General Context

By mid-2025, Canadian manufacturers are operating in a global environment characterized by ongoing geopolitical tensions, a steady increase in environmental requirements, and sweeping changes in trade frameworks. While escalating tariffs, new carbon regulations, and international sanctions have made the business landscape more complex, emerging trade opportunities—particularly in Latin America and Asia—offer real potential for those prepared to adapt with agility.

This summary highlights the key developments identified by Affilia Legal that are likely to impact the manufacturing sector.

1. Trade Expansion: New Markets Within Reach

Le Canada accélère la diversification de ses partenariats commerciaux :

• Canada–Ecuador Free Trade Agreement: Targeted for signing by the end of 2025.
• Canada–Asia (ASEAN) Trade Agreement: Negotiations are on track for conclusion by year-end.
• Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): Indonesia and Costa Rica are moving towards accession, providing preferential market access opportunities.

For manufacturers: Take advantage of this momentum by reassessing your export markets and proactively exploring new opportunities in regions such as Ecuador, Indonesia, and ASEAN member states.

2. Canada–US Relations: Growing Tariff Uncertainty

• US Tariffs: Steel and aluminum imports remain subject to 50% tariffs, with ongoing investigations that could expand these measures to aerospace and pharmaceuticals.
• Canadian Response: An initial set of 25% counter-tariffs remains in place, with a second wave prepared if Washington enacts a further 30% tariff hike as announced for August.
• Key Dates: August 1—Canada may launch new countermeasures if negotiations do not advance.
• Tariff Rate Quotas: Import duties of 100% apply to steel and aluminum from countries not covered by a trade agreement with Canada.
• Buy Canada Act: Effective July 14, a temporary government policy on reciprocal procurement allows Canada to exclude suppliers from countries that restrict Canadian access to their public procurement. Quebec and Ontario already enforce similar rules.

For manufacturers: Stay informed about tariff developments, use available public financial supports to buffer the impact of higher duties, defend your interests in the face of countermeasures, and adjust to local content rules in public tenders.

3. ESG and Environmental Regulations: Increasing Complexity

ESG (Environmental, Social, Governance) regulations are evolving rapidly, either becoming stricter or taking on new forms:

• European Union: Plans to simplify reporting requirements (CS3D and CSRD), while maintaining ambitious border carbon adjustment measures.
• United Kingdom: Will implement its own border carbon adjustment in 2027, modeled closely on the EU system.
• Maritime Carbon Tax (from 2027): Exporters will face a logistics surcharge of $100 to $380 USD per ton of CO₂ for ships exceeding 5,000 tons.
• Plastics: Starting September 2025, companies placing more than 1,000 kg of plastic on the market must report these volumes. Requirements will broaden in 2026 and 2027 to cover a wider range of products.
• Greenwashing: The Competition Bureau has just published new guidelines to help companies meet obligations regarding the prohibition of greenwashing and misleading environmental claims.

For manufacturers: Anticipate and plan for carbon-related costs, ensure teams are trained in ESG obligations, set up robust plastic volume tracking, prepare for mandatory plastic registration by September 2025, and maintain transparency in your practices to avoid penalties for greenwashing.

4. Sanctions and Geopolitical Restrictions

Ongoing international tensions are directly impacting sourcing and partner choices:

• Canada: Has tightened sanctions against Russia through asset seizures and actions targeting some foreign companies, such as Hikvision (China).
• United States: There’s an increased risk of secondary sanctions against entities with energy ties to Russia.

For manufacturers: Consult experts like Affilia Legal for targeted support on geopolitical, commercial, and transactional risks. Include compliance clauses related to sanctions in contracts and establish strong monitoring mechanisms to quickly anticipate any risks of non-compliance or supply chain disruption.

5. New Market Access and Trade Disputes

• CUSMA/USMCA:
  • The US is challenging Canada’s Online News Act, citing negative effects for US digital companies.
  • The rapid response mechanism is already being utilized, especially for labor rights issues in Mexico.
• WTO Agreements:
  • Implementation of the ban on subsidies for overfishing and illegal fishing is planned by the end of 2025.
  • Albania and Costa Rica are expected to join the Government Procurement Agreement (GPA) by year-end.
  • Uzbekistan and Ethiopia are advancing in their WTO accession, while Somalia has just begun the process.
  • The Multi-Party Interim Appeal Arbitration Arrangement (MPIA) now includes 57 members, including the UK.
• WTO Disputes:
  • Canada anticipates favorable outcomes in its disputes with the US over steel, aluminum, automotive products, and with China over agricultural products.
  • However, Canada is expected to lose its case regarding import restrictions on Chinese electric vehicles.

For manufacturers: Stay alert to developments in WTO agreements that could open new market opportunities.

To read the full Affilia Mid-2025 Forecast, click here.