As the review of the United States–Mexico–Canada Agreement (USMCA) gets underway, most manufacturers report they utilize Canada or Mexico for critical parts of their supply chains – at a time when trade uncertainty remains their top business concern.
The Q1 2026 Manufacturers’ Outlook Survey released by the National Association of Manufacturers (NAM) also shows manufacturers’ optimism is rising, with 75.3% reporting a positive outlook for their company, up 5.4 percentage points from the previous quarter.
The survey was conducted Feb. 10–26, before the start of the Middle East war that could affect North American trade through higher energy prices, supply chain disruptions, or global economic shocks.
The USMC is a free trade agreement that replaced NAFTA in 2020. It required a mandatory review, six years into the agreement (2026) to be evaluated whether it should be extended.
Among the manufacturers that utilize Canada or Mexico for critical parts of their supply chain, exactly half rely on both countries, according to the latest findings. Most U.S. imports from Mexico and Canada are industrial inputs such as machinery, equipment and raw materials while Canada and Mexico also purchase one-third of manufactured good exports—more than the next nine U.S. trading partners combined.
“Manufacturers are ready for liftoff, but the skies need to clear,” NAM President and CEO Jay Timmons said on Wednesday. “This quarter shows a mixed bag of results with real momentum from tax reform, regulatory rebalancing and energy policy.
“At the same time, the results underscore how essential durable supply chains are to manufacturing success—and how critical Canada and Mexico are to that system, which is why we need to preserve and strengthen the USMCA,” Timmons said.
“For the first time since 2023, manufacturers’ outlook topped the historical average of 74.3%, and manufacturers expect most indices to improve meaningfully over the next 12 months. Sales and production are projected to rise 3.8% and 3.5%, respectively, up from the previous quarter’s forecast of 2.8% and 2.4% growth,” said NAM Chief Economist Victoria Bloom.
“However, challenges persist. For example, raw material and other input costs are not anticipated to slow, rising at the same pace as projected in Q4 (4.1%) and ranking as the third-highest business concern at 57.5%.”
Key findings:
- 70.6% of manufacturers cited trade uncertainties as a top business challenge for the fifth consecutive quarter.
- 54.6% secure critical inputs from either Canada or Mexico. And 82.2% of those manufacturers say they source raw materials or other inputs from either country.
- Of those that utilize Canada or Mexico, 62.7% benefit from a strong customer base across the border.
For the second consecutive quarter, rising health care/insurance costs (69.8%) remained the second most-cited business challenge for manufacturers.
The NAM releases these results to the public each quarter. Further information on the survey is available here.
