Affilia 2026 Forecast: Key Questions in International Trade Law

January 21, 2026

Affilia thanks André-Philippe Ouellet, Affilia Collaborator, and Bernard Colas, Lawyer and Partner, as well as the members of the Affilia team for this forecast.

Business leaders focused on global markets are heading into 2026 with pressing questions about their markets, supply chains, and profit margins. This Affilia 2026 forecast addresses those concerns by offering concrete guidance that can be applied directly in your decision-making processes. In a context where powerful forces are reshaping international trade, it helps clarify where the most significant risks truly lie and where the highest-priority opportunities can be found.

1. Will the United States increase the customs duties applied to our exports in 2026?

It is possible. American tariffs on Canadian goods are expected to remain near their current peaks in 2026, including surcharges on the non‑CUSMA portion of products, as well as on steel, aluminum, and certain strategic goods, pending the U.S. Supreme Court’s decision on the legality of the new reciprocal tariffs. For a Canadian exporter, the main challenge is therefore less a sudden spike in duties than the careful management of an already very high tariff burden, which creates significant regulatory and administrative complexity.

To limit their exposure, businesses must rigorously document their supply chains so they can fully benefit from CUSMA rules of origin. In the case of products containing aluminum, this is especially important, because an incomplete or inaccurate declaration of origin can result in the goods being treated as Russian in origin and hit with a 200% tariff, turning a simple documentation error into a sudden and severe cost shock.

2. Is Canada planning to retaliate against U.S. tariffs?

No, not unless there is a major geopolitical crisis, such as an invasion of Greenland or the Arctic. In the short term, Canada is favouring de‑escalation over a broad tariff war. Broad‑based countermeasures have been dropped in favour of targeted counter‑tariffs, particularly on U.S. steel, aluminum, and automobiles, while some tariff quotas have been reduced and a new global tariff on steel derivative products has been introduced.

Canada is simultaneously relying on a new “Buy Canada Act” to support local producers, while preserving access to Canadian public procurement markets for countries that respect their international obligations. The Policy on the Preference for Canadian Suppliers and Content in Strategic Federal Procurement applies to all strategic procurements valued at 25 million dollars and above, and as of June 15, 2026, this threshold will be lowered to 5 million dollars and above.

3. Will CUSMA be renewed?

Probably, but with changes. Under CUSMA, Canada, the United States, and Mexico must, by July 1, 2026 at the latest, indicate whether they wish to extend the agreement beyond 2036 for a further 16‑year period. If at least one of the parties refuses, the question must then be raised again every year until 2036, unless a compromise is reached earlier or a country decides to withdraw by giving six months’ notice.

In this context, it is very likely that the United States will not want to renew CUSMA in its current form and will seek a series of concessions that Canada – especially under a minority government – and Mexico will have little appetite to accept. In the absence of a full U.S. withdrawal, which remains unlikely at this stage, the most plausible scenario is one in which Canada tries to preserve the status quo as much as possible: rejecting demands it considers unacceptable, avoiding any frontal challenge to the agreement, and remaining open to targeted adjustments. Despite the tensions, Canadian exporters still benefit from average tariffs of around 6%, which is significantly more favourable than the roughly 14% faced on average by exporters not covered by CUSMA.

One of the main themes of any potential renegotiation will be the construction of a “Fortress America,” with much closer alignment to U.S. policy toward China. Under pressure from Washington, Mexico has already imposed tariffs of 50% on a large share of its Chinese imports, and a tightening of rules of origin can be expected to prevent North America from serving merely as a transit platform for Chinese goods. In this context, goods produced by Chinese companies, or those deeply integrated into Chinese supply chains, could be excluded from the benefits of the agreement even if they are assembled in Canada or Mexico, pushing Canada toward a hybrid scenario halfway between a free trade area and a customs union with the United States.

For a Canadian manufacturer, this means rethinking product composition, supplier selection, and location strategies in order to remain compliant with stricter rules of origin. It also requires preparing for a more contentious negotiating environment, where simply defending the status quo will already be an ambitious goal and every investment decision will need to be tested against the logic of a “Fortress America.”

4. Will Canada finally succeed in diversifying its markets?

Yes, and the strategy is now more targeted. Even though Canada already has agreements covering about 70% of global trade, the Canadian government has chosen in its new deals to downplay provisions on environmental and human rights protection in order to speed up their conclusion, focusing first on economic results –an approach Prime Minister Carney summarizes by saying his government deals with “the world as it is.”

The cornerstone of this diversification strategy is India, with negotiations expected to move ahead quickly in 2026. This prospect is strengthened by the recent conclusion of a trade agreement between India and the United Kingdom.

In parallel, Canada is leveraging the Comprehensive and Progressive Agreement for Trans‑Pacific Partnership (CPTPP), which several countries are seeking to join (Costa Rica, the United Arab Emirates, Indonesia, the Philippines, Uruguay), while also negotiating with the Association of Southeast Asian Nations (ASEAN) and relaunching bilateral discussions with Thailand and the Philippines, and soon Singapore.

The warming of relations with China – illustrated by the recent arrangement allowing a quota of 49,000 Chinese electric vehicles into the Canadian market in exchange for lowering certain duties on Canadian products such as canola – could also reopen export channels and sectoral cooperation that had previously been blocked. However, this relationship will remain constrained by ongoing sanctions and by continued U.S. pressure to limit China’s integration into North American supply chains.

A third important pillar is Latin America, with the resumption of negotiations with Mercosur and the expected finalization of an agreement with Ecuador, as well as exploratory talks with South Africa.

5. Should we expect more sanctions?

Yes, but with less clear signals. Canada may further align its sanctions regime with those of its European and U.K. allies, while continuing to focus primarily on states accused of serious human rights violations, such as China, Iran, or Russia.

For businesses, the risk is no longer purely commercial. In 2025, the sanctions regime led to the first criminal prosecution and the arrest of a businessman for allegedly circumventing measures targeting Russia. To avoid being drawn into a criminal investigation or media firestorm, enhanced due diligence on clients, partners, and financial channels has become essential.

6. Is the shift toward stronger ESG standards really starting to slow?

Yes, it is clearly slowing. In fact, the push has largely stalled: in several industrialized economies, including Canada, values traditionally advanced in the areas of human rights and the environment are giving way to what many describe as an “economy of death,” driven by rising military spending and the weakening of environmental and social standards, at the expense of an “economy of life.”

This shift is showing up in concrete ways. In 2025, negotiations on a global plastics pollution treaty collapsed without an agreement and plans at the International Maritime Organization for a carbon levy on maritime freight of 100 to 380 USD per tonne were effectively put on ice under pressure from the United States. At the same time, Canada has walked back upcoming phases of the federal plastics registry and announced it will scrap the option for third parties to file greenwashing complaints, while in 2026 the United States is set to implement its decision to withdraw from, or cut funding to, 66 international organizations and committees, many of them focused on climate, energy, and environmental protection.

The European Union’s Carbon Border Adjustment Mechanism (CBAM) has been fully in force since 1 January 2026, and the United Kingdom’s similar mechanism is scheduled to follow next year. However, as previously anticipated by Affilia, the EU has narrowed the scope of CBAM and of other environmental obligations (including certain ESG requirements, impact assessments, and its deforestation regulation), while also proposing to reimburse carbon costs paid by some exporters shipping to countries without comparable regimes – steps that weaken its environmental ambitions and increase the risk that the scheme will be challenged at the WTO.

Like Canada, the EU is now taking a more accommodating approach on environmental matters, forcing companies to distinguish between ESG trends that remain structural and those that can quickly be rolled back as geopolitical and economic priorities shift.

7. Which new trade measures should we be watching for beyond the Canada–U.S. relationship?

Canadian businesses will need to closely monitor the implementation of an EU-Mercosur agreement, as Mercosur’s export profile is quite similar to Canada’s, which could affect Canadian competitiveness in those markets. The gradual abolition of de minimis thresholds on low‑value shipments to the EU – and potentially to the United Kingdom – will also increase costs and paperwork for exporters to Europe who rely on online sales and small parcels.

In parallel, a new European customs agency is being set up to harmonize how rules are applied across member states, preventing importers from routing goods through the most lenient EU countries. This centralization is likely to make controls more systematic and demanding for businesses trading with the EU.

In addition to the changes taking place in Europe, Canadian customs has launched a consultation on proposed amendments to the customs valuation rules, notably to clarify when a transaction truly qualifies as a “sale for export to Canada” and who can be treated as a “purchaser in Canada.” These changes could directly affect how importers structure their invoicing chains, set their import prices, and substantiate their transactions with proper documentation.

8. Will 2026 be a good year for the World Trade Organization (WTO)?

It is shaping up to be a mixed year. 2026 is unlikely to bring real stability to the WTO, but it is not expected to descend into outright chaos either: the organization remains under strain, caught between a handful of targeted advances and a mounting challenge to its founding principles.

On the positive side, the 14th Ministerial Conference planned in Cameroon, the anticipated accession of countries such as Uzbekistan and Ethiopia, and the entry into force of the Agreement on Fisheries Subsidies give the institution a measure of breathing room – provided a second agreement is concluded by 2030 to prevent the first from expiring. The dispute settlement system also remains very active, particularly thanks to the interim appeal mechanism (MPIA), now used by 57 participants including Canada, under which the EU recently prevailed in an intellectual property dispute against China.

On the negative side, the picture is equally stark. The United States has mounted a direct challenge to one of the WTO’s core principles – most‑favoured‑nation (MFN) treatment – by multiplying partner‑specific tariffs and arguing that such concessions were historically meant only for countries with similar political and economic orientations. Affilia expects this offensive to continue in 2026, making it unlikely that concessions already secured by Washington from certain partners will be extended more broadly; instead, the MFN principle is likely to emerge weakened, especially given the troubling signals coming from the EU and the United Kingdom.

For businesses, this means a less predictable multilateral landscape, in which regional and bilateral agreements – often shaped under intense geopolitical pressure – increasingly take precedence over the WTO’s common rules.

9. Will Canada be involved in disputes at the WTO or elsewhere?

Canada is already involved in several disputes, notably with China, and other countries, including Taiwan, are considering proceedings against it over protective measures on steel and aluminum. Even if most SMEs are not formal “parties” to these cases, their sectors and supply chains can still feel the indirect effects.

In parallel, the United States is increasingly seeking to obtain Canadian legislative changes and the removal of non-tariff barriers through negotiation (for example via CUSMA/USMCA) rather than through formal disputes. For an executive, the challenge is to anticipate these regulatory pressures and adapt to them before the new rules translate into margin losses or business disruptions.

10. Affilia’s Strategic Pirorities for Canadian Businesses in 2026

Map and document your supply chains, especially for steel, aluminum and the origin of product components, in order to secure USMCA preferences and limit surtaxes.

Adjust your online sales models in response to the gradual phasing out of “de minimis” thresholds on low‑value shipments to the EU.

Develop new commercial partnerships in countries with which Canada already has, has just concluded (Indonesia), or is negotiating agreements (notably India, ASEAN, Mercosur, Ecuador) in order to diversify your exports.

Treat China as a market to approach in a targeted and cautious way, taking into account the persistence of certain sanctions and U.S. pressure to limit its integration into North American supply chains.

Test different location scenarios (Canada, United States, Mexico, other partners) to anticipate the impact of a “Fortress America” dynamic on your costs and competitiveness.

Take part, directly or through your industry associations, in the many government consultations on Canada’s negotiation of trade agreements, U.S. trade policy and possible countermeasures.

Leverage the new Canadian public procurement rules by positioning your business to benefit from the “Buy Canada” program provisions and the lowered thresholds starting at 5 million dollars and above.

Maintain exemplary standards on compliance and sanctions by strengthening due diligence on your clients, partners and financial flows, so as to avoid falling under Canadian, U.S. or European sanctions regimes.

Take a step back from the constant flow of presidential statements to limit their anxiety‑inducing effect on your decisions, and keep grounding those decisions in a clear, long‑term strategy.

To discuss these developments and strategic directions in more detail, you can contact members of the Affilia team.