The rules of cross-border trade have changed dramatically, and Canadian food and beverage manufacturers are facing the most volatile trade environment in nearly a century.
Tariffs are being used in the United States to protect domestic industries from unfair trade, reduce trade deficits, generate revenue, to address emergencies, to maintain national security objectives, and as leverage for trade negotiations. The impact of tariff walls, retaliatory measures, and protectionism is especially pronounced for businesses in the Canadian agriculture and agri-food industry. For many Canadian food companies, the assumption of open access to the U.S. market is over, and a quick return to low U.S. tariffs seems increasingly unlikely.
The stakes are too high for a wait-and-see approach. Here’s what Canadian food and beverage manufacturers and the agri-food industry needs to know about the current pressures, regulatory challenges and strategic opportunities.
The new reality: America First Trade Policy
The volatility stems largely from the “America First Trade Policy,” signed on Jan. 20, 2025, which aims to reshape the trade environment to prioritize U.S. national interests. This transformation has resulted in a series of executive orders increasing tariffs on imported goods.
Under the International Emergency Economic Powers Act, U.S. President Donald Trump has raised tariffs on Canadian products to 35 per cent, effective Aug. 1, 2025. While the legality of these actions is currently being challenged, the pressure is immediate.
Manufacturers should also be aware of specific sectoral tariffs. Canadian manufacturers of agricultural equipment, such as combines, tractors, and grain handling equipment, have already seen an export market slowdown. This is due to U.S. sectoral tariffs of 50 per cent on aluminum and steel articles, including “derivative articles” (products created from these metals), implemented in August 2025 under section 232 of the Trade Expansion Act of 1962. Firms using these derivatives in their facilities or production lines are scrambling to track their origins. Minimizing duties requires identifying the precise content of steel and aluminum derivatives, a process that can be extraordinarily difficult for the uninitiated.
The Canada-US-Mexico Agreement (CUSMA) remains pivotal, but it is firmly in the crosshairs of U.S. policy. For Canadian manufacturers exporting south of the border, the “CUSMA Shield” is essential. Products of Canada that qualify as originating under CUSMA are eligible for duty-free entry into the US. Manufacturers must step up efforts to certify their goods as CUSMA originating, and importers must have this certification at the time of importation to claim preferential tariff treatment.
Canada, the U.S., and Mexico have been negotiating essential CUSMA elements throughout 2025. The first joint review is scheduled to begin in 2026, marking a truly pivotal time for the agreement. It is likely the U.S. administration will demand revisions and amendments to CUSMA to serve U.S. interests. Furthermore, under Article 34, the agreement includes a review and sunset clause; if the countries do not confirm its continuation, CUSMA will end in 2036, creating opportunities for U.S. officials to demand revisions through subsequent annual reviews.
Canada’s supply management system – which operates through production controls, pricing mechanisms, and tariff rate quotas (TRQs) to stabilize prices and production in the dairy, chicken, and egg sectors – has long been considered a trade irritant by the U.S. government. Although the system survived the first CUSMA negotiations, it is a likely target for the 2026 talks. The U.S. administration will likely seek greater market access to Canadian dairy, poultry, and egg sectors, putting pressure on manufacturers in these supply-managed industries.
Domestic trade decisions have also led to significant international retaliation. Following Canada’s decision to align with the U.S. by imposing a 100 per cent tariff duty on Chinese electronic vehicles (EVs), China retaliated by imposing a 75.8 per cent tariff on Canadian canola. Canola is a massive contributor to the Canadian economy, supporting 200,000 jobs and generating $4.9 billion in exports to China in 2024. The possibility of easing or lifting the Canadian EV tariff is now being examined by the government as a primary goal is to re-open this vital canola market for Canadian producers.
Mitigating trade headwinds
Faced with these risks, Canadian food and beverage firms must map out vulnerabilities in their business models, supply chains, and trading relationships, and identify mitigation options. Firms importing equipment or derivatives subject to aluminum and steel tariffs can benefit from proactive “planning and tariff engineering” to design the most tariff-efficient supply chains. Consulting with law firms, customs brokers, and consultants is advisable to minimize U.S. duties. Using business tools like a “gap analysis” can help firms identify the current state, desired future state, and the necessary steps to bridge the gap.
Canada has deployed financial support, including the $5 billion capacity under the Trade Impact Program for financing and insurance solutions. Canada’s Regional Tariff Response Initiative provides $1 billion over three years to support small and medium-sized enterprises impacted by tariffs, helping them to adapt to tariff disruptions and contribute to economic resilience. Part of this funding is earmarked for exporters who require advice and support to use the CUSMA Shield and to deal with other trade compliance issues.
To bolster economic growth and market access within Canada, Federal, Provincial, and Territorial governments are focusing on harmonizing and aligning regulations that historically created interprovincial trade barriers including transportation, inspections and licensing.
The global pivot
Since open access to the U.S. market is not guaranteed, export diversification is a crucial long-term strategy. Canada has entered into 15 free trade agreements with 51 countries across the world, encompassing more than 1.5 billion consumers. These free trade agreements provide Canadian exporters with enhanced access to foreign markets and opportunities for duty-free treatment.
One such example is the Comprehensive and Progressive Transpacific Partnership (CPTPP) which provides market access for Canadian exporters into the Indo-Pacific Region. The CPTPP region includes Canada and eleven other countries: Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United Kingdom and Vietnam.
As a high-growth market, comprising more than 40 countries, four billion people and $47.19 trillion in economic activity, the Indo-Pacific Region has been identified as a key area of opportunity for the agri-food industry. This environment of rapid population growth, rising incomes, and changing eating habits is creating specific opportunities for Canadian exporters to grow revenue from sales of exported processed products. Furthermore, it is estimated that by 2030 the Indo-Pacific Region will account for two-thirds of the global middle class and that by 2040 it will account for 50 per cent of global GDP and 40 per cent of global consumption. Much of the current volume of Canadian agriculture and agri-food exports to the Indo-Pacific Region is in the agricultural commodities sector.
Canadian agri-food products already hold a strong international reputation for quality, food safety, and reliability. To capitalize on this, Canadian companies may consider selling to distributors in a foreign market, which can be useful when seeking an international partner who understands the nuances of the local market. Top of FormSupported by initiatives like targeted Brand Canada Campaigns, digital marketing, and the newly established Canada’s Indo-Pacific Agriculture and Agri-Food Office in Manila, Canadian food and beverage manufacturers have the opportunity – and the necessity – to expand their reach far beyond North America.
The bottom line
For Canadian food and beverage manufacturers, the stakes are enormous. This is not a wait-and-see moment. The companies that move quickly to adapt – securing CUSMA certifications, accessing federal support, engineering tariff-efficient supply chains, and diversifying into growth markets – will gain a significant competitive advantage.
The era of guaranteed U.S. market access is over. The question is: how fast can your business adapt to what comes next?
Daniel L. Kiselbach is a managing partner at Miller Thomson LLP in Vancouver. Dan leads the firm’s global trade and customs group nationally. He is licensed to practice law in the U.S. and Canada, and is a licensed Canadian customs broker. Jaya Scott is an articling student at Miller Thomson LLP in Vancouver.