Businesses brace for CUSMA negotiations, higher costs

Amid ongoing Canada-U.S. trade talks, 88 per cent of Canadian business leaders say that the greatest risk to their company would be to lose their current protections under the Canada-U.S.-Mexico Agreement (CUSMA), finds a new KPMG survey. A further 84 per cent expect to pay some amount of U.S. tariffs even if their goods qualify under a future continental trade agreement.

KPMG's annual federal budget survey of 501 Canadian business leaders reveals that more than nine in ten business leaders believe the greatest risk to Canada's economic future is a negative outcome in renegotiating the free trade agreement with the U.S. While securing a trade deal is seen as vital to Canada's economy, 82 per cent believe that U.S. tariffs, that essentially require all countries - including Canada - to pay for access to the U.S. market, are here to stay.

"Although exemptions for CUSMA-compliant goods are providing an escape hatch from many U.S. tariffs, the framework and rules may change under a new trade deal in the future," says Joy Nott, Partner, Trade and Customs. "Historically, a North American free trade zone has allowed all three countries to act against global supply chain threats and work together in a highly competitive world trading environment. However, we could see a situation in which a bilateral agreement with the U.S. replaces CUSMA in 2026 and alters the playing field."

Given evolving trade dynamics, four in five business leaders say they would support a bilateral agreement with the U.S. only. Ms. Nott points out that while a trilateral agreement is preferred, a Canada-U.S. agreement would still be an acceptable outcome of negotiations for a majority of business leaders. Furthermore, if a bilateral agreement is reached, Canada will still have a free trade agreement with Mexico under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, although under different terms.

• 93 per cent agree that unpredictable U.S. policies and the cost of accessing the U.S. market is among the most pressing issues facing the economy
• 80 per cent say Canada's retaliatory tariffs against the U.S. wound up hurting their business
• 82 per cent agree that the loss of the $800 duty-free exemption on shipments to the U.S. (the de minimis exemption) hurts their profits
• 80 per cent would support a bilateral agreement with the U.S. only, rather than the trilateral Canada-U.S.-Mexico agreement
• 75 per cent say that given all the uncertainty, they are pausing new investments
• 73 per cent can't afford the added costs of exploring new markets (e.g., legal, regulatory, jurisdictional knowledge, travel, transportation, suppliers etc.)

While 88 per cent agree that U.S. tariffs are having an effect, the impact has been more moderate than expected. Nonetheless, a majority of respondents report that U.S. tariffs have made their businesses less competitive. Some business leaders also indicate that the cost of accessing new overseas markets is prohibitive, while others say the loss of the U.S. $800 duty-free exemption is hurting sales and taking a bite out of their profits.

"The full effect of U.S. tariffs is only beginning to make its way through the economy now. In the initial phase, affected businesses chose to absorb the tariffs, whereas going forward we are expecting to see more businesses pass on the tariff costs through to end consumers," says Lachlan Wolfers, National Leader, KPMG Law.

Most Canadian businesses have taken short-term measures to mitigate trade disruption and uncertainty, including moving product into the U.S. in advance of new tariff measures and the use of 'foreign trade zones', adds Mr. Wolfers. "Although about half of survey respondents have been exploring new markets overseas, many businesses are yet to take longer-term measures such as establishing new trade corridors or shifting production activities to the U.S."

KPMG Canada surveyed 501 Canadian companies between Sept. 11 to Oct. 2, 2025, to gauge the views and priorities of business leaders ahead of the November 4th federal budget. All respondents are business owners or executive-level decision makers and are from all industry sectors. Thirty-five per cent lead companies with $500 million to $1 billion in annual gross revenue; 31 per cent, over $1 billion; 20 per cent, between $300 million to $499 million; 9 per cent, between $100 million and $299 million; and the remaining 5 per cent, between $10 million to $99 million. Fifty-seven per cent of the companies are privately held, 30 per cent are owned by private equity, 11 per cent are publicly traded, and 2 per cent are foreign-owned subsidiaries. The survey used Sago's Methodify online research platform.