Trump imposes 25% tariffs; Canada responds

President Trump has signed an executive order imposing a 25% tariff on all Canadian imports and a 10% tariff on Canadian energy resources. Canada announced retaliatory tariffs of 25% phased in on $155B worth of U.S. goods.

President Trump’s action on tariffs has generated broad criticism and concern from Canadian officials and industry. U.S. industry associations and unions, including steel, auto, retail and consumer industry and union leaders, have expressed criticism of President Trump’s tariffs.

Torys’ Canadian and New York offices are monitoring these developments closely and continue to provide regular briefs on the legal ramifications of the tariffs and other cross-border policy developments on the horizon.

U.S. tariffs on Canada

The United States has imposed a 25% tariff on all Canadian goods, other than energy resources, to come into effect Tuesday, February 4. Canadian energy resources (crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals) will be tariffed at a lesser amount of 10%.

The President has reserved the power to increase tariffs, if necessary, in response to retaliatory tariffs from Canada. Duty drawback (which allows for the refund of duties, taxes, and fees paid on imported goods that are subsequently exported) will also not be available for these tariffs.

The President unilaterally invoked the tariffs under the International Emergency Economic Powers Act, which authorizes the U.S. President to regulate international commerce after declaring a national emergency in response to any “unusual and extraordinary threat”. The President cited the purported failure of Canada to counter the flow of illicit drugs, particularly fentanyl, into the United States as a public health crisis and national emergency.

How long will U.S. tariffs last?

The Secretary of Homeland Security is ordered to regularly consult with key officials on the northern border situation and to inform the President of any circumstances that “indicate that the Government of Canada has taken adequate steps to alleviate this public health crisis through cooperative enforcement actions”. If the President then determines that Canada has taken sufficient action, the tariffs will be removed.

Canada’s response

Canada has announced phased tariffs in response to the U.S. tariffs. On Tuesday, February 4, Canada will impose 25% tariffs on $30B of U.S. goods, including products such as “orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and pulp and paper”.

Those tariffs will be followed by a 25% tariff on an additional $125B of U.S goods. A full list of those goods will be made available for a 21-day comment period, and will include products such as “passenger vehicles and trucks, including electric vehicles, steel and aluminum products, certain fruits and vegetables, aerospace products, beef, pork, dairy, trucks and buses, recreational vehicles, and recreational boats”. Multiple provincial governments have already announced retaliatory actions, including excluding U.S. vendors from procurement processes, and ordering their respective provincial liquor authorities to no longer purchase American alcohol. 

Seeking exemptions from tariffs

The Government of Canada has outlined a process for requesting remission of tariffs on certain goods from the U.S., effective February 4, 2025. Remission requests will be considered in cases where goods cannot be sourced domestically or from non-U.S. sources, or in other exceptional circumstances that could severely impact the Canadian economy.

Canada will also be instituting a 21-day comment period for the second wave of tariffs, the details of which have not yet been announced.

Historically in the U.S., Section 232 exclusions include General Approved Exclusions and specific exclusions for individual requests, with a process involving objections, rebuttals, and surrebuttals, while Section 301 exclusions, particularly for tariffs on China, have varied over time with public comment periods and focus on product availability, economic impact, and strategic importance. At this time, there is no indication there will be an exemption process.

 
Read more Tariffs and trade briefs.