Tariff exemptions for CUSMA compliant Canadian imports into the U.S. until April 2. President Trump announced on March 3 that the tariffs he threatened under the International Emergency Economic Powers Act (IEEPA), namely, 25% across-the-board tariffs & the 10% energy tariff, would enter into force on March 4 at 12:01 a.m. However, on March 6, President Trump signed an Executive Order that temporarily suspended these tariffs on Canadian goods that claim and qualify for CUSMA preference until April 2 (see the related Fact Sheet for more information). Notably, any tariffs that were collected from March 4-6 will not be refunded.

According to a White House official that briefed reporters, only 38% of imports from Canada used CUSMA preferences last year whereas 50% of imports by Mexico did. These figures reflect the fact that the Most Favoured Nation (MFN) tariffs via the WTO were 0% or relatively low at the time and there was therefore often not a need for Canadian exporters to utilize tariff preference under CUSMA to ship to the U.S. It is expected that there will now be a shift towards using the CUSMA preference to avoid the tariffs. Economists have come up with different numbers for how many goods the tariff suspension could affect. According to calculations by the Peterson Institute for International Economics, about 85% percent of U.S. merchandise imports from Canada and Mexico may be eligible for preferential tariffs under CUSMA.

Finance Canada is interpreting ‘CUSMA-compliant’ trade based on whether companies claim CUSMA preferential treatment when exporting goods to the U.S. (i.e. by completing the necessary trade documentation for CUSMA tariff rates) and whether they meet the CUSMA rules of origin provisions. Additionally, according to Finance Canada, transitioning from Most Favored Nation (MFN) status to CUSMA preference may not be overly burdensome for many companies, as they may already be complying with CUSMA's rules of origin requirements.

Other tariff exemptions and adjustments. In addition to the exemption for CUSMA compliant Canadian imports, the following temporary exemptions and adjustments to the IEEPA tariffs against Canada are now in place:

• • There is a lower 10% tariff on any potash imported from Canada and Mexico that falls outside the CUSMA preference.
  • On March 5, the White House announced that a 30 day tariff exemption would be granted for vehicles made in compliance with USMCA “so they are not at an economic disadvantage.”
  • On March 2, an Executive Order was issued that creates a temporary exception for goods eligible for duty-free de minimis treatment from Canada (e.g. shipments valued at less than $800). Per the Executive Order, this exemption will cease to be available once adequate systems have been put in place to collect tariff revenues.

Steel and aluminum tariffs (25%) to double – taking effect on March 12. On February 10, President Trump “restored” Section 232 tariffs on steel and aluminum that the U.S. had imposed in 2018, raising the aluminum tariff rate to 25% to match the steel tariff rate. According to the President, the tariffs will go into effect on March 12. On March 11, President Trump made post on Truth Social indicating that the tariffs against Canadian steel and aluminum would double to 50% in response to Ontario’s surcharge on electricity supplied to neighbouring states. The situation remains highly fluid, especially as the Canadian government is expected to respond to this escalation.

The U.S. Federal register notices for tariffs on steel and aluminum have been published. These include extended lists of targeted derivative products. Notably, the scope products covered is substantially larger than the scope of products covered in the steel and aluminum tariffs from 2018. Even if your exports were not impacted by U.S. tariffs in 2018, it is important to verify whether your businesses might be impacted by the latest tariffs by checking the tariff codes in the federal register notices. Many downstream products likely will be impacted (e.g. auto parts, furniture, gym equipment, etc.)

Canada’s retaliatory tariffs and other responsive measures

The federal government’s initial retaliatory measures to proceed. On March 4, the Canadian federal government confirmed that it is moving forward as expected with its plan for 25% tariffs on $155 billion worth of imported goods, beginning immediately with a list of goods worth $30 billion. The $30 billion list of tariffed goods is unchanged from the list that was announced on February 1 and will proceed as planned. The scope of the Canadian counter tariffs will be increased to $155 billion if the current U.S. tariffs are maintained. The larger list includes products such as electric vehicles, fruits and vegetables, beef, pork, dairy, electronics, steel, aluminum, trucks, and buses. Notably, Canada's tariffs only apply to goods originating from the U.S., which shall be considered as those goods eligible to be marked as a good of the U.S. in accordance with the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations. The government has also announced a remission framework to help importers who may need to seek transitional relief from tariffs. Additionally, the government is also considering non-tariff measures, potentially relating to North American security and energy security.

New federal supports for impacted businesses. On March 7, the federal government announced a new $6 billion support package to help businesses navigate U.S. tariff related disruptions. Notably these measures include temporarily relaxing rules around a program that allows employees to receive partial EI benefits while working reduced hours, updated Investment Canada Act Guidelines, and measures to ensure businesses have liquidity (e.g. Trade Impact Program through EDC, loans via BDC, and financing via Farm Credit Canada for Canadian ag and food industry).

Provincial non-tariff retaliatory measures. All provincial governments have announced non-tariff counter measures in response to the U.S. tariffs. Such measures include taking U.S. liquor off store shelves, restricting U.S.-based companies from taking part in government procurement, financial assistance for impacted businesses, and also implementing a 25% surcharge on electricity supplied to neighbouring states in the case of Ontario.

• • Ontario: Ontario rips up Starlink deal, plans to tax electricity in response to Trump trade war | CBC News

Finance Canada’s consultation on counter tariffs

Finance Canada has launched its 21-day consultation on the second phase of Canada’s tariff response (25% tariffs on $125 billion worth of imported goods). The consultation webpage can be viewed here.

The government is seeking views on the proposed tariff measures, including the scope of goods targeted by Canada’s second phase of counter tariffs. The list of potential goods that might be tariffed can be viewed here. Notably, this list of goods is cumulatively valued at approximately $200 billion, whereas the second phase of retaliatory tariffs is intended to only capture $125 billion worth of goods. This disparity has been acknowledged by Finance Cananda and points to the fact that there is presently flexibility regarding goods the government might remove from its counter tariff list.

Input on tariff measures should be provided by completing this form. If you wish to provide additional information not included in the form, as well as any additional views or comments you would like to provide on Canada's tariff response, you can also e-mail consultations@fin.gc.ca, and include "U.S. Tariff Consultations" in the subject line.  While the notice period ends on April 2, the Government may need to respond to additional tariff threats from the United States before this date. Should the U.S. impose additional tariffs on Canada, the government would consider all options in response.

See the Canadian Chamber’s Business Data Lab’s analysis of the economic implications of a 25% across-the-board import tariff: What the Return of the “Tariff Man” Means for the Canadian and U.S. Economies - Business Data Lab 

Trade Tracker : Explore the Canadian Chamber of Commerce (CCC)'s Canada-U.S Trade Tracker for information on vital cross-border partnerships, along with specific provincial ties that are at risk. Steel and aluminum tariffs (25%) – taking effect on March 12.On February 10, President Trump “restored” Section 232 tariffs on steel and aluminum that the U.S. had imposed in 2018, raising the aluminum tariff rate to 25% to match the steel tariff rate. According to the President, the tariffs will go into effect on March 12. The U.S. Federal register notices for tariffs on steel and aluminum have now also been published. These include extended lists of targeted derivative products. Notably, the scope products covered is substantially larger than the scope of products covered in the steel and aluminum tariffs from 2018. Even if your exports were not impacted by U.S. tariffs in 2018, it is important to verify whether your businesses might be impacted by the latest tariffs by checking the tariff codes in the federal register notices. Many downstream products likely will be impacted (e.g. auto parts, furniture, gym equipment, etc.)Canada is the top supplier of both steel and aluminum to the U.S., therefore these tariffs will be a significant source of disruption for producers in Ontario and Quebec, and the automotive, construction, manufacturing, defense and aerospace industries.

Reciprocal tariffs – taking effect after April 1. On February 13, the President issued a Presidential memo calling for reciprocal tariffs on all U.S. trading partners. The stated objective of this policy is to counter “non-reciprocal trading arrangements” that the U.S. views as unfair to its commercial interests. Unfair trading arrangements are here defined very broadly, and the accompanying White House fact sheet specifically identifies Canada’s digital services tax (DST), and value added taxes (VATs) as issues warranting action. The memo does not set out a specific time frame for new tariffs, only that there should be investigations into non-reciprocal arrangements starting as early as April 1.The European Commission has published a helpful Q&A regarding the U.S. reciprocal tariff policy. Finance Canada is looking into sharing similar guidance.

Potential tariffs on autos, pharmaceuticals, and semiconductors (around 25%). On February 18, President Trump said at a press conference that he intends to impose auto tariffs "in the neighborhood of 25%" and similar duties on semiconductors and pharmaceutical imports. According to the President, the tariffs on autos could take effect as early as April 2, whereas he did not provide dates for other tariffs.