Canada Exports to U.S. Protected by CUSMA Exemption, Experts Say

Canadian exports can avoid Trump tariffs if they comply with the Canada-U.S.-Mexico Agreement (CUSMA). The majority of Canadian exports can qualify for this exemption, which has led to companies rushing to do paperwork to get their products deemed compliant. CUSMA-compliant goods are exempt from Trump's latest tariff threat on Canada. This exemption gives Canada a huge comparative advantage over the rest of the world, which faces broad-based tariffs on nearly all exports to the U.S.

Canadian exporters across a wide range of industries have found a way to escape U.S. President Donald Trump’s blanket tariffs. The escape hatch is compliance with the Canada-U.S.-Mexico Agreement (CUSMA), a three-way free trade deal signed by Trump in 2018. U.S. and Canadian officials have confirmed that across-the-board tariffs Trump is threatening to impose on August 1 will not apply to goods that comply with the terms of CUSMA.

Trade policy experts estimate that the vast majority of Canadian exports can qualify for this exemption, leading to a surge of companies rushing to complete the necessary paperwork to get their products deemed compliant. This exemption, originally characterized as a one-month pause, remains in effect.

CUSMA-compliant goods are exempt from Trump's latest tariff threat on Canada. According to an analysis by RBC Economics, around 86% of the value of Canada's exports to the U.S. have the potential to qualify for this exemption and cross the border tariff-free [1].

The CUSMA exemption provides Canadian exporters with a significant advantage. Wolfgang Alschner, the Hyman Soloway Chair in Business and Trade Law at the University of Ottawa, describes this as "a huge deal." While not perfect and not beneficial for all sectors, it is considered the best deal for any country currently facing U.S. tariffs [1].

Which Canadian exports are tariff-exempt through CUSMA? The majority of products have the potential to qualify for the exemption. However, products that contain predominantly non-North American content and are merely shipped to the U.S. from Canada do not qualify. Additionally, products facing Trump's sector-specific tariffs, such as the 50% tariff on steel and aluminum and the 25% tariff on non-U.S. content of automobile imports, are also not exempt [1].

To be considered CUSMA-compliant, a product must meet specific rules of origin. Generally, 60 to 75% of a good must come from within North America to be tariff-free. Proving compliance involves obtaining a certificate of origin, which can be time-consuming and complex, particularly for products involving international content [1].

The CUSMA exemption plays a crucial role in ongoing trade talks. All indications from the Trump White House suggest that some level of tariffs are inevitable on at least some Canadian exports. Maximizing the proportion of Canadian exports that avoid tariffs is a key mission for Canada's trade negotiators. The CUSMA exemption provides a path to achieve this, and the three-way trade deal is scheduled for renegotiation in July 2026 [1].

While the exemption offers a significant advantage, it is not without risk. If Trump were to revoke the exemption, it could create a severe impact on Canadian exports. Laura Dawson, executive director of the Future Borders Coalition, underscores the importance of businesses proving compliance to continue doing business with the U.S. [1].

References:
[1] https://www.cbc.ca/news/canada/tariffs-trump-cusma-compliance-explained-1.7590517
[2] https://ca.news.yahoo.com/many-canadian-exports-avoid-trump-100000633.html