Trade tensions resurface: Implementation of U.S. tariffs and Canadian retaliatory measures
In a move to counter the recent US tariffs, Canada has imposed duties on American goods worth $30 billion, with plans for a second phase of duties on an additional $125 billion worth of goods.
The tariffs were initially announced on February 1, following months of speculation, and were implemented on March 4, following a 30-day pause from their original implementation date on February 4. They apply to 'all articles that are products of Canada' - i.e. Canadian-origin goods.
The US tariffs, which came into effect on the same day, impose a 25% duty on all imports of products of Canada, except certain energy and energy resources, which are subject to a lower 10% duty. These tariffs were imposed pursuant to the President's authority to address national emergencies under the International Emergency Economic Powers Act.
The Canadian counter-tariffs will only apply to goods originating from the USA, which shall be considered as those goods eligible to be marked as a good of the USA in accordance with the Determination of Country of Origin for the Purposes of Marking Goods (CUSMA Countries) Regulations.
The Canadian Government has stated that, at least for its first round of counter-tariffs, its existing Duties Relief and Duty Drawback Programs will be available for all duties paid or payable, subject to the requirements under CUSMA.
The US tariffs were not the only actions taken by the Trump Administration. On February 10 and 11, President Trump signed two additional Executive Orders, which will result in 25% tariffs on all raw, semi-processed, and derivative steel and aluminum imports into the US from any country, including such imports from Canada. These new tariffs are set to come into effect on March 12.
In response to the US tariffs, some provinces have threatened to double road-toll fees on commercial vehicles from the USA, while the Quebec Government announced penalties of up to 25% on all bids presented by American companies. Ontario Premier Doug Ford has threatened to cut off electricity supply from Ontario to power grids in New York State.
Businesses can and should consider the following actions in the face of trade uncertainty: review contractual clauses, re-evaluate origin, consider supply chain diversification, and look to other Free Trade Agreements.
As of March 4, there is no specific public record of new tariffs imposed by the USA specifically against Canada; the USA's tariff policies at this time primarily involve 10-15% tariffs on many imports broadly, including reciprocal tariffs on the EU, but exceptions apply for USMCA partners like Canada, which typically enjoy preferential tariff treatment.
The tariffs announced on February 1 were almost identical to those originally announced, with one exception being a March 2 amendment that temporarily allows for the de minimis exception to continue to be available for a period of time.
As of the date of publication, only Alberta and Saskatchewan had yet to announce any planned countermeasures, but all provinces appear to be largely supportive of the federal response.
