Trade turbulence: Implementation of American tariffs and Canadian counter-tariffs set for Tuesday, February 4th
The United States has imposed tariffs on various goods imported from Canada, marking the first blows in a potential trade war. The tariffs, announced by the White House, will take effect on Tuesday, February 4, 2025.
The tariffs are framed under the International Emergency Economic Powers Act (IEEPA) as a response to the flow of drugs and illegal immigration. However, the justification for these tariffs primarily stems from national security concerns, with the US President invoking a state of emergency declaration to protect domestic industries and jobs.
The tariffs will affect a wide range of Canadian imports, including orange juice, peanut butter, wine, spirits, beer, coffee, motorcycles, appliances, apparel, footwear, cosmetics, and pulp and paper. However, certain goods that were already in transit to Canada on the day the tariffs come into force, or those that were loaded onto a vessel or in transit on the final mode of transport before 12:01 a.m. ET on February 1 are exempt from the new tariffs.
The Canadian government has announced retaliatory tariffs on $155 billion of US imports, starting with $30 billion worth of goods on February 4 and adding another $125 billion worth of goods 21 days later. The Canadian tariffs target 'all articles that are products of the United States' and are subject to complex rules of origin.
The tariffs are in violation of the Canada-US-Mexico Agreement (CUSMA), but an exemption for 'Essential Security' might be invoked by the Trump Administration. It's important to note that the details on potential Canadian drawbacks or other relief have not yet been announced.
In response to these developments, Canadian and US businesses are advised to review contractual clauses, re-evaluate the origin of goods, consider diversifying supply chains, explore free trade agreements with other regions, and engage legal counsel and customs brokers.
It's worth mentioning that the tariffs exclude personal communications, donations of food, clothing or medicine, informational materials, and personal baggage when traveling. The Canadian government may provide 'pandemic-level' relief for Canadian businesses affected by the tariffs.
This new trade landscape between Canada and the US is a significant development that will likely have far-reaching implications for both countries. As the situation unfolds, it's crucial for businesses and governments to stay informed and adapt to the changing trade environment.
This article has been written by Ian Chesney and Jonah Secreti, articling students.
Lastly, it's important to note that the US is not only imposing tariffs on Canada but also on imports from Mexico and China. The implications of these tariffs on global trade remain to be seen.
Canada may take non-tariff measures related to exports of energy and critical minerals, and the provinces may take additional measures. As the situation evolves, it's essential to stay informed and prepared for potential changes in the trade landscape.
