Escalating Trade Tensions: U.S. Tariffs on Canada and Canada’s Retaliatory Measures

UPDATE: As per the developing news, tariffs were postponed by 30 days.

U.S. TARIFFS ON CANADA: KEY DEVELOPMENTS

1. Tariff Implementation: The U.S. administration has officially signed an order imposing tariffs on Canadian imports. The measures include a 25% tariff across all sectors, 10% tariff on energy products, with no exemptions.

2. Effective Date: The duties will take effect on Tuesday and will be formally published in the U.S. Federal Register.

3. Legal Basis: The tariffs are being implemented under the International Emergency Economic Powers Act (IEEPA), justified by a national border emergency related to fentanyl.

4. Duration: These tariffs will remain in place until Canada addresses alleged drug trade concerns, despite limited evidence supporting such claims.

5. No Duty Drawback: Unlike typical trade policies where businesses can apply for duty refunds on re-exported goods, this measure explicitly prohibits duty drawbacks – adding further costs for American companies.

6. Potential Escalation: The order includes a retaliation clause, warning that if Canada responds with countermeasures, U.S. tariffs could be increased further.

CANADA’S RESPONSE: RETALIATORY TARIFFS AND TRADE MEASURES

1. Retaliatory Tariffs Announced: The Canadian government has introduced 25% retaliatory tariffs on $155 billion worth of U.S. goods, with $30 billion taking effect immediately on Tuesday and an additional $125 billion within 21 days. Products targeted include:

• First Wave (Immediate Tariffs): American beer, wine, peanut butter, bourbon, tires, jewelry, fruit juices, apparel, appliances, lumber, plastics, and more.

• Second Wave (After 21-Day Consultation): Vehicles (including EVs), trucks, steel, aluminum, aerospace products, fruits, vegetables, beef, pork, dairy, RVs, and boats.

2. Provincial Retaliation: Some Canadian provinces have introduced additional trade restrictions, including banning U.S. contractors from procurement contracts and removing U.S. alcohol from retail shelves. 

3. Official Tariff List Published: The Canadian government has released an official U.S. surtax order detailing the tariff codes for affected products. 

4. Remission Application Process: Canada has introduced a remission application process, allowing businesses to apply for relief from tariff payments or refunds for duties already paid. 

BEYOND TARIFFS: ADDITIONAL TRADE MEASURES UNDER CONSIDERATION

Beyond tariff measures, the Canadian government is reportedly exploring non-tariff restrictions in areas such as government procurement policies and critical minerals exports. These measures could further impact trade dynamics between the two countries.

SOURCES/ RECOMMENDED READ:

• Imposing Duties to Address the Flow of Illicit Drugs Across Our Northern Border | White House Pool | Forth

• List of products from the United States subject to 25 per cent tariffs effective February 4, 2025 – Canada.ca

• Fact Sheet: President Donald J. Trump Imposes Tariffs on Imports from Canada, Mexico and China – The White House

• Orders In Council – Search