Canadian exporters are facing a more complicated trade landscape this year, as U.S. tariff actions, a stalled renewal of the Canada-United States-Mexico Agreement (CUSMA), and new counter-tariff measures squeeze margins and cash flow. In response, businesses and public financing agencies are increasingly emphasizing trade finance tools, market diversification and new trade agreements as ways to manage risk.
At the centre of the pressure is CUSMA. At a joint review of the agreement on July 1, 2026, the United States declined to extend it to 2042. The agreement remains in force until 2036, but according to the Asia Pacific Foundation of Canada, it now enters a cycle of annual reviews that observers expect the U.S. to use as recurring leverage in future negotiations. The U.S. is described as the destination for more than 60 per cent of Canada’s AI-intensive exports, underscoring how much of the country’s trade remains concentrated in a single market.
Tariffs Squeeze Margins and Cash Flow
Export Development Canada (EDC) has warned that Canadian tariffs on U.S. goods, along with related counter-tariff measures, can raise import costs for Canadian manufacturers and ripple through pricing, supply chains and customer relationships. In one example cited by EDC, a Canadian machinery manufacturer importing U.S.-made components accounting for 30% of production costs could see that cost base rise, forcing a choice between absorbing the hit or passing it to customers. EDC is advising exporters to review Harmonized System (HS) classifications, confirm country-of-origin status, and check whether products qualify for preferential treatment under CUSMA’s rules of origin, outlined in Chapter 4 of the agreement.
EDC says tariff-related cost increases can create particular cash flow strain for small- and medium-sized enterprises, since importers often must pay higher duties before they are paid by their own customers. The agency points businesses toward working capital support, inventory financing, export financing and accounts receivable protection as options to bridge that gap. EDC has also been expanding its Trade Impact Program (TIP), which it says gives eligible exporters and their suppliers access to expanded financing, working capital support, trade credit insurance and foreign exchange solutions amid what the agency describes as a period of trade uncertainty.
Diversification Beyond the U.S.
With U.S. market access facing new question marks, diversification has become a recurring theme in Canadian trade policy discussions. The Asia Pacific Foundation of Canada’s research on AI-intensive exports frames diversification toward the Indo-Pacific as an “urgent means” of managing U.S. market-access risk, pointing to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) as a vehicle that already improves market access for AI-enabled services in countries including Australia, Japan, Malaysia, New Zealand, Singapore and Vietnam. The report notes, however, that implementation of digital trade commitments under the CPTPP remains uneven, and that barriers such as data localization rules, cloud licensing regimes and local-presence requirements persist across the region, compounded by a patchwork of national AI regulations ranging from Japan’s principles-based approach to Vietnam’s more prescriptive 2026 AI law.
Latin America is also drawing fresh attention. Canada and Ecuador officially signed a free trade agreement in July 2026, which EDC says will reduce or eliminate tariffs, support investment flows and increase transparency for Canadian businesses, with Ecuador agreeing to remove duties on 97.2% of tariff lines under the negotiated terms. Two-way merchandise trade between the two countries reached approximately C$1.3 billion in 2023, with Canadian exports including cereals, lentils, peas, fertilizers, machinery and industrial products, while Canadian direct investment in Ecuador grew to roughly $4.4 billion between 2018 and 2023. EDC notes that Ecuador’s use of the U.S. dollar as its official currency — shared in the region only with El Salvador and Panama — can reduce foreign exchange uncertainty for Canadian firms, and that Ecuador ranks sixth among regional destinations for Canadian goods exports and seventh for Canadian investment.
Building Resilience Through Supply Chains and Acquisitions
EDC is also encouraging exporters to reduce reliance on single suppliers or shipping routes, suggesting companies identify secondary suppliers in Canada, Mexico, Europe or Asia-Pacific markets and strengthen inventory planning to absorb unexpected policy shifts. Separately, the agency has promoted mergers and acquisitions as an alternative route to international growth, arguing that acquisitions can give Canadian companies faster access to customers, distribution networks and local expertise than building a presence organically, provided they are paired with thorough due diligence and integration planning.
Taken together, the recent push around tariff exposure reviews, expanded trade financing programs, CPTPP engagement and new agreements like the one with Ecuador reflects a broader pattern among Canadian trade officials and financiers: encouraging exporters to reduce concentration risk in a single market and build more flexible financing and supply arrangements as longstanding trade relationships, including CUSMA, face a more uncertain path forward.
This article is for informational purposes only and does not constitute financial, investment, or legal advice. Consult a licensed financial advisor before making investment decisions.
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