Tariff round-up: Where we are and where we may be headed

Torys’ Canadian and New York offices will be providing regular briefs on the legal ramifications of the tariffs and other cross-border policy developments on the horizon.

Since the United States first imposed tariffs on Canadian goods on March 4, significant changes have continued to take place regarding Canada’s trade relationship with the United States, and other countries. We provide a review on the state of play on U.S. tariffs, Canada’s retaliatory tariffs, China’s new tariffs on Canada, and discuss where we may be headed in the next few weeks.

U.S. tariffs

Over the last two weeks, President Trump has threatened, imposed, and adjusted a variety of tariffs against Canada.

1. March 4 general tariffs. On March 4, President Trump implemented 25% tariffs on all Canadian goods and 10% tariffs on Canadian “energy” and “energy resources” products. President Trump also imposed 25% tariffs on goods from Mexico and a further 10% tariff on goods from China.
2. March 6 partial “pause”. President Trump announced a further “pause” on tariffs for Canadian goods that are “compliant” with CUSMA, including automobiles and auto parts, until April 2. Also, potash that is not CUSMA-compliant will be tariffed at the lower rate of 10%. CUSMA certification and compliance with related rules of origin is required for goods to benefit from the pause¹.
3. March 12 steel and aluminum tariffs. President Trump implemented a 25% global tariff on all steel and aluminum products. Canada is the largest exporter of both products to the United States. These tariffs “stack” on top of the general tariffs imposed on March 4—i.e., for non-CUSMA compliant steel and aluminum, or if the “pause” is not extended on April 2, Canadian steel will have a 50% tariff and aluminum will have a 35% tariff as a critical mineral and “energy resource”.
4. Dairy and softwood lumber. President Trump has also threatened tariffs on dairy and softwood lumber, two areas of the Canadian economy that the United States has long viewed as subject to protectionist measures; however, concrete action has not yet been taken.

Canada’s retaliatory measures

Canada and its provinces have responded with a variety of tariff and non-tariff measures:

1. March 4 – Phase 1 retaliatory tariffs. Canada responded to the March 4 tariffs with retaliatory tariffs on $30 billion worth of U.S. goods, mainly targeting agricultural and consumer goods, such as orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and pulp and paper.
2. March 6 – Phase 2 retaliatory tariffs paused. In response to President Trump’s partial “pause” on tariffs for CUSMA-compliant goods, Canada paused until April 2 its second phase of retaliatory tariffs on $125 billion of U.S. goods, including goods in a variety of industrial sectors. Canada is carrying out consultations before April 2 regarding any planned Phase 2 tariffs that should be exempt.
3. March 12 – Steel and aluminum retaliatory tariffs. In response to President Trump’s global steel and aluminum tariffs, Canada implemented reciprocal tariffs on U.S. steel and aluminum products worth $15.6 billion, as well as on additional U.S. goods worth $14.2 billion.
4. Government procurement. Some provinces and local governments have announced their intention to give priority to Canadian suppliers and, in some cases, exclude U.S. suppliers from government contracts. Some provincial liquor control boards have also ceased purchasing and offering for sale products from the United States.
5. Electricity. British Columbia, Ontario, Manitoba and Québec export electricity to the United States and Alberta exports oil. On March 10, Ontario Premier Doug Ford announced a 25% levy on all electricity exports to the U.S. in response to U.S. tariffs, which would impact New York, Michigan and Minnesota. The next day, this levy was paused after the Premier spoke with U.S. Commerce Secretary Howard Lutnick and agreed to meet in Washington to discuss the tariff situation and next steps.

China’s tariffs on Canada and Mexico

On March 8, China announced tariffs on Canadian agricultural products, including a 100% tariff on rapeseed oil, oil cakes, and peas, and a 25% duty on aquatic products and pork. This move follows Canada’s imposition of duties on Chinese-made electric vehicles, steel, and aluminum in late 2024. China also announced tariffs on a basket of Mexican goods.

Commentators indicate that this move is likely an attempt to try to dissuade Canada and Mexico from following the United States in matching tariffs, to form a North American bloc vis-à-vis China, as was floated the week prior.

Support for Canadian businesses

Canada has announced a variety of measures to support businesses experiencing financial pressure in this circumstance:

1. Exemptions. Businesses may petition for exemptions from Phase 2 of Canada’s retaliatory tariffs, anticipated for April 2.
2. Remission. Unlike U.S. tariffs, Canadian retaliatory tariffs are subject to applications for remission in cases that meet two public policy goals, to address: (a) situations where goods used as inputs cannot be sourced domestically, either on a national or regional basis, or reasonably from non-U.S. sources; and (b) on a case-by-case basis, other exceptional circumstances that could have severe adverse impacts on the Canadian economy.
3. Support measures for businesses. Canada has introduced several measures to support affected businesses, including: (a) the Trade Impact Program through Export Development Canada deploying $5 billion over two years to help exporters diversify their export markets and navigate tariff challenges; (b) $500 million available for favourable loans from the Business Development Bank of Canada; (c) $1 billion in new financing options from Farm Credit Canada; and (d) temporary flexibilities in the EI Work-Sharing Program have been implemented to assist workers in sectors directly impacted by the tariffs.
4. Protection from foreign acquisition. Canada announced updates to its foreign direct investment review policy. As a result of the “rapidly shifting trade environment,” the government will review investments in Canadian businesses on national security grounds if those investments could undermine Canada’s economic security, including on the basis of “the enhanced integration of the Canadian business with the economy of a foreign state.”

Where we may be headed

April 2 is likely to mark a pivot point—and a broadening—in the ongoing trade war. From that date, the United States is set to impose worldwide “reciprocal tariffs” in the form of a “wide-ranging global trade and tariff policy.” On April 2, the current “pause” on tariffs for CUSMA-compliant goods will end (we do not know whether there will be any further extension at this time).

Reports on the March 13 meeting with Commerce Secretary Lutnick place the tariffs into the context of Trump administration goals: the U.S. is pursuing goals of cutting taxes while avoiding a further increase of the $2 trillion annual U.S. federal deficit, and building back a U.S. manufacturing base in certain key sectors. Tariffs in April are reported to be focused on specific sectors that the U.S. is hoping to grow at home, such as steel, aluminum, automobiles, forestry, and tech. After worldwide reciprocal tariffs are imposed, there may be negotiations on exemptions or other measures.

 
Read more Tariffs and trade briefs.