Non-energy exporters struggle to meet trade rules while oil shipments enter US nearly tariff-free
Nearly all Canadian oil exports to the US entered duty-free in June 2025, pushing overall USMCA compliance to 92 percent, according to US Census Bureau data.
Reuters reported that outside of oil and gas, Canadian exporters remain far behind—only 45 percent of non-energy sectors met free trade requirements, up slightly from 42 percent in June 2024.
The disparity is notable: oil and gas exports reached 84 percent compliance in June 2025, a sharp increase from 25 percent a year earlier.
Including all forms of exemptions, 99 percent of Canadian oil exports now enter the US without tariffs.
By contrast, other sectors—including live animals, meat, vegetables, cereals, chemicals, and furniture—struggle to meet the agreement’s content and transformation requirements.
While overall compliance with USMCA jumped 20 percentage points in April to 56 percent, progress has plateaued. From April through June 2025, the average compliance rate held steady at 56 percent.
This shift followed a major trade policy move by US President Donald Trump, who imposed a 25 percent tariff on non-compliant Canadian goods in January 2025, later increasing it to 35 percent.
Reuters said that exemptions apply only to firms meeting the trade agreement’s origin rules.
Toronto-based StarField Optics illustrates the financial strain on smaller Canadian exporters.
Owner Steve Mallia said his business faced a collapse in US-bound orders after the initial tariff was introduced in January. “As soon as the tariff started to really take place, that disappeared,” he said.
Mallia had to halt sales for six months while overhauling his supply chain and production process to meet USMCA standards.
He estimated the US previously accounted for around 60 percent of sales.
Despite the added costs of compliance—setting up new facilities and shifting to regional suppliers—he believes it was necessary to maintain access.
“At the end of the day, they're the biggest economy in the world, and they're right there,” Mallia said. “You are foolish not to look at that.”
To qualify under USMCA, companies must prove that products are either made in or substantially altered within Canada, Mexico, or the US.
Clifford Sosnow, partner at Fasken, noted that not all firms are positioned to comply. “Some companies are just not able to do that (comply), and some companies will not be able to do that in the short term,” he said.
Small and medium-sized enterprises—almost 98 percent of all firms in Canada and responsible for over 50 percent of the economy—face particular challenges.
Reworking long-established supply chains, hiring legal support, and documenting production cycles can take months or years.
Barry Appleton, international trade expert and professor at New York Law School, said most easy compliance wins have already been achieved. “The low-hanging fruit has been picked,” he said, adding that costs will likely be passed on to customers.
Despite the slow pace, the Bank of Canada expects that 95 percent of Canadian goods exports will be compliant within two years.
But with USMCA up for renegotiation in 2026, uncertainty around long-term access to the US market persists.
For now, sectors such as steel, aluminium, and autos continue to face separate tariffs ranging from 25 percent to 50 percent.
