What was NAFTA, and what is CUSMA?

NAFTA, the North American Free Trade Agreement, was the trade pact among Canada, the United States and Mexico that took effect on Jan. 1, 1994, and it was replaced on July 1, 2020, by the Canada-United States-Mexico Agreement, or CUSMA, which is still in force in November 2026 after the three countries did not agree to extend it at its first scheduled review.

NAFTA grew out of the Canada-U.S. Free Trade Agreement, which took effect in 1989, and extended free trade to Mexico. Over a transition period that lasted until 2008, it removed most tariffs on goods traded among the three countries, as long as the goods met rules of origin showing they were mostly made in North America. It also set up panels to settle disputes over anti-dumping and countervailing duties, protected foreign investors through a process that let companies sue governments, and was accompanied by side agreements on labour and the environment.

The agreement reshaped supply chains, particularly in the auto industry, where parts could cross borders several times before a vehicle was finished. It also drew criticism in all three countries, from concerns about lost manufacturing jobs in the United States to disputes over Canadian softwood lumber that NAFTA panels never fully resolved.

In 2017, the United States demanded a renegotiation. After more than a year of talks, the three countries reached a deal in the fall of 2018, signed it on Nov. 30, 2018, and amended it in December 2019. It took effect on July 1, 2020. Canada calls it CUSMA, the United States calls it the USMCA and Mexico calls it the T-MEC.

Much of NAFTA carried over, including tariff-free trade for qualifying goods, but there were significant changes. Cars and light trucks must contain a higher share of North American content to qualify for duty-free treatment, and part of each vehicle must be made by workers earning at least US$16 an hour. Canada gave U.S. dairy producers more access to its market while keeping its supply management system. The process that let investors sue governments was phased out between Canada and the United States. Canada kept the panel system for anti-dumping and countervailing duty disputes and its exemption for cultural industries. The full text is published by Global Affairs Canada.

CUSMA also added something NAFTA lacked: a fixed term with a built-in review. Under Article 34.7, the agreement lasts 16 years unless renewed. On its sixth anniversary, the three countries’ Free Trade Commission must hold a joint review, and each government confirms in writing whether it wants a new 16-year term. If any country does not confirm, the commission must meet for a joint review every year for the rest of the term, and the countries can still agree to extend it at any point before it expires.

That first review took place on July 1, 2026. Dominic LeBlanc, the federal minister responsible for Canada-U.S. trade, met U.S. Trade Representative Jamieson Greer and Mexico’s Secretary of Economy Marcelo Ebrard. The agreement was not renewed at the meeting. In his statement afterward, LeBlanc said Canada reaffirmed its support for CUSMA and its renewal, that the agreement remains in force until 2036 and can be renewed at any time, and that Canada is in substantive discussions with the United States on sectoral tariffs affecting Canadian steel, aluminum, autos and lumber. He said the three countries agreed to keep talking. Under the agreement’s text, the absence of a renewal means annual joint reviews for the rest of the term.

For Canadian businesses, goods that meet CUSMA’s rules of origin still cross into the United States and Mexico under the agreement’s preferential terms. Those terms do not prevent the U.S. sector-specific tariffs on products such as steel, aluminum, autos and lumber, which have been applied separately. Our explainer on which tariffs are in effect now tracks those measures.

The stakes for Canada remain large. Canadian merchandise exports to the United States totalled $564.6 billion in 2025, down 5.3 per cent from 2024, according to Global Affairs Canada’s chief economist. The U.S. share of Canada’s merchandise exports fell to 72.5 per cent in 2025 from 76.3 per cent a year earlier, as exports to other markets grew.

Businesses that depend on cross-border trade should check how the rules of origin and current tariffs apply to their own products with a qualified customs broker or trade lawyer.

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File photo: The Ambassador Bridge, which links Windsor, Ont., and Detroit. Photo by Andrea_44, Wikimedia Commons, CC BY 2.0.