On the afternoon of Saturday, February 1, 2025, the Trump Administration imposed sweeping tariffs on virtually all Canadian goods imported into the US. Later that evening, Canadian Prime Minister, Justin Trudeau, announced counter-tariffs on US goods imported into Canada. The tariffs on both sides of the border are to take effect Tuesday, February 4 (with some Canadian tariffs coming into force 21 days later).
US Measures
Pursuant to the Presidential emergency powers under the International Emergency Economic Powers Act (the "IEEPA"), the US President implemented a 25% additional1 tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China. Energy resources from Canada will have a lower 10% tariff. "Energy" or "energy resources" means crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals. The 10% tariff will apply to electricity imported from Canada as well.
The White House clarified that the reasons for the tariffs are unlawful migration and fentanyl flows from Canada, Mexico and China. The action is consistent with Trump's "America First Trade Policy" memorandum of January 20, 2025, declaring trade policy as a critical component in national security.2
The IEEPA allows the President to "regulate" the importation and exportation of goods during a time of emergency presenting an "unusual and extraordinary threat... to the national security, foreign policy, or economy of the United States."3 Pursuant to the IEEPA, the President shall consult with the Congress before exercising any of the authorities under the IEEPA and shall immediately transmit to the Congress a report whenever the President exercises such authorities.4
The new tariffs will be imposed through amendments to the US Harmonized Tariff System, to be adopted before February 4, 2025.
There is a limited carve out for goods in transit, meaning goods "loaded onto a vessel at the port of loading or in transit on the final mode of transport prior to entry into the United States before 12:01 a.m. eastern time on February 1, 2025."
There is no mention of exclusions or other relief in the Executive Order. Because the tariffs were imposed pursuant to the IEEPA, any exclusions or exceptions would need to be developed by the responsible US Government agency or be adopted by specific Executive Order.
Separately, there are limited exceptions to the grant of authority under IEEPA: personal communications, donations by persons subject to the jurisdiction of the United States of articles, such as food, clothing, and medicine, intended to be used to relieve human suffering (subject to limited exceptions), the importation of any information or informational materials, and transactions ordinarily incident to travel, such as importation of baggage for personal use.
Goods from Canada will no longer benefit from the duty-free treatment under the US de minimis (below $800) value threshold and duty drawback will no longer be available for tariffs paid on goods imported from Canada.
The Executive Order warns that should Canada retaliate against the United States in response to the tariffs through import duties on United States exports to Canada or similar measures, the President may increase or expand in scope the duties imposed under the Executive Order to ensure its efficacy.
No specific time is fixed or conditions stipulated for the termination of the tariffs but the White House Factsheet also issued on February 1 prescribes that the tariffs will remain in place "until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country."
Canada Measures
Later that same evening, the Canadian Prime Minister announced that Canada will impose countermeasures on US goods. Canada's initial tariff package will target CA$155 billion of US goods imported into Canada. Canada's measures have been published in an Order in Council, United States Surtax Order (2025) which was adopted under subsection 53(2) and paragraph 79(a) of the Customs Tariff.
The first set of tariffs on CA$30 billion of US goods will enter into force on Tuesday, February 4 (the same day as the US tariffs). The list of goods impacted includes products such as orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and pulp and paper. The Order in Council sets out 1,256 HS codes that are subject to the 25% tariff as of February 4. The full list, with descriptions of all the items is published here: https://www.canada.ca/en/department-finance/news/2025/02/list-of-products-from-the-united-states-subject-to-25-per-cent-tariffs-effective-february-4-2025.html.
Under the United States Surtax Order (2025) US-origin goods are based on the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations. The applicable origin rule under that marking regulation includes US goods that meet the following criteria:
- the goods are wholly obtained or produced;
- the goods are produced exclusively from domestic materials;
- each of the foreign materials incorporated into the goods undergoes an applicable change in tariff classification and satisfies any other applicable requirements of these Regulations; or
- a good is considered to originate under a Chapter Note set out in Schedule III.
Note that Schedule III of the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations includes several tariff shift rules.
The remaining CA$125 billion in tariffs will be subject to a 21-day consultation period and will then enter into force. Among other goods, this will include products such as passenger vehicles and trucks, including electric vehicles, steel and aluminum products, certain fruits and vegetables, aerospace products, beef, pork, dairy, trucks and buses, recreational vehicles, and recreational boats. The full list of goods for this portion of the package is not yet available. Anyone that is impacted by the tariffs should consider making a submission to the Department of Finance during this 21-day period, setting out how a particular business or industry will be harmed by the tariffs, especially when certain goods can only be obtained from US suppliers.
Additional non-tariff measures relating to procurement, energy and critical minerals are also being considered for potential future measures.
In addition to the 21-day consultation, impacted parties will be able to seek a remission order from the Department of Finance, that can effectively exclude tariffs on specific products or for specific end uses. Remission submissions will need to provide detailed information and be prepared with care by the companies requesting remission of tariffs.
In addition to the announcement by the Government of Canada, various Canadian premiers, including the Premiers of British Columbia, Quebec, Ontario, and Nova Scotia, have announced various actions that range from limiting procurement to US entities/ individuals, cancelling existing contracts held by US entities, and removing US alcohol from Canadian provincially controlled liquor stores.
Our International Trade team is monitoring these developments. For any questions, please reach out to Paul Lalonde and Sean Stephenson in Canada and Michael Zolandz and Susanne Cook in the United States. Here are some additional resources to help you stay informed:
- Trump Transition Tracker: Stay updated with real-time insights on key policy shifts and personnel developments affecting North American trade.
- Trade Alert: Planning for Tariffs in 2025: Insights from our US team on proactive strategies for managing potential tariffs, along with an overview of how we can support you during this period of uncertainty.
- Information Sessions – Starting Friday, February 7, we will be hosting a weekly webinar to discuss the latest developments and strategies for navigating the evolving trade landscape. Contact Dentons Canada Events to be updated when details are finalized.
Footnotes
1 Meaning that the duties come on top of existing tariffs on those products.
2 https://www.federalregister.gov/documents/2025/01/30/2025-02032/america-first-trade-policy
3 IEEPA, Sections 1701 and 1702.
4 IEEPA, Section 1703.
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