1) U.S. tariff updates

• Tariff exemptions for CUSMA compliant Canadian imports into the U.S. until April 2. President Trump announced on March 3 that the tariffs he threatened under the International Emergency Economic Powers Act (IEEPA), namely, 25% across-the-board tariffs & the 10% energy tariff, would enter into force on March 4 at 12:01 a.m. However, on March 6, President Trump signed an Executive Order that temporarily suspended these tariffs on Canadian goods that claim and qualify for CUSMA preference until April 2 (see the related Fact Sheet for more information). Notably, any tariffs that were collected from March 4-6 will not be refunded.

According to a White House official that briefed reporters, only 38% of imports from Canada used CUSMA preferences last year whereas 50% of imports by Mexico did. These figures reflect the fact that the Most Favoured Nation (MFN) tariffs via the WTO were 0% or relatively low at the time and there was therefore often not a need for Canadian exporters to utilize tariff preference under CUSMA to ship to the U.S. It is expected that there will now be a shift towards using the CUSMA preference to avoid the tariffs. Economists have come up with different numbers for how many goods the tariff suspension could affect. According to calculations by the Peterson Institute for International Economics, about 85% percent of U.S. merchandise imports from Canada and Mexico may be eligible for preferential tariffs under CUSMA.

Finance Canada is interpreting ‘CUSMA-compliant’ trade based on whether companies claim CUSMA preferential treatment when exporting goods to the U.S. (i.e. by completing the necessary trade documentation for CUSMA tariff rates) and whether they meet the CUSMA rules of origin provisions. Additionally, according to Finance Canada, transitioning from Most Favored Nation (MFN) status to CUSMA preference may not be overly burdensome for many companies, as they may already be complying with CUSMA's rules of origin requirements.

• Other tariff exemptions and adjustments. In addition to the exemption for CUSMA compliant Canadian imports, the following temporary exemptions and adjustments to the IEEPA tariffs against Canada are now in place:

• • There is a lower 10% tariff on any potash imported from Canada and Mexico that falls outside the CUSMA preference.
  • On March 5, the White House announced that a 30 day tariff exemption would be granted for vehicles made in compliance with USMCA “so they are not at an economic disadvantage.”
  • On March 2, an Executive Order was issued that creates a temporary exception for goods eligible for duty-free de minimis treatment from Canada (e.g. shipments valued at less than $800). Per the Executive Order, this exemption will cease to be available once adequate systems have been put in place to collect tariff revenues.

• Steel and aluminum tariffs (25%) – IN EFFECT AS OF MARCH 12. President Trump confirmed steel and aluminum tariffs at the original rate of 25%. "Pursuant to his previous executive order, a 25 per cent tariff on steel and aluminum with no exceptions or exemptions will go into effect for Canada and all of our trading partners at midnight, March 12."

The U.S. Federal register notices for tariffs on steel and aluminum have been published. These include extended lists of targeted derivative products. Notably, the scope products covered is substantially larger than the scope of products covered in the steel and aluminum tariffs from 2018. Even if your exports were not impacted by U.S. tariffs in 2018, it is important to verify whether your businesses might be impacted by the latest tariffs by checking the tariff codes in the federal register notices. Many downstream products likely will be impacted (e.g. auto parts, furniture, gym equipment, etc.)

2) Canada’s retaliatory tariffs and other responsive measures

• Canada on Wednesday announced new trade duties on some $30 billion worth of U.S. good in response to President Donald Trump implementing universal steel and aluminum tariffs. "The U.S administration is once again inserting disruption and disorder into an incredibly successful trading partnership and raising the costs of everyday goods for Canadians and American households alike" said Francois-Philippe Champagne,Canada's  minister of innovation, science, and industry.

• New federal supports for impacted businesses. On March 7, the federal government announced a new $6 billion support package to help businesses navigate U.S. tariff related disruptions. Notably these measures include temporarily relaxing rules around a program that allows employees to receive partial EI benefits while working reduced hours, updated Investment Canada Act Guidelines, and measures to ensure businesses have liquidity (e.g. Trade Impact Program through EDC, loans via BDC, and financing via Farm Credit Canada for Canadian ag and food industry).

• Provincial non-tariff retaliatory measures. All provincial governments have announced non-tariff counter measures in response to the U.S. tariffs. Such measures include taking U.S. liquor off store shelves, restricting U.S.-based companies from taking part in government procurement, financial assistance for impacted businesses. You can view each individual province’s non-tariff measures below.
  • Alberta: Alberta pushes back on illegal U.S. tariffs | alberta.ca
  • Ontario: Tariff Update
  • Quebec: U.S. Tariffs - Priority: Protecting Our Economy Government of Quebec
  • British Columbia: B.C.’s response to unjustified U.S. tariffs - Province of British Columbia
  • Nova Scotia: Statement on U.S. Tariffs | Government of Nova Scotia News Releases
  • New Brunswick: Government shares provincial tariff action plan
  • Manitoba: Tax deferrals coming, other measures to follow as Manitoba fights back against U.S. 'economic attack': Kinew | CBC News
  • Saskatchewan: Saskatchewan To Halt Us Alcohol And Procurement | News and Media | Government of Saskatchewan
  • Prince Edward Island: tariff_response_plan.pdf
  • Newfoundland and Labrador: Statement from the Premier in Response to U.S. Tariffs - News Releases

3) Finance Canada’s consultation on counter tariffs

Finance Canada has launched its 21-day consultation on the second phase of Canada’s tariff response (25% tariffs on $125 billion worth of imported goods). The consultation webpage can be viewed here.

The government is seeking views on the proposed tariff measures, including the scope of goods targeted by Canada’s second phase of counter tariffs. The list of potential goods that might be tariffed can be viewed here. Notably, this list of goods is cumulatively valued at approximately $200 billion, whereas the second phase of retaliatory tariffs is intended to only capture $125 billion worth of goods. This disparity has been acknowledged by Finance Canada and points to the fact that there is presently flexibility regarding goods the government might remove from its counter tariff list.

Input on tariff measures should be provided by completing this form. If you wish to provide additional information not included in the form, as well as any additional views or comments you would like to provide on Canada's tariff response, you can also e-mail consultations@fin.gc.ca, and include "U.S. Tariff Consultations" in the subject line.  While the notice period ends on April 2, the Government may need to respond to additional tariff threats from the United States before this date. Should the U.S. impose additional tariffs on Canada, the government would consider all options in response.