Age of Agility: Key Themes Shaping North America in 2026

The outlook for North America in 2026 will be shaped by the changing political, geopolitical and trade landscape of 2025. For 2026, the United States-Mexico-Canada Agreement (USMCA) is likely to face significant revisions. Based on early 2026 developments, US foreign policy is likely to remain subject to changes, with a focus on establishing preeminence in its own hemisphere. It will also limit its participation in alliance coordination as it pushes the burden of international stability onto other regional actors.

Another focal point will be the US Federal Reserve’s incoming new leadership and composition, and its influence on monetary policy. Investment spending and equity valuations on AI are important components of this year’s outlook, although realization of productivity gains seem likely to come later.

• Tariffs will remain highly prominent within the policy landscape, probably remaining the main determinant of the trajectory for both the US and Canadian economies in 2026. This more protectionist approach raises significant risks of material change to the USMCA trade agreement.
• US foreign policy in 2026 likely will be characterized by renewed regional assertiveness, economic nationalism, alliance realignment, and burden shifting. 
• The Canadian economy looks set for slower growth given trade policy challenges, leading it to place more reliance on government spending to support its economy. 
• The Federal Reserve will face elevated risks on both sides of its dual (inflation and economic activity) mandate, with the longer-term issue of the central bank’s independence in focus due to the imminent change in leadership. 
• Investment in AI will almost certainly rise in 2026, although productivity gains will likely only materialize over several years. The US housing market will likely enter 2026 in a phase of normalization, with sharp regional disparities beginning to narrow.

Tariffs appear highly likely to be a major determinant of the trajectory for the US economy in 2026, with protectionist policy continuing regardless of the pending US Supreme Court decision. The current suite of tariffs, authorized under Section 232 of the Trade Expansion Act and the International Emergency Economic Powers Act (IEEPA), is likely to persist in some form.

Tariffs are expected to have two major, countervailing effects on the 2026 outlook. By increasing the cost of imported inputs, tariffs will likely contribute to inflation, which will encourage the US Federal Reserve (Fed) to remain cautious, leaving interest rates higher than they might otherwise have been. This will tighten financial conditions and dampen growth in interest-sensitive sectors of the economy, including housing, consumer durables and business investment.

Counterbalancing this, tariffs will make imports more expensive and redirect domestic demand away from foreign suppliers to domestic producers, assuming close substitutes and sufficient capacity exist within the domestic economy, thus increasing domestic demand.

The USMCA faces a pivotal review in July 2026, with revisions in rules of origin, agriculture, labor and investment pending. Unless all parties agree to extend the agreement for 16 years in 2026, thus extending the agreement to 2042, annual reviews will follow until the agreement officially expires in 2036, with any party able to withdraw after six months’ notice.

Our baseline remains a 16-year extension with major changes and continued emergency tariffs for non-compliant goods, although risks of trade policy uncertainty remain high for manufacturers and traders, as shown by December 2025 statements by US officials suggesting that the US could withdraw from the agreement and seek bilateral trade agreements with both countries.

US foreign policy in 2026 will be shaped by several overarching themes, including renewed regional assertiveness, economic nationalism, alliance realignment and burden shifting. US military action in Venezuela in January 2026 and statements from the administration that the US will consider military operations against other hemispheric countries suggest that the US is seeking to reassert its dominance of the Western Hemisphere.

At a minimum, it appears likely to aim to persuade these countries into adopting foreign and domestic policies more aligned with US security and economic interests. In practice, early-2026 foreign policy will be centered on US security efforts in the Americas. The revitalized US-Venezuela relationship will likely require sustained US military, diplomatic and economic commitments, as the Trump administration seeks to preserve the post-Maduro order and provide opportunities for US energy companies to enter the Venezuelan market. The likelihood of US military intervention in the region will remain high following Maduro’s removal.

As seen in 2025, the US is unlikely to withdraw completely from its NATO security commitments, although its overall participation in alliance activities will likely decrease. While the threats of immediately higher tariffs related to Greenland appear to have passed following a widespread equity market selloff, moderate risks of trade policy disruption will continue over 2026, especially if Greenland talks falter or if the administration increasingly blames the failure of a Russia-Ukraine ceasefire on EU members.

The US will expect regional partners in Asia, the Middle East and elsewhere to take the lead on stability, offering only limited support for international peacekeeping efforts or development initiatives aside from those sponsored by US President Donald Trump’s newly formed Board of Peace, such as reconstruction initiatives in Gaza, Venezuela or other key areas of US national interest.