Why Canada Is Turning to Latin America Amid Rising U.S. Tariffs

Understanding the Shift: The Tariff Pressures That Are Reshaping Trade

In recent months, the United States has imposed steep tariffs on Canadian exports—including autos, steel, aluminum, and energy goods—some ranging up to 50%. These unpredictable trade barriers are causing considerable economic strain, particularly in export-driven sectors that traditionally rely on American buyers.

But rather than capitulate to these pressures, Canada is leveraging them as a strategic wake-up call. The country is actively diversifying its economic outreach—not only by strengthening internal unity but also by expanding trade ties with Latin American partners.

1. Free Trade Talk Resumes with Mercosur

A significant move in this strategy is the renewed dialogue between Canada and Brazil’s Mercosur trade bloc, which includes key Latin American economies like Brazil, Argentina, Uruguay, and Paraguay. Discussions have just resumed to revive a free trade agreement—a development Canadian officials view as a less complicated path to diversification amid fragile U.S. trade relations.

By re-engaging with Mercosur, Canada gains more reliable access to goods such as beef, soybeans, and minerals—providing mutual commercial benefits that reinforce both food security and supply chain resilience.

2. Deepening Ties with Mexico Amid USMCA Dynamics

With the upcoming 2026 review of the United States-Mexico-Canada Agreement (USMCA), Canada is also proactively pursuing closer trade relations with Mexico. Canadian Prime Minister Carney plans to meet his Mexican counterpart next month to discuss trade diversification strategies amid continued U.S. tariffs.

Although many Canadian goods remain tariff-free under USMCA, sectors not meeting compliance standards—such as autos or certain steel imports—still face heavy restrictions. This uncertainty reinforces the urgency for Canada to balance its trade reliance.

3. Turning Crisis into National Resilience

Ironically, what began as an economic mid-crisis is fast becoming a catalyst for transformation. Analysts note that Canada’s reaction—encouraging a “Buy Canadian” movement, streamlining internal trade, and seeking partners beyond the U.S.—reflects a growing national resolve to build a more self-reliant economy.

The federal government’s push to dismantle interprovincial barriers could add up to $200 billion in annual economic gains. Simultaneously, companies are being pushed to ensure USMCA compliance, which until recently had been deprioritized. This strategic recalibration is fostering new partnerships and ensuring long-term viability.

4. Latin America: A Natural Partner for Strategic Expansion

Latin America offers Canada:

• Numerous FTA frameworks—such as agreements with Chile and Peru—that significantly reduce tariffs and streamline trade.

• Access to fast-growing markets with complementary product demand (e.g., agri-food, mining, clean energy).

• Opportunities to diversify supply sources and reduce geopolitical risk by collaborating across the Global South.

5. What This Means for LBS and LATAM Entrepreneurs

For Latin American businesses, Canada’s shift represents a pivotal opportunity—especially for those considering expansion. Here’s how LBS can help:

By aligning your strategy with Canada’s new trade direction, your business benefits from:

• Access to new markets eager for quality goods and services

• Reduced dependence on U.S.-driven volatility

• Strategic partnerships that emphasize resilience and growth

Final Thoughts: Turning Trade Turmoil into Opportunity

While U.S. tariffs have disrupted long-standing economic patterns, they’ve also unlocked pathways for strategic redirection. Canada’s pivot toward Latin American trade—through renewed Mercosur negotiations, strengthened USMCA ties, and national resilience campaigns—signals a new era of collaborative growth.

If you’re a LATAM business leader, now is the moment to explore Canada as a gateway for expansion. At LBS, we’re here to guide your entry strategy, from incorporation to market integration.