacy groups. Businesses are actively supporting (and in many cases helping to shape) targeted government support, interprovincial trade-barrier removal, and broader liquidity measures.
- Exporters and importers alike are accelerating market diversification beyond North America. We are seeing increased use of the Comprehensive Economic Trade Agreement (CETA) for European entry, growing interest in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) partners, and a steady flow of new initiatives aimed at the European Union, United Kingdom, India, and the broader Indo-Pacific region.
The biggest change we see in boardrooms today is that few are taking the U.S. market for granted anymore. Most growth plans now have a plan B and often a plan C. While some sectors continue to face headwinds, the strategies above are already helping businesses reduce exposure, lower costs, and open new growth paths.
Closing perspective
Canada has faced trade challenges before and has come out stronger. 2025 was louder and more sudden than most, but it has accelerated decisions that were already overdue: building more pliability at home, removing internal barriers, and actively growing relationships with reliable partners around the world.
As Canada moves forward in this new trade environment, it is important for businesses to look to all markets to achieve resilience, diversification, and growth. The businesses that have developed strategies and options, whether that be through new structures, markets, partnerships, or customers, stand to be well-positioned in a world that does not trade like it used to.
The information in this publication is current as of December 17, 2025.
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.