2026 Global Trade Outlook
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Breakdown
U.S. Tariff Policy: The Fate of IEEPA
01.
Canada's Trade Diversification (for real this time)
02.
A New Customs Regime in Mexico
03.
UK Low-Value Imports Evidently Not "for the the BIRDS"
04.
Under Review: North American Free Trade
05.
Steely Resolve: EU-US Trade Relations
06.
Transpacific Trade: Why scenario planning is so critical
07.
2023 recap
Early on in the year, importers, exporters, policymakers and pundits alike will be watching closely the U.S. Supreme Court’s decision on the U.S. administration’s IEEPA tariffs (those implemented under the International Economic Emergencies Powers Act). Most know these tariffs as “reciprocal” tariffs that are imposed on countries rather than products, and the fentanyl “trafficking” tariffs on China, Canada, and Mexico. The Supreme Court’s decision will have long-term and widespread implications on U.S. trade policy. A ruling in favor of the administration will ultimately allow the current state of volatility in trade policy to continue, while a ruling against the administration will hamper the administration’s trade negotiating power with other countries. It would also do away with some of the most punitive trade measures and potentially allow U.S. importers to recover some of the duties they have already paid (although that remains to be seen). To be sure, the administration is likely to continue to use other mechanisms at its disposal to impose tariffs on specific products (as it has already done with steel, aluminum, copper, pharmaceuticals, auto parts and others). The difference will be a slower and more predictable implementation period, allowing importers much needed time to strategize on how to navigate the change.
The outcome of the tariffs has been that trade management has been elevated beyond operational considerations to the core of business strategy. In a recent survey of CEOs, nine out of 10 said tariffs will affect their business performance. Irrespective of the SCOTUS decision, businesses will be placing far greater scrutiny on the countries from which they source materials, but also on data-hygiene practices and trade automation. These will be the keys to prevent overpayment of duties and securing duty drawback when it’s available. With 68% of CEOs saying their organizations will increase prices as needed in response to tariffs, reduction in landed costs will become of paramount importance in business competitiveness.
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Jill Hurley
Senior Director, Global Trade Consulting, United States
2026 GLOBAL TRADE OUTLOOK
Canada’s Trade Diversification (for real this time)
Canada’s policymakers have long spoken of the importance of trade diversification, particularly during periods of U.S. protectionism, but few Canadian businesses have reduced their dependence on the U.S. market. This time is different. Exports overall fell precipitously over the first half of 2025—from $73 billion in January to $61 billion by August. Almost one-quarter (23.4%) of Canadian businesses are reporting slight increases in costs from U.S. suppliers and 19.5% are reporting a significant increase in costs. Given that three-quarters of exports go to the U.S., that paints a pretty clear picture. Meanwhile, exports to other nations, such as the United Kingdom and European Union have seen notable increases, this is particularly true for tariff-impacted products like Canadian steel. To this end, the federal government has been feverishly engaging with other nations to open up other international markets to Canadian exporters. Prime Minister Mark Carney has made more trips abroad since his election in March than his predecessor had in any given year of his three terms. His recent trip to the Group of 20 summit in South Africa produced the possibility of ongoing discussions with India on a bilateral trade deal. In short, both policymakers and commercial entities are now looking farther afield in their international commerce than ever before.
2026 will prove to be as volatile as 2025 for Canadian businesses. The legal fate of the U.S. administration’s tariff remains unknown, but key industries, such as automotive, aluminum and steel will continue to be impacted irrespective of the outcome of the legal challenge as they are imposed under a different legal statute. In addition, the USMCA, which governs trade across the continent will be put under review and the possibility remains that its terms could be radically altered, or that the agreement could be dissolved altogether by the U.S. in favor of bilateral trade deals. The latter scenario would have monumental implications to businesses in Canada with trade partners in the U.S. as the regulatory regime would be vastly altered, requiring new processes, policies and supply chain partners. Canadian businesses have already been investing in USMCA compliance in 2025 with USMCA-certified Canadian exports to the U.S. jumping from 33.3% in February to 84.6% in August. But in addition to that, Canadian businesses would be wise to focus on customs fundamentals (i.e., practices that were relegated obsolete by free trade) in order to ensure they’re set up for success come what may. All this to say that if businesses are to be agile in today’s environment, they’ll need to embrace an entirely new form of R&D (Resilience and Diversification).
Michael Zobin
Senior Director, Global Trade Consulting, Canada
Effective December 9, 2025, Mexico is employing a new, far more rigorous and arguably more invasive customs regime than anything the country has seen previously. The Manifestación de Valor, which will be the most notable change in Mexico’s trade regime in 2026, does away entirely with paper-based customs filings, opting for a digital-only approach to clearance. That may sound easier, but it comes with heavier administrative burden in the form of accompanying documentation, such as commercial invoices, bills of material, price lists, royalties, and much more. The new regime also comes with greater scrutiny, leading to audits. It's all part of the Mexican government’s move to address tax evasion and corruption and, in turn, improve revenue streams. It’s also designed to advance transparency and modernize processes, and to prop up domestic industries by creating what the government has identified as fairer market conditions for local producers. The changes will have profound implications for many businesses operating in Mexico, but particularly those who have integrated North American supply chains for which Mexico is a key component. It will require retooling of compliance systems and improved data hygiene to ensure all data elements are properly documented and accurately shared with customs authorities.
“Attention to detail will be of paramount importance in 2026 as importers and exporters in Mexico cope with the magnitude of change. Businesses engaged in trade should already be re-evaluating their existing processes to ensure they can produce accurate documentation, and particularly the new digital E2 form, which is directly connected to the primary customs declaration form (pedimento), and which must contain accurate product valuation, or risk significant fines from the government. This is not a nice-to-do but a mandatory requirement that could result in goods being held at the border for non-compliance, or even loss of import/export license—a major risk for high-volume traders who rely on Mexico as a manufacturing base. Inability to consistently produce accurate data regarding valuation, product origin and materials/components will not only create future administrative burden in the form of audits, it could bring production cycles to a grinding halt.
Judith Álvarez
Director, Global Trade Consulting Mexico and Latin America
UK low-value imports evidently not “for the BIRDS”
Not to be outdone by their friends across The Pond, British policymakers have identified a new revenue stream for His Majesty’s Revenue Service (HMRC) in the form of low-value imports. Earlier this year, Washington’s decision to fast-track the elimination of tariff exemption on low-value or de minimis goods created a shock to the e-commerce cost model and proposed legislation from the British government is set to do just the same. HMRC put forward the Consultation on Nov. 26, 2025, which will do away with tariff exemptions on imports valued at less than £135, subjecting them to standard ad valorem taxes. The obvious impact is the cost increase, but there are hidden risks and burdens tucked away into the legislation that will make things tricky for those impacted. The first is that no date has been set for implementation; only that the change should come into effect no later than 2029. That means it could be in 2026, or not. It could be in 2027, or not. But more importantly, unless the consultation (which ends on March 6, 2026) identifies a new simple yet compliant mechanism for handling low value imports, the removal of the tariff exemption means businesses will be required to submit formal customs declarations. This new administrative burden will create an added layer of complexity to trade as low-value imports (LVI) join the ranks of their higher-priced cousins in the customs regime established in the wake of Brexit. It’s also possible HMRC will cover the cost of facilitating all these new formal customs entries with a new handling fee (though this remains somewhat tentative). The good news, however, is that UK businesses that have long complained of being disadvantaged by foreign e-commerce giants will soon have a levelled playing field, albeit not soon enough for them if comparable legislation in the EU takes hold earlier than the currently proposed date of July 1, 2028.
“The removal of the LVI exemption will have a far greater impact on British businesses than many realize. Research we conducted shows £3.807 billion in low-value goods entered the UK via the simplified Bulk Import Reduced Data Set (BIRDS) procedure in the 2023-24 financial year alone. Based on the £135 value threshold, this £3.8 billion value equates to a minimum of 28.2 million individual parcels. If not implemented with care, the removal of the low-value exemption has the potential to overwhelm the customs clearance system due to the volume of declarations, leading to massive delays, and impacting the just-in-time systems on which e-commerce supply chains rely so heavily.”
Gavin Everson
Director, UK Brokerage
The United States–Canada–Mexico Agreement (USMCA), the continent’s governing free-trade framework, is approaching its first trilateral review. Under the terms of the deal—signed in late 2019 and implemented July 1, 2020—the three parties must conduct a formal review six years after implementation. This process allows each country to flag concerns, propose amendments, and seek resolutions. It also carries risk: the agreement could be terminated altogether, a possibility that exists at any time through the deal’s sunset clause. A major point of contention will be the series of tariff actions taken throughout 2025, when Washington imposed 25% duties on Canadian and Mexican imports before later exempting USMCA-qualifying goods. Additional product-specific tariffs—particularly on steel, aluminum, automobiles, auto parts, and goods containing those materials—further complicated continental trade. The concern now is that the U.S. administration may resist rolling back these measures and could even prefer dissolving the agreement in favor of separate bilateral deals. Such an outcome, while unlikely, could result in entirely different customs regimes at the U.S. northern and southern borders. After a year marked by volatility, many business leaders are entering 2026 with the mindset that “anything is possible.”
From our client conversations, it’s clear that uncertainty is a far bigger challenge than the tariffs themselves. Tariff costs, while significant, can be managed—through supplier negotiations, consumer price adjustments, or margin reductions. Uncertainty, however, puts businesses in a holding pattern. As with the NAFTA renegotiation period, many companies are likely to delay major production or supply-chain investments until the review’s outcome becomes clearer. In the meantime, we advise continued investment in trade-automation tools that strengthen compliance and enhance data governance. With such systems in place, companies are far better positioned to adapt quickly to whatever direction the review may take.
Candace Sider
Senior Vice President, Regulatory Affairs, North America
Steely Resolve: EU-US trade relations
There were high hopes for calm waters in transatlantic trade going into 2026. In July, the U.S. and EU announced their impasse over tariffs had come to an end with Brussels agreeing to a lowered general tariff rate of 15%. But the ink on that framework trade deal had barely dried when Washington imposed new steel tariffs of 50% tariff rate on a list of more than 400 products. In October, the EU responded in kind (albeit with a shorter list of affected products). Now Washington is subtly suggesting it wants the EU to overhaul its laws over digital products—a long running dispute between the two entities—as part of its negotiation over those steel tariffs. The row over the EU’s Digital Markets Act (DMA) and Digital Services Act (DSA) harkens back to the Trump administration’s first term when the U.S. administration argued the legislation unfairly targeted U.S. tech companies and put them at a disadvantage in the European market. That view is the same today and is compounded by the DSA’s requirement that tech companies combat disinformation, which is in conflict with U.S. First Amendment rights. Brussels, of course, disputes the claims noting that its laws apply equally to all firms, irrespective of origin, and that its laws are designed simply to create a levelled playing field and protect its citizens from online harm. At time of writing, the suggestion that the EU should revisit the DSA and DMA is only being put forward as an informal suggestion, but given the volatility of recent months, there’s no telling where things may lie as the parties resume steel-tariff talks into the new year.
David Merritt
EU importers of American consumer goods should be prepared for disruption to their supply chain and/or landed costs. Those landed costs aren’t just being affected by the payment of duties, but also greater vigilance in how goods are classified as the EU’s customs agencies will be increasing their scrutiny of U.S. imports. Improper classification can lead to significant fines and penalties, not to mention reputation damage.
Director, Global Trade Consulting Europe and Asia
It’s difficult to believe, but the volume of trade action out of Washington in 2025 actually overshadowed the ongoing tug-o-war between Washington and Beijing on trade. U.S. President Donald Trump and Chinese leader Xi Xinping have been engaged in a hot and cold diplomacy since 2018 with the Biden administration serving to create a string of low-action continuity in between. After months of heated exchanges between the two leaders and their respective governments, they finally reached a truce in late October with China agreeing to stem the tide of fentanyl into the U.S., discontinue its export controls on rare earths essential for tech manufacturing, and do away with tariffs on key U.S. agri exports while also agreeing to buy more products from U.S. farmers. In return, the U.S. agreed to lower (but no eliminate) its tariff rate on imports from China. The two nations are entering 2026 on a high note despite remaining issues between them on the trade front and Washington’s limited band on private investment in China’s tech sector. China’s state-owned enterprises have responded by limiting their investment in the U.S. private sector. Many U.S. companies have continued to rely on China and have been able to limit the trade war’s impact on their inventory by frontloading imports to beat tariff implementation deadlines. Whether or not that trend continues during the current lull in hostility remains to be seen.
“We’ve been here before. Smiles and handshakes and trade truces. But for importers of goods from China, the big questions are how long it will last? What if the U.S. administration can no longer use IEEPA tariffs to force China’s hand? How will China change its negotiating strategy and how will businesses in both countries be directly and inadvertently impacted? Importers and exporters should be engaged in scenario planning to determine the strategies they can employ. There are old favorites like China-plus-one, but tariff engineering could become an emerging strategy, particularly if the IEEPA tariffs are no longer an option for Washington and the administration is forced to target individual products. In that latter scenario, applications for exceptions and request for duty drawback will also be critical. For now, we wait.”
Steven Guo
Senior Manager, Asia Operations
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