By Dalena Reporters l January 1, 2026
OTTAWA / TORONTO — As Canada enters 2026, the country’s trade landscape stands at a pivotal crossroads, shaped by shifting global dynamics, renewed diplomatic initiatives and significant domestic policy changes that collectively define both challenges and opportunities for the Canadian economy. From tariff pressures with key partners to internal barriers coming down and ambitious diversification strategies, trade and commerce are at the forefront of policy debates in Ottawa and across the provinces.
1. Evolving U.S. Trade Dynamics and Tariff Pressures
One of the most consequential developments has been the ongoing recalibration of Canada’s trade relationship with the United States, historically by far its largest trading partner. Under the second Trump administration, higher tariffs — including a 25 per cent levy on many Canadian imports — have reshaped cross-border commerce and prompted retaliatory measures in Canada. Ottawa responded with its own tariff measures and support programs for businesses affected by U.S. actions, reflecting a deepening “trade war” that has continued into late 2025.
The Canada–United States–Mexico Agreement (CUSMA) remains a critical framework. Canada has relied on special exemptions under CUSMA throughout 2025 to largely shield its exports from the worst of U.S. levies, but experts warn that the 2026 scheduled review could put these carve-outs at risk, potentially exposing exports to broader tariffs and jobs to disruption if renegotiations falter.
2. Government Response: Support and Diversification
In response to external pressures, the Canadian government has rolled out significant programs to shield businesses and workers from trade disruptions. These include expanded Work-Sharing Program benefits, credit and financing facilities for exporters, and targeted support for farmers and agricultural sectors to cushion the impact of tariffs and help pivot toward new markets.
Diversification strategies are now central to Canada’s trade policy for 2026. Ottawa has initiated consultations toward new trade agreements with partners like India, the United Arab Emirates, Thailand and the Mercosur bloc — a move aimed at reducing dependence on the U.S. market and capturing growth in fast-growing regions.
3. Interprovincial and Internal Trade Reforms
Beyond external trade, domestic trade barriers have become a priority. The One Canadian Economy Act and related provincial measures like the Free Trade and Mobility within Canada Act are designed to streamline interprovincial commerce — eliminating redundant licensing requirements and harmonizing provincial standards to allow goods, services and professionals to move more freely within Canada. This effort responds to long-standing criticisms that internal trade restrictions suppress national productivity and economic growth.
These reforms aim to create a more unified national market, unlocking efficiencies and boosting competitiveness, even as external challenges demand resilience and adaptability.
4. Sector-Specific Pressures and Strategic Shifts
Major industries have felt acute effects from global trade shifts:
- Steel and heavy manufacturing have suffered from import surges and foreign subsidised competition, leading to calls from industry leaders for stronger safeguards or protectionist measures — though Ottawa has emphasised multilateral cooperation over isolation.
- The automotive sector continues to navigate a fragile North American supply chain amid tariff uncertainty and regulatory changes, particularly concerning electric vehicle policies and alignment with U.S. standards.
- Agricultural producers have faced reciprocal tariffs, including levies from China on canola and other key exports, highlighting the need for deeper engagement with non-U.S. markets.
5. What’s at Stake in 2026
Looking ahead, 2026 represents a critical year for Canada’s trade strategy:
- CUSMA review and renegotiation — The future of tariff exemptions and the broader North American trading framework will shape export prospects and influence domestic economic planning.
- Market diversification — Successful new agreements with emerging markets could reduce vulnerability to regional shocks and broaden opportunities for Canadian exporters.
- Internal competitiveness — Continued domestic reforms may unlock growth, strengthen labour mobility and deepen national economic cohesion.
In essence, Canada’s trade policy in 2026 seeks to balance short-term resilience with long-term strategic positioning — navigating geopolitical pressures while expanding partnerships and strengthening internal markets in an era of economic uncertainty and shifting global alliances.