By Kevin Ford
The United States, Mexico and Canada have a longstanding trade relationship that has aimed at mutually beneficial policies for the three countries and businesses that operate across North American borders. Initially, this was through the North American Free Trade Agreement (NAFTA), which had governed North American commerce since 1994. In 2020, that trade framework shifted to the United States–Mexico Canada Agreement (USMCA), adding stricter automotive manufacturing rules and updated provisions on labor rights, environmental standards and digital trade.
In July of 2026, the Trump administration declined to renew this trilateral trade agreement, opening the door for renegotiation and likely policy changes. The current USMCA guidelines, governing an estimated $1.6–$2 trillion in annual trilateral trade in goods and services, will stay in place through 2036, after which it will expire if no agreement is reached.
Impact on the home furnishings industry
U.S. businesses in the home furnishings industry depend heavily on the import of lumber from Canada, as well as textiles, fabrics and leather from both Canada and Mexico. While it is a common assumption that USMCA-compliant materials avoid trade penalties, this is not the case for Canadian lumber.
Furniture imported from Canada will face a new 50% U.S. tariff beginning Aug. 19 under a series of proclamations signed by President Donald Trump in mid-July. President Trump invoked Section 338 of the Tariff Act of 1930, a rarely used provision allowing the president to impose tariffs of up to 50% on countries found to discriminate against U.S. commerce. The 30-day period before the duties take effect leaves time for negotiations between the two countries. Canadian officials and business groups have urged both governments to use that window to reach an agreement, while Ontario Premier Doug Ford has called for Canada to respond with equivalent tariffs if the U.S. measures proceed.
In the last couple of years, many U.S. companies shifted manufacturing and materials sourcing to North American countries to avoid the heavy tariffs levied on countries like China and Vietnam. However, ongoing trade policy uncertainty — highlighted by recent Supreme Court rulings that simply prompted the administration to pivot from IEEPA to Section 122 tariffs — forces businesses in the home furnishings sector into a state of continuous volatility. Rather than engaging in long-term strategic planning, companies must focus on rapid adaptation.
Ultimate changes to the USMCA could force home furnishings companies to further shift manufacturing and supply chain practices to avoid unpredictable cross-border trade and escalating costs. Even modest tweaks to the agreement during the new annual review process could drastically reshape compliance requirements, timing and regional business confidence. The price volatility associated with these shifting trade policies disproportionately strains smaller furniture companies, which lack the capital reserves larger players use to absorb sudden cost increases.
What we can expect to see from negotiations
Current economic conditions may strengthen the US negotiating hand. According to Convera‘s market analysts, the tariffs and trade uncertainty weigh on exports and business investments in Canada. At the same time, the U.S. economy has remained comparatively solid, supported by stronger consumption and investment dynamics.
The Trump administration has signaled it will seek additional concessions from Mexico and Canada on trade disputes and to address non trade issues, such as migration, drug trafficking and continental defense. Under President Claudia Sheinbaum, Mexico has made USMCA preservation a top foreign policy priority, focusing on the automotive, energy and agriculture industries. Similarly, in Canada, a weak labor market and stagnant economy are pushing the country to seek a broader trade framework while diversifying away from the U.S. in the long term.
Outlook for home furnishings businesses
The political and economic context surrounding this new period of negotiations is unlike anything the original NAFTA architects and the 2020 USMCA negotiators anticipated. With the July 1, 2026, USMCA review deadline officially passing without an agreement, the baseline for North American trade is now firmly rooted in unpredictability.
Home furnishings manufacturers are facing a perfect storm of compounding costs. The ongoing Iran conflict and resulting oil supply disruptions have sent global freight and energy costs soaring, stoking persistent inflation worries and weakening global growth. When these macroeconomic pressures are stacked with the ~35% effective tariff rate currently burdening Canadian lumber imports, regional supply chains are put under historic strain.
The businesses best positioned to navigate the coming months and years are those that deeply understand their own supply-chain exposure and treat compliance adaptability as a core function rather than a contingency. Furthermore, with the intense currency volatility driven by the broader U.S.- Canada trade disputes, actively managing FX risk through comprehensive, dynamic hedging strategies is no longer optional — it is essential to protecting margins.
Kevin Ford is a foreign exchange (FX) and macro strategist at Convera, a leading global payments and FX risk management company.
