Canada Pursues Bilateral Agreement Parallel to USMCA Review

Canada is negotiating bilateral agreements to resolve industrial tariffs alongside the mandatory 2026 USMCA review, aiming to secure long-term stability for the steel, aluminum, and automotive sectors. This dual-track strategy seeks to mitigate ongoing trade friction and potential US withdrawal threats by formalizing sectoral relief while leveraging the deep integration of the US$2 trillion North American trade corridor. Resolving these tensions is critical for Canadian and Mexican exporters, as the industry shifts toward a rigorous enforcement framework where documentary traceability and strict rules of origin are now essential for maintaining preferential market access.
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The Canadian government is in negotiations with the United States to remove tariffs on critical industrial sectors, to incorporate these resolutions into bilateral agreements alongside the upcoming USMCA review. Canada-US Trade Minister Dominic LeBlanc stated that Canada is seeking to reduce or eliminate tariffs on steel, aluminum, and automobiles. These measures were implemented by the administration of President Donald Trump last year. Canadian Prime Minister Mark Carney previously indicated that discussions regarding these sectoral tariffs would likely be integrated into the trilateral trade review process.

LeBlanc clarified that while USMCA remains a trilateral framework, the specific resolution of these industrial tariffs would be handled through bilateral arrangements adjacent to the main pact. Despite public criticism of the USMCA from some US officials, LeBlanc characterized private government-to-government discussions as "not discouraging." He noted a distinction between political rhetoric in the United States and the ongoing technical negotiations between the three nations.

USMCA is currently subject to a mandatory review, which must be concluded by July 1, 2026. Mexico has already entered formal negotiations with the United States regarding the renewal of the agreement. LeBlanc expressed optimism regarding the process, citing the shared economic interests of all three signatories as a primary driver for maintaining the framework. LeBlanc is scheduled to meet with US Trade Representative Jamieson Greer next week to further these discussions.

US Stakeholders Agree on the USMCA Benefits

Despite private discussions within the White House regarding a potential US departure from the agreement, a broad consensus remains among business stakeholders regarding the pact's value. Kenneth Smith, President of the Bilateral Committee, Mexican Business Council for Foreign Trade, Investment and Technology (COMCE), noted that during USMCA consultations, over 75% of experts consulted by the US government support maintaining the USMCA, with only 2% expressing opposition.

While US President Donald Trump is reportedly assessing withdrawal as a tactical option to secure better terms, specifically targeting rules of origin and labor protections, analysts suggest a full termination is unlikely due to the deep integration of North American supply chains. The relationship is currently valued at approximately US$2 trillion, as reported by MBN.

What to Expect in the USMCA Review? 

Antonio Ortiz, President of the Technical Committee Mexico-USMCA at COMCE, emphasized that Mexico holds a unique competitive advantage in what he described as an international disorder. He argued that while the United States increasingly bypasses WTO rules, Mexico’s preferential access through the USMCA offers a level of security and certainty that other nations lack, potentially positioning Mexico as a primary beneficiary of the shifting trade landscape.

According to Paola Vaca, CEO, Grupo Zeit, USMCA is transitioning into a phase where undocumented compliance is effectively treated as non-compliance. Six years after it entered into force, the agreement has moved beyond the simple requirement of regional production toward a more demanding environment of traceability and risk management. 

Vaca notes that for companies in the automotive and manufacturing sectors, this means that operational success now depends on the ability to support production reality with consistent and up-to-date documentation. “Six years after its entry into force, the USMCA has made one thing clear: it is no longer enough to produce within the region. Companies must now be able to prove it, document it, and sustain it operationally,” she wrote for MBN.

Rules of origin remain the most critical challenge under the treaty, particularly as they require a high level of regional content that forces companies to thoroughly map their entire supply chain down to Tier 2 and Tier 3 suppliers. Many organizations currently meet origin requirements in their physical production but fail in documentary traceability, which exposes them to the loss of preferential tariffs, customs reprocessing, and significant disruptions across their logistics operations. 

Vaca notes that in Mexico, the Customs Value Declaration has emerged as a new pillar of compliance and a strategic enforcement mechanism. Rather than a simple administrative formality, this document is now a primary tool used by tax authorities to validate that duties and trade preferences are calculated correctly. Recent shifts in enforcement involve automated cross-checks between customs entries, electronic invoices, and payment records to prevent undervaluation. Because USMCA benefits are directly tied to the accuracy of the declared value, omissions regarding dutiable additions such as royalties or technical assistance can result in the rejection of origin claims and the retroactive payment of taxes and surcharges.