United States Tariffs

Effective Tuesday, March 4, 2025, and following a 30-day pause, President Donald J. Trump implemented tariffs on goods originating from Canada and Mexico under the International Emergency Economic Powers Act (“IEEPA”), the National Emergencies Act, and the Trade Act of 1974. Goods originating from Canada and Mexico and presented for entry into the U.S. are subject to U.S. tariffs levied at the rate of 25% on the value for duty. Certain energy goods originating in Canada are subject to a lower 10% tariff.[1]

As a result of  United States Executive Order issued on March 6, 2025, Canadian-origin imports qualifying under the Canada-U.S.-Mexico Free Trade Agreement (the “CUSMA”) are temporarily exempt from the 25% duty levied on Canadian imports. The March 6, 2025, Executive Order also reduced duties for potash from Canada that does not qualify under the CUSMA from 25% to 10%. A 10% duty rate on Canadian energy and energy resources remains in place.

As a countermeasure to U.S. tariffs, Canada imposed a 25% surtax on U.S.-origin goods pursuant to the United States Surtax Order (2025-1),valued atC$30 billion. The surtax came into effect on March 4, 2025.

A 25% ad valorem tariff on all imports of steel and aluminum products, as well as derivative steel and aluminum imports into the U.S., went into effect on March 12, 2025. This tariff was imposed under section 232 of the Trade Expansion Act of 1962.

Following a dollar-for-dollar approach, Canada is imposing 25% reciprocal tariffs on a list of steel products worth $12.6 billion and aluminum products worth $3 billion, as well as additional imported U.S. goods worth $14.2 billion, for a total of $29.8 billion as of March 13, 2025. The list of additional products affected by counter-tariffs includes tools, computers and servers, display monitors, sports equipment, and cast-iron products.[2]

The U.S. tariffs do not appear to apply to certain imported goods that are currently subject to the U.S. de minimis exception. However, such duty-free de minimis treatmentwill cease to be available for otherwise covered articles upon notification by the Secretary of Commerce to the President that adequate systems are in place to fully and expeditiously collect tariff revenue.  President Trump has stated that the tariffs are necessary to combat an extraordinary threat to U.S. national security, including public health risks posed by drug trafficking.[3]

Canadian Retaliatory Measures

Former Canadian Prime Minister Justin Trudeau announced, “Canada will not let this unjustified decision go unanswered.”[4] The first phase of Canadian retaliatory measures was swiftly imposed following the announcement of U.S. tariffs.[5] Effective Tuesday, March 4, 2025, certain U.S.-origin goods imported into Canada are subject to a 25% surtax on the value of duty. 

The surtax is imposed under the United States Surtax Order (2025-1). The surtax applies to certain U.S.-origin goods listed as tariff items in Schedule 3 to the order and imported into Canada. Goods originating from the U.S. are those eligible to be marked as goods of the U.S. in accordance with the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations.[6] The Schedule to the United States Surtax Order (2025-1) contains a complete list of goods subject to the surtax.The surtax also appears to apply to U.S.-originating goods that may be eligible for the remission of customs duties, sales, or excise taxes under the Postal Imports Remission Order or the Courier Imports Remission Order. The surtax payable is in addition to any other duties owing, such as any applicable anti-dumping duties.

Exemptions

The surtax should not apply to the majority of goods classified under, or goods that should be classified under, Chapter 98 of the Schedule to the Customs Tariff [Special classification provisions – non-commercial], with some exceptions.[7]  It should also not apply to goods that may be classified under the tariff items of Chapter 99 of the Schedule to Canada’s Customs Tariff [Special classification provisions – commercial], with some exceptions.[8]

The surtax should not apply to U.S. goods in transit to Canada on March 4, 2025, including goods that were already in transit before the surtax came into force. “In transit to Canada” refers to goods that were bound for Canada but have not yet arrived and remain in the control of a carrier. An importer must prove that the goods in their possession were in transit to Canada to demonstrate that the surtax does not apply. Proof may be requested by the CBSA and may take the form of shipping documents, report of entry documents, and cargo control documents.[9]

Proof of Origin

Proof of origin must be provided for all imported goods. Exceptions to this proof of origin requirement are set out in the Proof of Origin of Imported Goods Regulations and Customs Notice 20-22: The Canada-United States-Mexico Agreement’s (CUSMA) Regulatory Amendments and New Regulations Made Pursuant to the Customs Act.[10]

For commercial goods, proof of origin can take the form of a commercial invoice or any other documentation that includes the following minimum data elements:

  • importer, exporter, or producer certification of origin;
  • certifier;
  • exporter;
  • producer;
  • importer;
  • description and HS tariff classification of the good;
  • origin criteria;
  • blanket period; and
  • authorized signature and date.

These minimum data requirements are set out in Annex 5-A (Minimum Data Elements) of CUSMA and replicated in Appendix H of Memorandum D11-4-2: Proof of Origin of Imported Goods.

The importation of “casual goods” (meaning non-commercial goods) is considered to originate in the U.S. when:

  • the goods are marked as a good of the U.S.; or
  • the goods have no country of origin and there is no evidence that they are a product of a country other than the U.S. 

Phase 1 Response

Canada’s first phase response includes tariffs on $30 billion in goods imported from the U.S. The list includes products such as orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and certain pulp and paper products.

Phase 2 Response

If the U.S. continues to apply tariffs on Canada, the Canadian government intends to impose additional countermeasures on $125 billion worth of U.S.-origin imports. Phase 2 measures will apply to products such as electric vehicles, fruits and vegetables, beef, pork, dairy, electronics, steel, aluminum, trucks, and buses.

The Canadian government welcomes input on the proposed tariff measures and will accept submissions from the public during a 21-day comment period, which runs until March 25, 2025.[11]

Actionable Steps

To optimize customs processes and enhance overall efficiency, consider the following key actions:

  • Conduct a gap analysis to assess current customs systems and processes, identifying areas for improvement and optimization.
  • Perform a sensitivity analysis to evaluate potential tariff impacts and assess the viability of alternative strategies.
  • Minimize the value for duty of goods by applying relevant customs rules, such as the first sale for export or intercompany sales.
  • Evaluate the impact of supply chain adjustments, including scenarios such as importing unsold inventory or shifting to wholesale-level imports.
  • Explore potential tariff relief measures, such as exclusions, exemptions, or remissions, to reduce costs and improve compliance.

Details on the Remissions Process

A remission application is essentially a request to cancel duties that would otherwise be imposed. Successful applications typically emphasize how granting the remission serves the public interest.[12]

Relevant factors may include:

  • the necessity of the remission to preserve jobs and support the economy;
  • evidence that granting the remission will not harm domestic industry; and
  • the inability to source alternative goods in a timely manner that are not subject to the surtax.

Alternative Strategies

  • Shift production lines to optimize costs and mitigate duty impacts.
  • Diversify into other markets to reduce dependency on a single region.
  • Amend supply contracts to pass on all or part of the increased duties.

Canada’s Mitigation Strategies

The Canadian government is establishing a remission process to consider requests for exceptional relief from the tariffs imposed in response to U.S. tariffs.[13]

More information

Now is the time to review your import/export processes to minimize the impact of tariffs and mitigate the risks associated with potential changes. Evaluating whether there is a more strategic method for importing goods can help reduce tariff exposure and ensure compliance.

Our interdisciplinary team has extensive experience with proven strategies and can implement them to safeguard your business. Taking action now is critical to maintaining profitability.

For more information on how commercial importers can minimize the impact of tariffs and surcharges, see our article, The US tariffs and Canadian retaliatory measures: What you need to know,which outlines several steps that may assist your business.

Please contact our Global Trade and Customs Group at Miller Thomson LLP for details and updates on the latest developments, as well as tailored strategies to navigate the U.S. tariffs and the Canadian surtax effectively.

[1]     See the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.), the National Emergencies Act (50 U.S.C. 1601 et seq.), section 604 of the Trade Act of 1974, as amended (19 U.S.C. 2483), and section 301 of title 3, United States Code.

[2] The list of products from the United States subject to 25% tariffs effective March 13, 2025, is provided at the following link: https://www.canada.ca/en/department-finance/news/2025/03/list-of-products-from-the-united-states-subject-to-25-per-cent-tariffs-effective-march-13-2025.html

[3]     See Department of Homeland Security, US Customs and Border Protection, Notice of Implementation of Additional Duties on Products of Canada Pursuant to the President’s Executive Order 14193, Imposing Duties to Address the Flow of Illicit Drugs Across Our Northern Border (Publication date: 3/6/2025) and Executive Order 14193 of February 1, 2025.

[4]     Prime Minister of Canada Justice Trudeau, Statement by the Prime Minister on unjustified U.S. tariffs against Canada (March 3, 2025).

[5]     See United States Surtax Order (2025), SOR/2025-15under subsection 53 and paragraph 79 of the Customs Tariff; and Government of Canada, Customs Notice 25-10: United States Surtax Order (2025-1)(March 4, 2025).

[6]     SOR/94-23

[7]     See Government of Canada, Customs Notice 25-10: United States Surtax Order (2025-1) at paragraph 17.

[8]     See Government of Canada, Customs Notice 25-10: United States Surtax Order (2025-1) at paragraph 8.

[9]     See Government of Canada, Customs Notice 25-10: United States Surtax Order (2025-1) at paragraph 17.

[10]    See Government of Canada, Customs Notice 25-10: United States Surtax Order (2025-1) at paragraphs 12 – 15.

[11] The electronic comment submission form is provided at the following link: https://forms-formulaires.alpha.canada.ca/en/id/cm7upmkx9008rx268zhy9l6pj

[12] The process for requesting a remission is provided at the following link: https://www.canada.ca/en/department-finance/programs/international-trade-finance-policy/process-requesting-remission-surtaxes-that-apply-on-certain-goods-china.html

[13]    Government of Canada, Department of Finance Canada, Canada announces robust tariff package in response to unjustified US tariffs (March 4, 2025).