The trade dispute between the United States ("US") and Canada has now entered a new phase, as the US imposed 25 percent tariffs on Canadian goods and 10 percent tariffs on Canadian energy products on March 4, 2025. Canada responded in kind and implemented the first phase of its previously announced retaliatory countermeasures through the United States Surtax Order (2025-1). The list of targetted US origin goods remains the same as the prior list, but for the addition of 14 new items under Chapters 98 and 99 of the Customs Tariff Schedule.
A Brief Review
Following consultations between President Trump and Prime Minister Trudeau concerning Canada's efforts at improving border security and stemming the flow of illicit drugs into US, President Trump paused the imposition of his blanket tariffs on Canadian products until March 4, 2025, through an executive order on February 3, 2025.
Canada then followed suit and repealed its United States Surtax Order (2025) on the same day. Since then, President Trump has proposed further reciprocal tariffs, steel and aluminum tariffs, and timber and lumber tariffs, through a series of executive orders. Negotiations between the trade partners have been ongoing but now the initial tariff moratorium has expired.
Canada's Retaliatory Measures – First Phase
In its first phase of retaliatory measures under the United States Surtax Order (2025-1), Canada has imposed a 25 percent surtax on $30 billion worth of specifically targetted US origin goods, including:
- Wine, beer, and spirits;
- Appliances and hand tools;
- Apparel and footwear;
- Orange juice, peanut butter, and coffee; and
- Certain vehicles, boats, and ships.
Second Phase
Canada is also planning on imposing a surtax on a more extensive list of US origin goods totalling $125 billion, following a 21-day public comment period. A previous news release by the Department of Finance Canada indicates the following goods will be targetted:
- Passenger vehicles, trucks and buses;
- Steel and aluminum products;
- Certain fruits and vegetables;
- Aerospace products; and
- Beef, pork, and dairy products.
Canada has imposed retaliatory surtaxes in response to President
Trump's tariffs.
Businesses seeking to mitigate the effects of the surtaxes will
require assistance from experienced legal counsel.
Takeaways
Canada's retaliatory measures stand to cause significant financial fallout for businesses selling targeted US origin goods, but there may be methods available to mitigate such fallout. We have previously written about duty drawback and duty unbundling as two such valuable options to mitigate the impact of Canada's retaliatory surtaxes. Businesses seeking to take advantage of these duty minimization opportunities and other exceptions to the surtaxes will generally require specialized customs and trade advice from experienced legal counsel.
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