- with readers working within the Healthcare industries
On September 20, 2025, the Government of Canada launched public consultations (the "Consultations") in preparation for the first joint review (the "Review") of the Canada-United States-Mexico Agreement ("CUSMA"), scheduled for July 2026. The Consultations provide Canadians with an opportunity to share their views on how CUSMA is working and what the Canadian government's priorities should be as it approaches this Review in light of the significant upheaval in Canada's trading relationship with the United States, as we've discussed in detail in our latest client alerts which can be found at our Cross-border Trade & Tariffs Roundup.
This Review marks a critical milestone in the life of the agreement. Although the Review is not a full renegotiation, it is a formal mechanism built into the agreement that allows the parties to assess its performance, propose updates, and decide whether to extend its term. Given the current state of trade relations among Canada, the United States and Mexico, this Review arrives at a critical time and presents an opportunity to address recently imposed tariffs and other acute trade concerns.
History and Review Process
CUSMA entered into force on July 1, 2020, replacing the North American Free Trade Agreement (NAFTA). It governs trade between Canada, the United States and Mexico, a market of approximately 500 million people with nearly $2 trillion in annual trilateral trade. The 2020 update, negotiated in the first Trump Administration, largely preserved tariff-free access across the North American market, while modernizing the rules to reflect then-current trade issues. Key updates at that time included:
- A new chapter on digital trade, prohibiting data localization requirements and customs duties on digital products.
- Stronger labor and environmental standards, including enforceable commitments.
- Revised rules of origin for automotive goods, increasing regional content requirements.
- Limited new market access in agriculture, particularly in dairy and poultry.
- Elimination of investor-state dispute settlement between Canada and the United States
CUSMA includes a built-in "review and term extension" mechanism in Article 34.7, often referred to as the "sunset clause." The agreement is set to expire automatically after 16 years (in 2036) unless the parties agree to extend it. To prevent expiry,a formal joint review must occur in year six after implementation, which will be 2026. The Review is conducted by the Free Trade Commission, composed by government representatives of each Party at the level of Ministers or their designees.
The Review must be completed by July 1, 2026. Upon completion of the Review, each country must confirm in writing whether it wishes to extend CUSMA for another 16 years, until 2042. If all three parties agree, the agreement is extended, and the next review will be scheduled for 2032.
If any party does not confirm its support of an extension, CUSMA remains in force, but annual joint reviews must take place until the agreement's scheduled expiry in 2036. At any of these annual reviews, the parties may still agree to extend the agreement. If no extension is agreed upon by 2036, CUSMA will terminate.
This process is separate from the ability of any party to withdraw from CUSMA at any time by providing six months' written notice. If one country withdraws, the agreement continues in force between the remaining two.
2026 Review and the Consultations
The Review will proceed through several key stages, beginning with public consultations by each party. Canada's consultations, initiated on September 20, 2025, will be open until November 3, 2025. During this period, Canadian businesses, civil society groups, and other stakeholders are invited to provide feedback on the agreement's performance. These submissions will help shape Canada's negotiating priorities and inform its approach to the upcoming joint review. Canada will continue engaging with provinces, territories, and industry groups to refine its position.
In early 2026, the CUSMA parties will finalize their internal positions. In the United States, the Office of the U.S. Trade Representative ("USTR") is required to report to Congress outlining its objectives and strategy for the review. USTR launched its review process in September 2025, which includes a 45-day public comment period, a public hearing on November 17, and a rebuttal comment phase. It must also submit a report to Congress by January 2026, at least 180 days before the joint review, detailing its assessment, objectives, and position on whether to extend the agreement.
Mexico's Ministry of Economy is following a similar process. Domestic consultations opened in September 2025, with a 60-day window (extendable by 30 days) for stakeholder input, as published in Mexico's official gazette. The Minister of the Economy has also indicated that early preparatory talks may begin before 2026.
The parties may then provide recommendations to the Free Trade Commission for updates to be made to CUSMA, which must be submitted at least one month before the joint review meeting.
This process will culminate in the July 1, 2026, meeting of the Free Trade Commission, where recommendations from all three countries will be reviewed and determined. At this meeting, each government must declare in writing whether it supports extending the agreement for another 16 years. If all three parties agree, CUSMA will be renewed until 2042, and the next review will be scheduled for 2032.
In practice, we anticipate that discussions and negotiations will build steadily over the coming months, with the most intense activity occurring in the final weeks leading up to the July 1 meeting. Stakeholders can expect a flurry of strategic planning, consultations, and decision-making as the parties finalize their positions.
Key Issues
While no government has formally outlined its priorities of the 2026 CUSMA review, several issues are likely to be raised based on recent disputes, stakeholder feedback, and evolving market conditions.
1) Chinese Investment and Transshipment
One issue that may feature prominently in the 2026 CUSMA review is concern over non-party countries, particularly China, gaining indirect access to North American markets through CUSMA member states. This issue has been raised in the context of Chinese investment and manufacturing operations in Mexico, which some U.S. policymakers view as a backdoor for tariff-free exports into the United States and Canada.
In response, the United States may seek to tighten transshipment rules, increase scrutiny of supply chains, or propose new provisions to prevent circumvention. Potential changes could include stricter origin verification, enhanced customs cooperation, or new thresholds and rules of origin that explicitly exclude certain non-party inputs.
2) Tariff Disputes
Since February 2025, the United States has used Section 232 of the Trade Expansion Act and the International Emergency Economic Powers Act (IEEPA) to restore previously imposed tariffs and impose new ones on imports from Canada, initially targeting steel and aluminum, citing national security and emergency powers. While CUSMA preserved Canada's preferential market access, these measures exposed a loophole that allows the United States to impose trade restrictions unilaterally, even on goods that meet CUSMA's rules of origin.
Canada continues to push for the removal or limitation of these tariffs. Prime Minister Carney has emphasized the need to prevent future misuse of these legal tools and strengthen protections ahead of the 2026 joint review.
3) Automotive Rules of Origin and Regional Value Content (RVC)
CUSMA's stricter rules for determining vehicle and parts eligibility for preferential tariffs have triggered compliance challenges and disputes—most notably in the "Super-Core" case. The Panel sided with Canada and Mexico, affirming that designated core parts can count as 100% of a vehicle's regional value content ("RVC") under the roll-up provision when incorporated into a finished vehicle. In contrast, the U.S. argued each core part must independently meet its RVC threshold. The term "super-core" refers to essential automotive components defined under CUSMA's rules of origin. The upcoming 2026 review may revisit RVC calculations, the roll-up provision, and whether current thresholds align with modern vehicle production, especially for electric and advanced technologies.
Chinese automakers have expanded their presence in Mexico, including through investments in electric vehicle production and assembly. Under current CUSMA rules, vehicles assembled in Mexico may qualify for preferential tariff treatment if they meet the agreement's rules of origin. Critics argue that this could allow Chinese companies to benefit from CUSMA without being subject to its labor, environmental, or subsidy disciplines. This could be a key issue in the 2026 Review, as the parties consider the integrity of the rules of origin and the potential for non-party companies to gain indirect advantages.
4) Agricultural Market Access and Supply Management Protections
Canada's dairy quota system has long been a cornerstone of the country's supply-managed agricultural sectors. Disputes over how these quotas are administered have led the United States to file formal complaints about access to Canada's markets under CUSMA, resulting most recently in panel rulings upholding Canada's measures.
The review may bring renewed pressure on Canada to expand U.S. access to dairy and its other supply-managed sectors or to tighten enforcement of existing commitments. For Canadian producers, the challenge will be twofold: defending the integrity of the supply management system while preparing for possible adjustments.
How to Participate
Global Affairs Canada is accepting submissions until November 3, 2025. Businesses and other stakeholders can send comments via email to CUSMA-Consultations-ACEUM@international.gc.ca or by mail. Submissions should identify:
- Positive outcomes from CUSMA.
- Challenges encountered.
- Recommendations for improvement.
The 2026 CUSMA review will have lasting implications for cross-border trade and investment. While the process stops short of full renegotiation, it opens the door for meaningful adjustments. Businesses should take this opportunity to advocate for their interests and shape Canada's negotiating position.
McCarthy Tétrault's International Trade and Investment Law Group is available to support stakeholders in preparing or refining their submissions.
To view the original article click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
