On April 2, 2025, President Trump signed executive order Regulating Imports with a Reciprocal Tariff, establishing a 10% baseline tariff on most worldwide imports to the United States and higher tariffs on approximately 60 other countries. Canada and Mexico are currently exempt from these new measures. The Phase 2 retaliatory measures on C$130-billion of U.S. goods previously announced by Canada also remain paused.
Existing U.S. tariffs on certain Canadian goods, including non-CUSMA-compliant (Canada-United States-Mexico Agreement) goods, steel and aluminum, and automobiles, continue to apply. Please see our prior bulletins at our Cross-Border Tariffs topic centre and our continuously updated Timeline of Key Dates and Documents for information relating to these prior measures and Canada’s response.
“Reciprocal” U.S. Tariffs on Global Imports
Effective April 5, 2025, a baseline 10% tariff applies to all imports into the U.S., subject to certain exclusions set out below. Additionally, country-specific tariffs were announced to take effect on April 9, 2025, for imports from 59 selected countries, including the EU (20%), South Korea (25%), and Japan (24%). However, these higher tariffs have now been suspended for 90 days (until July 9, 2025), except for those imposed on China.
The term “reciprocal” has drawn criticism, as the rates are not based on foreign tariffs on U.S. goods but rather seem to be driven by the U.S.’s trade deficits with the respective countries. Notably, the baseline 10% tariff applies even to countries with trade surpluses with the U.S.
Exclusions from the “Reciprocal” Tariffs
Goods excluded from the additional tariffs include:
- Canadian and Mexican goods subject to the existing U.S. tariffs of 25% and 10% on all Canadian goods and energy products, respectively, which do not comply with CUSMA (March 4 tariffs)
- Goods subject to the U.S. tariffs on steel and aluminum
- Goods subject to the U.S. tariffs on autos and auto parts
- Other goods specifically exempted, including pharmaceuticals, semiconductors, critical minerals, energy and energy products, lumber articles, and certain copper products
Further, if at least 20% of the value of the good originates in the U.S., the “reciprocal” tariff applies only to the non-U.S. content.
If the March 4 tariffs against Canadian and Mexican goods are suspended or withdrawn, a 12% tariff will apply to all non-CUSMA-compliant goods from these countries, and CUSMA-compliant goods, energy, energy sources and potash will benefit from a 0% tariff rate.
U.S Tariffs on Autos and Auto Parts
U.S. presidential proclamation “Adjusting Imports of Automobiles and Automobile Parts into the United States” dated March 26, 2025, imposes a 25% U.S. tariff on imports of autos and auto parts (U.S. auto tariffs). These tariffs are effective for autos on April 2, 2025, and for auto parts on a date to be no later than May 3, 2025. Included are exemptions for the U.S. content of the auto or auto part.
Canada’s Retaliation to U.S. Auto Tariffs
In addition to the two previous rounds of retaliatory measures, Canada has introduced a third round of retaliatory tariffs in response to the U.S. auto tariffs, effective April 9, 2025. These include:
- A 25% tariff on all non-CUSMA-compliant vehicles imported from the U.S.
- A 25% tariff on the non-Canadian and non-Mexican portion of vehicles imported from the U.S. that are CUSMA-compliant
Canada is also implementing a remission framework to allow for relief or refund of the tariffs on U.S. vehicles.
Action Steps for Businesses
1. Exporters to the U.S. Should Certify CUSMA-Compliant Goods
Canadian goods exported to the U.S. are currently tariff-free if they meet the “rules of origin” requirements under CUSMA. Goods qualify if they are wholly obtained or produced in a CUSMA territory (Canada, the U.S. or Mexico), made entirely with materials mined or produced in the CUSMA territory, or undergo sufficient processing in the CUSMA territory.
CUSMA contains very specific rules of origin based on a goods’ Harmonized System (HS) classification. Exporters should review origin rules to confirm whether they can benefit from the preferential treatment and prepare certificates of origin to support such claims.
2. Importers Into Canada Should Review HS Classifications
Canadian retaliatory tariffs apply to a subset of U.S. goods based on their HS classification. Significantly, there is no equivalent exemption from the Canadian tariffs on CUSMA-compliant U.S. goods imported into Canada. It is therefore critical to review HS classifications to ensure proper tariff classification.
Additionally, Canadian tariffs only apply to goods 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 (e.g., Made in the USA). For non-U.S. goods that are subsequently integrated with U.S. goods, or goods that are only partially processed or manufactured in the U.S., a careful analysis of the country of origin should be undertaken to ensure that tariffs (or non-tariffs) are being applied properly.
Importers should also explore the availability of other relief mechanisms, such as duty relief and drawback programs or remission.
We encourage businesses to contact the authors of this bulletin or any other member of our International Trade group if they are concerned about how tariffs may affect them.
For the latest information, see our Cross-Border Tariffs topic centre and our Timeline of Key Dates and Documents.
