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The US government has formally cataloged its trade complaints against Canada as both countries barrel toward the first joint review of the USMCA, the trade agreement that replaced NAFTA. The review is set for July 1, 2026, and the stakes are about as high as trade negotiations get: the outcome will determine whether the pact extends for another 16 years or enters a far less stable arrangement of annual reviews.
What Washington wants to talk about
The Office of the US Trade Representative wrapped up public consultations in late 2025, collecting over 1,500 comments from stakeholders across industries. The USTR subsequently reported its concerns regarding Canada to Congress by early January 2026.
At the top of the complaint list sits Canada’s dairy supply management system. For those unfamiliar, Canada uses a quota-based system that tightly controls domestic milk production and effectively limits how much foreign dairy can enter the market. American dairy producers have long argued this amounts to a trade barrier dressed up as agricultural policy.
Then there’s Canada’s digital services tax, which applies levies to revenue earned by large tech companies operating in the country. Washington views this as disproportionately targeting American firms, a complaint the US has lodged against similar taxes in other countries as well.
Automotive rules of origin are another sore spot. The USMCA set specific thresholds for how much of a vehicle’s content must originate in North America to qualify for tariff-free treatment. Disagreements over how these rules are being applied, and whether they’re achieving their intended goal of keeping manufacturing on the continent, remain unresolved.
Rounding out the list are concerns about enforcement of labor and environmental provisions baked into the agreement.
Tariffs complicate everything
The US has already imposed tariffs as high as 50% on certain Canadian imports, including steel, aluminum, copper, and specific automobile categories. Washington has justified these measures under national security and border security rationales.
Canada and Mexico have both voiced support for extending the USMCA agreement, even as US tariff threats continue to loom. The alternative, a lapse into annual reviews or outright termination, would inject significant uncertainty into the roughly $1.6 trillion in annual trade that flows between the three countries.
The USMCA entered into force on July 1, 2020, replacing the 25-year-old NAFTA framework. Built into the agreement was a sunset clause requiring the parties to conduct a joint review at the six-year mark. If all three countries agree to extend, the deal gets another 16 years, pushing its expiration to 2036. If they don’t agree, the agreement doesn’t immediately collapse but instead enters a phase of annual reviews.
What this means for markets and trade-exposed sectors
The sectors most directly affected mirror the complaint list. US dairy exporters stand to benefit if Washington secures broader access to the Canadian market. American tech companies would welcome relief from Canada’s digital services tax. And automotive manufacturers on both sides of the border are watching the rules of origin debate with particular intensity, since even small changes to content requirements can reshape supply chain decisions worth billions.
The existing tariffs on steel, aluminum, and copper add another layer of complexity. Canada could view tariff relief as a prerequisite for making concessions elsewhere, while the US could use the tariffs as additional leverage.
Canada’s digital services tax and broader regulatory posture toward technology companies create ripple effects across the digital economy. Any amendments to the USMCA’s digital trade provisions could influence how cross-border data flows and digital commerce are governed across North America for years to come.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
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