77% of US Firms Pause North American Supply Chain Investment: Livingston

A decisive 77 percent of US firms and 67 percent of Canadian firms plan to pause investments in North American supply chains until the future of the USMCA trade pact becomes clearer, according to Livingston International's latest trade dynamics report.

The survey, which polled importers and exporters across both countries, found exporters and importers "weary" and "decidedly glum" about the prospects for cross-border trade. One-quarter of Canadian exporters said they lack confidence in the stability of relations going forward, and another 40 percent described themselves as only somewhat confident.

Confidence in the pact itself runs low. Only 34 percent of US businesses and 28 percent of Canadian businesses said the US-Mexico-Canada Agreement — which President Donald Trump brokered to replace NAFTA — makes them feel confident about North American trade stability over the next five years.

What does the review process change?

Washington's July decision not to renew the USMCA shifted the pact into a yearly review process that will terminate in 2036. That move paradoxically lifted some sentiment: 43 percent of US respondents and 29 percent of Canadians said the decision positively affected their confidence in future North American trade, likely because it ended a fraught review period marked by a year of tensions.

Livingston analysts flagged the stakes plainly. Free trade has been "an integral aspect of supply chain integration and regional interdependence for two generations," they wrote, so declining reliance on the system that facilitates it carries real weight.

Timeline expectations are split. Three-quarters of US respondents and 62 percent of Canadians expect the trade environment to improve within two years, while roughly 20 percent in both countries put recovery at three to four years — a point at which Trump will have left the White House and a new leader will own the task of repairing trade ties or negotiating a new framework.

How are tariffs hitting operations now?

The US-Canada trade war has already damaged day-to-day operations. More than three-quarters of US businesses and 77 percent of Canadian firms report serious hurdles complying with shifting tariff policies, and almost two-thirds of respondents in both countries have passed cost increases on to consumers.

The sourcing response is broad. A substantial 84 percent of US importers and 91 percent of Canadian importers are exploring new sourcing locales, with 84 percent across both countries looking into Asia. Canadian firms favor China, while US firms — facing high duties on China-made goods — lean toward Vietnam. Analysts cautioned, however, that "no individual country in Asia has the same level of attractiveness as those closer to home."

Regional nearshoring persists alongside the search for alternatives:

• 90 percent of US importers and 75 percent of Canadian importers will still use North American suppliers outside their own countries, but plan to add domestic suppliers as backup.
• Slightly over 50 percent of exporters in both countries are considering Europe and the United Kingdom for new sales ventures.
• Central and South America are gaining ground with 50 percent of Canadian respondents and 47 percent of US firms.

Is anyone abandoning North America?

Not yet, according to the report. "It's critical to note that importers and exporters are not abandoning the North American market," analysts wrote. "Rather, they are increasingly seeing the continent as one component of a broader global supply chain that is allowing them to de-risk through export-market and supplier diversification."

For sourcing teams, the survey forces a concrete decision: hold capital commitments until the yearly USMCA reviews clarify tariff exposure, or build dual-supplier structures now — pairing North American capacity with Asian and European backups — ahead of the 2036 termination date.