U.S.–Canada Tariff Threats Are Not Going Away: How Businesses Can Prepare

Effective Tuesday, March 4, 2025, following a 30-day reprieve and much confusion, it now appears that Canadian imports into the United States will be subject to an additional 25% tariff, except for Canadian energy products, which will be subject to a 10% tariff. Energy products include “critical minerals,” such as aluminum, uranium and other minerals listed by the US Department of Energy.

Additional U.S. tariffs on imported steel and aluminum have been announced, with an effective date of March 12, 2025. These tariffs are not limited to Canadian goods, and they are expected to apply in addition to the Canada-specific tariffs mentioned above. In addition to both of these categories of tariffs, the U.S. is also poised on April 2, 2025, to apply “reciprocal” tariffs to match any imposed on U.S. goods by other countries. It has been reported that the U.S. President considers Canadian goods and services tax/harmonized sales tax to be targeted for reciprocal tariffs.

It is widely expected that if U.S. tariffs do go ahead, the Canadian government will impose retaliatory tariffs on U.S. goods. Previously, Canada announced that it would impose tariffs in two phases, with phase 1 targeting select U.S.-originating products, including orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and pulp and paper. The complete list from February 2025 is available here.

The next phase of retaliatory tariffs will be effective following a consultation period and will include a wider range of products, such as passenger vehicles (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 list of these products is not yet available.

The Canadian federal government and provincial governments have also indicated that they may retaliate with non-tariff measures, including barring U.S. companies from public procurement processes. The scope of entities included in such procurement bans and the extent of connection to the U.S. to be included in any such ban is not yet known.

Prepare for Tariffs

As described in our recent bulletin, U.S. Imposes Sweeping Tariffs on Canada; Canada Announces Countermeasures, tariffs will have wide-ranging impacts on Canadian businesses and their global supply chains, and businesses should review their supply chains, supplier contracts and customs valuation methodologies to assess the financial and operational impact of tariff measures.

Canadian businesses should take proactive steps, including:

• Review contractual arrangements to evaluate who is the “importer” and who bears the costs of additional surtaxes if new tariffs are imposed.
• Quantify the risk to determine the financial viability to the business of the various tariffs.
• Identify alternative supply options, including under Canada’s extensive network of international treaties (see our Doing Business in Canada Guide).
• Consider legal dispute options to directly challenge the application of tariffs to specific goods or to assist in initiating and supporting state-to-state proceedings under international trade agreements.
• Reconfigure or reduce cross-border supplies through M&A or redomiciling options where available to reduce reliance on cross-border sales of goods for the business.
• Reach out to the federal and/or provincial government if there is any risk your business may be included in the scope of a “buy Canadian” program, to try and secure an exemption.
• Consider short- to mid-term financing options to weather the impact of tariffs as the underlying political issues play themselves out.

Our team is closely monitoring developments, and we will provide updates when more details are made available by Canada and the U.S.

For further details, please contact the authors or any other member of the Blakes International Trade group.