The Canada-United States-Mexico Agreement entered its mandatory six-year review period this week. Under the terms of the 2020 ratification, the tripartite review is not optional: it is a formal evaluation mechanism built into the agreement, with a focus on whether the deal is serving its original objectives. The current round centres on auto rules of origin, EV supply chain content requirements, and whether Canada and Mexico are meeting US expectations on trade with non-CUSMA parties, a clause aimed primarily at Chinese goods transiting through Canada.
Most commentary has framed this as a trade policy event. For financial advisors, the more immediate question is narrower and more actionable: what does a prolonged CUSMA negotiation mean for the registered accounts of clients who hold US-listed securities?
The Currency Variable Is Already Working Against Canadian Investors
USD/CAD closed Thursday at approximately 1.4195, near its weakest level since April 2025. The Canadian dollar has lost roughly 4.5% against the US dollar over the past twelve months, driven by the Fed-BoC policy rate differential, the Hormuz-driven energy shock's complex effect on Canadian terms of trade, and persistent uncertainty about CUSMA's future.
The currency math has a direct and underappreciated effect on registered account performance. A client who holds a US-listed S&P 500 index fund inside their RRSP has seen the fund's CAD-denominated return enhanced by CAD weakness over the past year. The return they see on their statement is real. The risk they do not always see is what happens when CAD recovers: any appreciation in the loonie reduces the CAD value of their US holdings without a single share being sold or a single dividend missed.
The CUSMA review introduces a specific tail risk to the CAD outlook. A negotiation that proceeds smoothly and produces an agreement preserving current terms would likely support CAD. A negotiation that stalls, escalates, or produces new tariffs on Canadian auto exports would weigh on the currency and potentially on GoC yields. Markets are currently treating the review as a known risk rather than an escalating one, which means the surprise in the CAD is more likely to come from an adverse outcome than a benign one.
The registered account currency exposure question is not resolved by predicting how CUSMA resolves. It is addressed by ensuring clients understand their exposure and have made a conscious choice about it, rather than holding US securities in RRSP or TFSA by default.
The following chart shows the USD/CAD trajectory over the past twelve months against key policy events, illustrating the structural drift that has built in registered account currency exposure for clients who have not actively managed it.
USD/CAD has drifted from approximately 1.362 in July 2025 to 1.4195 as of July 3, 2026, a 4.5% depreciation in CAD. The shaded band marks the February 28 Hormuz disruption onset. The green dashed line shows the pre-war reference rate.
RRSP vs. TFSA: The Withholding Tax Placement Question
The Canada-US tax treaty exempts US-source dividends paid into an RRSP from the standard 15% US withholding tax. The exemption applies because the IRS treats the RRSP as a pension plan under the treaty. The TFSA does not receive the same treatment: US dividends paid into a TFSA are subject to the full 15% withholding, and the tax is not recoverable.
This is not a new rule. But it becomes a more important planning consideration in a period when clients are actively reviewing their US equity holdings for CUSMA-related reasons. A client who holds a high-dividend US equity, or a US-listed dividend ETF, inside a TFSA is paying a 15% drag that does not apply inside an RRSP. For a client with, say, $100,000 in US dividend payers yielding 3% annually, the cost is approximately $450 per year, compounding permanently.
The planning action is straightforward: US dividend payers and US-listed equity ETFs belong in the RRSP. Canadian dividend payers, REITs, and growth-oriented equity without meaningful yield belong in the TFSA, where the dividend tax credit does not apply anyway and the withholding tax issue is absent.
CUSMA review does not change this rule. It makes reviewing it timely, because clients are already engaged on their US exposure.
T1135 and the CAD Weakness Threshold Risk
The T1135 foreign income verification form is required for any Canadian resident whose total cost of foreign property exceeds $100,000 CAD at any point during the tax year. The threshold is not indexed to inflation, and it is calculated in Canadian dollars.
The practical implication of CAD weakness is that clients who hold US-listed securities can breach or approach the T1135 threshold purely through currency movement, without adding a single new position. A client who held US securities with a cost base of $90,000 CAD in July 2025 and has seen CAD weaken 4.5% against the USD may now have a cost base above $100,000 CAD without having made any new purchases.
The CRA does not make exceptions for currency-driven threshold breaches. The penalty for failing to file a T1135 when required is $25 per day, up to $2,500, plus a possible gross negligence penalty. Confirming which clients are approaching or past the threshold is a routine but easily overlooked review item, particularly in a year when CAD has moved materially.
The exemption for securities held in registered accounts (RRSP, TFSA, RRIF) means that US-listed securities inside these accounts do not count toward the $100,000 threshold. US property held in non-registered accounts does count. Clients with both registered and non-registered US exposure need the clearest accounting of where they stand.
The Sector Concentration Question for Auto and Materials Clients
The CUSMA review's primary focus areas, auto rules of origin and EV supply chain content, create specific exposure for clients with concentrated positions in Canadian auto parts manufacturers, steel and aluminum producers, or auto assembly companies with Canadian operations. These are not the most common holdings in a diversified Canadian portfolio, but they exist, particularly among clients in Ontario and Quebec with professional ties to the manufacturing sector.
A review that results in tighter rules of origin requirements could directly affect the economics of Canadian auto parts production. A review that escalates into tariff threats, as the 2024-2025 CUSMA dispute did before the current agreement, would be more broadly disruptive. Neither outcome is the base case at this stage, but both warrant a specific conversation with affected clients before the negotiation produces a concrete result.
The timing of the review, running through 2026 into potential 2027 resolution, means this is a planning conversation that benefits from an early start, not one that waits for a headline outcome.