The United States–Mexico–Canada Agreement (USMCA), effective 1st July 2020, modernises the North American Free Trade Agreement (NAFTA) by updating trade, labour, environmental, and digital commerce regulations.
A key feature is that USMCA-compliant goods are exempt from US tariffs, including those set for 2nd April 2025. Compliance hinges on a significant portion of a product’s value coming from North American sources. Thus, companies relocating production to North America and using regional inputs can avoid US import duties, with Mexico positioned to benefit strategically in the current trade environment, says GlobalData.
GlobalData’s recent report, ‘Industry Insights: The impact of tariffs on consumer packaged goods’, reveals which CPG-relevant sectors are most affected by tariffs within specific trade relationships and how companies within these sectors will be affected. It also provides insights into consumer reactions to changes in the market caused by the imposition of tariffs.
Rory Gopsill, Senior Consumer Analyst at GlobalData, comments: “Products manufactured in the US, Mexico, and Canada using materials sourced from North America are generally more likely to meet USMCA regulations and, as a result, may qualify for tariff exemptions. However, the situation becomes more intricate when raw materials are obtained from outside North America, known as ‘non-originating’ materials. To qualify as USMCA-compliant, these non-originating materials must not contribute more than 40% of the product’s transaction value or more than 50% of the net cost of production, as outlined by the US Trade Representative. Therefore, it is essential for companies to ensure that a significant portion of a product’s value and costs is derived from materials and processes sourced within North America.
The exemption of USMCA-compliant goods was confirmed by the US when a raft of tariffs was announced in April 2025. This is likely to have contributed to concerns about tariffs’ inflationary impact not increasing significantly among Mexican consumers and decreasing noticeably among Canadian consumers between Q1 and Q2 2025 (according to GlobalData’s Q1 and Q2 2025 surveys). This reflects the positives that the exemption of USMCA-compliant goods could yield for the Canadian and Mexican economies.
Achieving USMCA-compliance will require supply chain changes
This situation presents two strategic opportunities for consumer goods and packaging companies. The first opportunity involves reshoring manufacturing operations to North America, with Mexico positioned as the primary beneficiary of this trend. Among the three North American countries, Mexico offers the lowest labour costs, making it an attractive manufacturing hub. This is evidenced by Mexico surpassing China as the largest exporter of goods to the US in 2023, as reported by Legacy Supply Chain.
Additionally, foreign direct investment in Mexico saw a 5% increase in the first quarter of 2025 compared to the same period in 2024, with new investments contributing 7.4%, up from 3% in the previous year, according to Mexico Daily News. This indicates a growing trend of both new investments and the reinvestment of profits in Mexico, despite the presence of tariffs, suggesting that Mexican manufacturing remains a viable option.
The second opportunity involves reformulating and adjusting supply chains to maximise the use of materials sourced within North America. For instance, a paperboard manufacturer may consider transitioning from pulp sourced in Asia to Canadian wood pulp, thereby ensuring that the packaging component is sourced from Canada. This strategic shift enhances the likelihood of the packaged product being compliant with USMCA regulations, thus qualifying for tariff exemptions. Similarly, a food and beverage company could opt for Canadian wood-fibre lids or board for their cartons. By utilising North American raw materials in this manner, consumer goods companies can improve their chances of adhering to rules of origin, thereby reducing import costs and simplifying supply chain compliance for their finished products.
Gopsill concludes: “Companies should observe that these strategic shifts would not necessarily deliver on the US’ aim of revitalising its domestic manufacturing sector (since the USMCA could result in manufacturing being reshored to Mexico, not the US). This could result in the Trump Administration rethinking tariff exemptions for USMCA-compliant goods.
“The USMCA is scheduled for review and potential renegotiation in 2026, and edits currently under discussion include modifications to automotive industry rules of origin and restrictions on Chinese companies in North America. Consumer goods and packaging companies should monitor how these talks progress closely to minimise risk when adjusting North American supply chain.”
