Welcome to 2025: Are You Ready for Tariffs?

Incoming United States President Donald Trump has announced his intent to impose a 25% tariff on imports from Canada when he takes office on January 20, 2025. Canada plans countermeasures on C$150-billion of U.S. imports — 10 times the amount targeted in 2018 to 2019.

Canada also imposed tariffs on Chinese electric vehicles (EVs), steel and aluminum in 2024, with new tariffs in critical manufacturing sectors expected in 2025.

Are you ready for tariffs? This bulletin highlights recent developments and key lessons for navigating the evolving landscape.

What Are Tariffs? 

A tariff is a form of tax or customs duty imposed on the import of goods. Tariffs raise the price of imported goods, privileging domestic products.

Under the World Trade Organization (WTO) and other trade agreements like the Canada-U.S.-Mexico Agreement (CUSMA), countries agreed to limit tariffs and apply the same rates to all parties. Imposing higher tariffs against another state may violate these treaties.

One exception is “anti-dumping duties” and “countervailing duties” (ADD/CVD). These are protective tariffs allowed under the WTO and other trade treaties in response to low-priced imports due to dumping or subsidizing by others.

Recent Developments in Tariffs

2025 is expected to see unprecedented new tariffs imposed between Canada and its largest trading partners. Recent developments include:

• U.S. tariffs against China. U.S. tariffs against China imposed in 2018 largely remain in place and have increased on EVs, steel and lithium-ion batteries. Additional tariffs on Chinese solar wafers, polysilicon and tungsten were announced in December 2024.
• Canadian tariffs against China. Canada imposed a 100% surtax on Chinese EVs and a 25% surtax on steel and aluminum products in August 2024. See our previous Blakes Bulletin.
• Retaliation by China. In September 2024, China commenced an ADD/CVD investigation into canola imports from Canada and requested WTO dispute consultations regarding Canada’s surtaxes on Chinese imports.
• Canada poised to expand tariffs against China. In fall 2024, Canada held consultations on new tariffs against Chinese imports in critical manufacturing sectors, including batteries, semiconductors, solar panels, critical minerals and clean technology.
• U.S. tariffs against Canada. In 2018, the U.S. imposed 25% tariffs on Canadian steel and 10% tariffs on Canadian aluminum, provoking C$16.6-billion in retaliatory tariffs. President Trump’s November 2024 threat to impose a 25% tariff would apply to all imports from both Canada and Mexico. 75% of Canadian exports are to the U.S.
• ADD/CVD duties proliferate. There are nearly 2,300 anti-dumping and countervailing duties in force worldwide. In 2024, the U.S. increased ADD/CVD on Canadian softwood lumber, and Canada imposed new ADD/CVD on Chinese pea protein. Canada maintains ADD/CVD duties against a range of products.

Lessons From Previous Tariff Rounds 

Tariffs are increasingly used to pursue a range of government policies, making it difficult to predict what measures will be enacted. However, previous tariff rounds hold valuable lessons:

• Retaliatory tariffs are imposed on a total value basis, not the same goods. In 2018, Canada responded to U.S. steel and aluminum tariffs with tariffs on a range of U.S. imports valued at C$16.6-billion, including iron, ketchup, household appliances, bourbon, toilet paper and orange juice.
• Some sectors are more likely to be targeted. The 2018 list of products affected by Canadian retaliatory tariffs prioritized products from Republican districts. Businesses should review the 2018 list and monitor announcements of goods likely to be targeted in 2025.
• Public consultations will be short. Engage early. Canada will likely hold short consultations on proposed countermeasures. However, engagement does not need to be limited to this process, and Canada is already preparing its list of countermeasures. Some industries were successful in advocating for exemptions in previous rounds.
• Remission orders will become available. In prior tariff rounds, Canada issued remission orders where short supply threatened production, for specified importers and where contractual requirements mandated sourcing from the U.S. or China (as applicable).

Prepare Yourself for Tariffs

Tariffs will have wide-ranging impacts on Canadian businesses and their global supply chains. Canadian businesses should take proactive steps, including:

• Review contractual arrangements to evaluate who the “importer” is and who bears the costs if additional tariffs are imposed.
• Review customs valuation methodologies. Tariffs apply based on “value for duty” of an import. Any overvaluation will increase tariff costs. Importing finished or intermediate goods at different levels of the supply chain can result in different values for duty.
• Participate in ADD/CVD proceedings in your sector. Businesses can initiate ADD/CVD proceedings or participate to support, oppose or ask for exclusions from duties.
• Identify alternative supply options, including under Canada’s extensive network of international treaties (see our Doing Business in Canada Guide).
• Consider dispute settlement. Canada’s trade treaties allow governments and, in some cases, private entities to dispute trade restrictions. Private industry plays an important role in initiating and supporting proceedings even where treaties only allow governments to bring disputes.

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 these measures will affect them.