Tariffs tend to show up without much warning, and when they do, they land straight on balance sheets. Canada has dealt with that pattern before. With another pressure point coming in 2026, trade planners in Ottawa and boardrooms in Toronto and Vancouver are starting to think several steps ahead.
The trigger sits inside the United States-Mexico-Canada Agreement. A mandatory review arrives next year, and for a country that sends most of its exports south, even the hint of instability forces a rethink.
What Makes This Year So Sensitive
USMCA requires the three countries to review the agreement six years after it took effect. The process already moved out of the background. In late 2025, the Office of the United States Trade Representative opened the door to public comments, laying out the structure and timing of the review in a formal announcement.
That step showed up in the regulatory record as well, where the hearing schedule and review scope were spelled out in a Federal Register notice. Lawyers and trade analysts point back to Article 34 of the agreement, which explains how a lack of consensus can push the deal into rolling annual reviews, a mechanism outlined directly in the USMCA text.
Research groups have warned that the review can turn political very fast. A breakdown of the process by the Center for Strategic and International Studies described the review as a moment when leverage matters more than paperwork, according to that CSIS analysis.
How Deep The Dependence Runs
Any talk of diversification starts with a hard fact. The United States remains the main destination for Canadian exports by a wide margin. In its 2024 trade summary, Statistics Canada put the US share of total exports at 75.9 percent, alongside record levels of bilateral goods trade.
A separate annual review from the federal chief economist team reinforced the picture, noting how tightly supply chains remain linked and how difficult a fast pivot can be, as outlined in the Global Affairs Canada report.
Numbers like that explain why tariff threats feel immediate. Even small policy changes can ripple through auto plants, farms, and energy producers within weeks.
A Shift Starts To Appear In The Data
Late 2025 offered a glimpse of how trade flows can change under pressure. Exports to the United States slipped while shipments to other markets jumped sharply. Coverage based on national statistics showed the US share falling to 67.3 percent, the lowest non-pandemic level since the late 1990s, as Reuters reported.
One month does not reset decades of integration. Still, the shift mattered because it showed how quickly companies can move when margins tighten and uncertainty grows.
View this post on Instagram
Where Canada Is Looking For Options
Part of the response focuses inside Canada. Ottawa has been working with provinces to reduce internal trade barriers and improve labor mobility. A recent federal update described mutual recognition efforts and changes aimed at smoothing logistics and licensing, detailed in that government release.
Internal reform rarely sounds dramatic, yet it can make the difference between a quick adjustment and a painful scramble when export routes get blocked.
Using Existing Trade Deals More Seriously
Canada already has access to large markets beyond North America. One example remains the Canada-European Union Comprehensive Economic and Trade Agreement. The agreement continues to apply provisionally, even as full ratification moves through remaining EU member states, a status summarized by the European Commission. Parliamentary analysis has tracked how exporters use the agreement despite the unfinished ratification process, according to a HillNotes briefing.
Another channel runs through the Comprehensive and Progressive Agreement for Trans Pacific Partnership. Canadian trade officials describe the pact as a practical route into Indo-Pacific markets, a view set out in an official CPTPP overview.
New Deals And Risky Conversations
Canada has also been adding new agreements to the mix. A comprehensive economic partnership with Indonesia aims to expand duty-free access for most exports, part of a broader Southeast Asia push, according to Reuters coverage.
China remains the most complicated option. Diplomatic outreach tied to trade diversification has drawn attention, with reporting from The Associated Press and The Guardian highlighting both opportunity and tension.
Trade data tells a mixed story, and a recent decline in Chinese imports from Canada underscored how fragile that channel can be, as Reuters noted.
What Diversification Looks Like On The Ground
Few exporters talk about leaving the US market behind. More often, the shift shows up in smaller moves. New distributors in Europe. Packaging aligned with EU rules. Shipping routes that run through Atlantic ports. Contracts written with tariff clauses that once felt unnecessary.
Government policy follows a similar logic. Internal trade changes lower friction at home. Existing agreements get used more aggressively. New deals act as backup plans rather than silver bullets.
What Comes Next
The next year will offer clearer signals. Public submissions tied to the USMCA review, monthly trade data, and progress on internal trade reforms will show whether diversification gains stay the power or remain a defensive posture.
Canada’s geography and supply chains keep the United States at the center of trade. Tariff risk and political uncertainty push in the opposite direction. The balance between those forces will shape trade policy long before negotiators sit down in 2026.
