Key Details on U.S. Tariffs & Canada’s Retaliatory Tariffs


Trade Update • Feb 2, 2025

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n February 1, President Trump issued executive orders under the International Emergency Economic Powers Act (IEEPA), imposing new tariffs on Canada, Mexico, and China in response to declared emergencies at the border related to fentanyl, drug trafficking, and illegal immigration. With tensions escalating, businesses engaged in U.S.-Canada trade should stay informed about these evolving developments and assess their potential impact.

Note: GHY will continue to provide updates as they come – with expected further details to be released by the USA in the Federal Register and Canada’s International Trade and Finance Policy.

Tariffs on Canadian Imports

The executive order sets forth the following key provisions for Canadian goods:

  • Legal Authority: International Emergency Economic Powers Act (IEEPA)
  • Tariff Rate:
    • 25% on all Canadian-origin articles, as specified in a forthcoming Federal Register (FR) notice.
    • 10% on energy and energy resources, as defined in the same forthcoming FR notice. (Sections 2(a), 2(b))
  • Effective Date:
    • Applies to goods entered for consumption or withdrawn from warehouse on or after 12:01 a.m. ET on February 4, 2025.
    • Exemptions apply only to shipments that were loaded onto a vessel or in transit before February 1, 2025, provided the importer certifies to CBP as required in the FR notice. (Sections 2(a), 2(b))
Additional Key Provisions:
  • Cumulative Duties: These tariffs apply in addition to any other existing tariffs on affected goods. (Section 2(c))
  • No De Minimis Exemptions: The $800 de minimis exemption under 19 USC 1321 will not apply. (Section 2(h))
  • No Drawback Available: While drawback remains for other duties, it is not permitted for these tariffs. (Section 2(g))
  • Duty Inversion Restrictions: Tariffs under this order will not be eligible for duty inversion benefits for goods entering the U.S. from foreign trade zones. (Section 2(f))
  • No Exemptions or Exclusions:
    • No exclusions for USMCA-originating goods.
    • The only exemptions apply to a very limited set of goods as defined by 50 USC 1702(b), including:
      • Communications,
      • Humanitarian donations,
      • Certain informational materials, and
      • Personal baggage for travelers. (Section 2(j))

The order also warns that if Canada retaliates, the President may expand or increase tariffs to reinforce the policy. (Section 2(d)).

Read More: Escalating Trade Tensions – U.S. Imposes Tariffs, Canada and Mexico Retaliate

Canada’s Retaliation

In response, Prime Minister Justin Trudeau announced retaliatory tariffs and additional trade measures against the U.S.

Retaliatory Tariffs
  • Total Impact: 25% tariffs on $155 billion in American goods, implemented in two phases.
  • Tariff Scope: The tariffs will apply to U.S.-origin products, consistent with Canada’s USMCA marking rules.
Phase 1 – Immediate Tariffs (February 4, 2025)
  • $30 billion worth of U.S. goods will face immediate tariffs. HS codes to which the tariffs apply are listed in an Order-in-Council.
  • Targeted Products (including but not limited to):
    • Orange juice, peanut butter, coffee, wine, spirits, beer
    • Appliances, apparel, footwear, motorcycles
    • Cosmetics, pulp and paper
Phase 2 – Additional Tariffs (February 21, 2025)
  • $125 billion worth of U.S. products will be subject to tariffs, following a public consultation process.
  • Targeted Products (including but not limited to):
    • Passenger vehicles and trucks, including electric vehicles
    • Steel and aluminum products
    • Certain fruits and vegetables
    • Aerospace products
    • Beef, pork, dairy
    • Trucks, buses, recreational vehicles, and recreational boats
Additional Non-Tariff Measures

Beyond tariffs, Canada is exploring additional trade restrictions, including measures on critical minerals, energy, and other strategic sectors. Some provinces have already enacted retaliatory actions:

Nova Scotia:

  • Doubled commercial vehicle tolls at Cobequid Pass for U.S. trucks.
  • Banned U.S. alcohol from provincial liquor stores.
  • Canceled government contracts with U.S. businesses and limited U.S. firms’ access to provincial procurement.

British Columbia:

  • Implemented similar restrictions on U.S. alcohol and government procurement opportunities.

Canada’s Remission Process 

The government is also taking steps to mitigate the impact of these countermeasures on Canadian workers and businesses. It is launching a remission process for Canadian businesses to request exceptional relief from the tariffs that are imposed as part of Canada’s response to the U.S. applying unjustified tariffs on Canada.

All options remain on the table as the government considers additional measures, including non-tariff options, should the U.S. continue to apply unjustified tariffs on Canada.

Potential Economic Impacts

Economists warn that escalating tariffs could lead to higher consumer prices, supply chain disruptions, and job losses. The automotive, energy, and agricultural sectors are expected to bear the brunt of these trade barriers.

  • Automotive Industry: Higher tariffs on steel and aluminum could increase vehicle production costs.
  • Energy Sector: A 10% tariff on Canadian energy imports may drive up fuel prices in the U.S.
  • Agriculture: U.S. farmers and ranchers, already facing challenges from previous trade disputes, could experience further market access restrictions.

The full economic impact will depend on the duration of the tariffs and any potential negotiations among the affected nations.

The imposition of new tariffs by the United States and the retaliatory actions by Canada and Mexico have heightened trade tensions in North America. As each country moves to protect its interests, these developments highlight the complexity of North American economic interdependence.

Businesses and policymakers alike are closely monitoring the situation, hoping for a resolution that prevents further economic disruption and maintains the stability of cross-border trade.

How GHY Can Help?

GHY specializes in helping businesses navigate and reduce the impacts of tariffs through strategic solutions tailored to their needs. Our experts can audit your supply chain to identify inefficiencies, uncover cost-saving opportunities, and ensure compliance with evolving trade regulations. We also employ tariff engineering techniques to optimize product classification and sourcing strategies, minimizing duty exposure and maximizing profitability.

By partnering with GHY, your business gains access to the tools and expertise needed to streamline operations and stay competitive in a challenging trade environment.

Contact Us Today! gts@ghy.com, or call +1 (800) 667-0771.

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