15 frequently asked questions

The new trade and tariff measures affecting Canadian companies can be grouped into four categories.

The first are border action tariffs that the US administration says are aimed at pressuring Canada, Mexico and China to take stronger measures against drug trafficking and illegal immigration, while supporting a broader strategy to protect US industries. On March 4, 2025, and March 6, 2025, the White House made several announcements that included:

• 25% tariffs on goods that do not satisfy the Canada-U.S.-Mexico Agreement (CUSMA) rules of origin.

• A lower 10% tariff on Canadian energy products that fall outside CUSMA. 

• A lower 10% tariff on Canadian potash that falls outside CUSMA.

• Canadian goods compliant with CUSMA would be exempt from tariffs until April 2, 2025.

Secondly, on March 4, 2025, the Canadian government announced targeted countermeasures. The first phase imposes tariffs on $30 billion worth of US goods, including various agricultural products, beverages and paper products. Additionally, a larger list of US goods, including machinery, electrical equipment and manufactured goods, will face tariffs starting April 2, 2025. The Canadian government indicated that these countermeasures will remain in effect until all US tariffs are removed.

Third, as part of President Trump's America First Trade Policy, the administration launched an investigation into its trade imbalance and other countries’ trade practices. Additionally, on March 12, 2025, the US applied a 25% tariff on imports of steel and aluminum products from all countries, including Canada. US officials have also identified copper, timber, semiconductors and pharmaceuticals for further investigation. And on March 26, 2025, President Trump announced plans to impose tariffs on imports of automobiles and certain automobile parts. 

Finally, China imposed tariffs on Canadian agricultural and food products that took effect March 20. These are in response to Canadian surtaxes on Chinese-origin steel and aluminum.

We estimate that a 25% tariff on Canadian products would result in approximately $73 billion a year in tariffs, based on US Census Bureau data. Additionally, a 10% tariff on energy resource products would result in $13 billion worth of tariffs annually. The most-affected Canadian products include motor vehicle and aerospace products and parts, metal manufacturing materials, machinery and equipment manufacturers, chemicals, food items and agricultural products. The exact impact would vary between sectors and individual businesses, depending on your upstream supply chain and US market circumstances for your products.

US tariffs and a Canadian surtax are expected to increase costs for Canadian businesses, disrupt supply chains and reduce profit margins. Every business in Canada—even those that do not directly trade with the US—may be affected. Many Canadian businesses are integral parts of the value chains of companies that would be directly impacted by trade measures. Additionally, we expect any trade measures to negatively affect Canadian economic growth, the value of the Canadian dollar and business investments in Canada.

No. Services, including Software as a Service and software digitally received, are not tangible goods. As such, they would not be covered under the current tariff environment.

The US trade measures could significantly affect companies importing affected products from China and Mexico.

Paragraph H of the US executive order on Canada initially stated that duty-free de minimis treatment, which allows for goods below a certain threshold to be imported into the US, are not eligible to get the de minimis benefit, or section 321. On February 7, 2025, the US administration said section 321 would continue until such time that the requisite systems are in place to handle the processing and collection of revenue. When adequate systems are deemed to be in place to process and collect the applicable tariff revenue by the President, section 321 for Chinese-origin goods would no longer apply. This is significant because of the large number of e-commerce distributors in Canada distributing Chinese-origin e-commerce goods into the US. Those goods will no longer enter the US duty free. Instead, these items will be subject to the most-favoured-nation duty rate, plus any other tariffs already imposed on China under section 201 or 301 of the US Trade Act and/or section 232 of the US Trade Expansion Act. These shipments will also be subject to the merchandise processing fee and any other relevant import fees as a result of the IEEPA. Once the US measures go into effect, we’ll see some companies go from paying no duties on goods entering the US to being charged upwards of 40% of the value of the goods.

In Mexico, the government has taken several trade and customs actions since April 2024 to promote domestic production and exports as well as align with the US strategy of reducing the supply of goods and materials from China. Canadian companies that manufacture products in Mexico for export to Canada or the US would do well to re-evaluate their supply chains by considering suppliers from countries that are trade partners of Mexico. They should also review their operating model, corporate structure and use of maquiladoras (duty- and tariff-free factories) and contract manufacturers.

The US will not apply tariffs to Mexican goods traveling from Mexico to Canada if the goods are kept in a bond for transit. Tariffs will apply if the goods are customs cleared on a consumption entry into the US, meaning they have entered the commerce of the US.

The wording of the US executive orders suggests items will be subject to tariffs every time they cross the border. This will be of particular concern to companies in the manufacturing sector as many parts and components move across the border multiple times before being assembled into a finished product.

Paragraph G of the US executive order specifies that no duty drawback or refund of duties will be available for those tariffs imposed under the order and eliminates any potential financial relief for businesses affected by these tariffs. This is significant because US companies have historically been able to perform a US duty drawback and claim back the duty they pay on inputs to finished product when goods are imported into the US and subsequently exported or used in the manufacture of a finished good that is typically exported.

There are mitigation provisions within the customs legislation in both Canada and the US when there are no changes to an item’s country of origin. This may apply when components are exported from the US to Canada for assembly into finished goods, provided they do not change in value or undergo substantial transformation or improvement. Our teams are exploring the details.

Canada has released a framework for Canadian companies to apply for a remission on certain goods used as inputs imported from the US that cannot be sourced from within Canada or be reasonably sourced from other countries.

The concept of remission is not a new one, as it has been in place already with respect to other tariffs (e.g. China).¹ The remission process requires submitting a comprehensive outline of your company's operations, a detailed description of the goods and their tariff classifications, and evidence that the product cannot be sourced from Canadian or non-U.S. suppliers. Additionally, you must provide information on the cost of manufacturing, the impact of remission on various aspects of operations and detailed reasons for requesting remission, including any supporting documentation. Our teams can help you with the remission submission process.

The federal government and several provinces have also released new tariff relief measures. In some cases, businesses can combine federal and provincial government supports, helping them move faster by making critical investments more financially viable.

The importer of record is the person or entity responsible for paying duties and taxes in the jurisdiction to which the goods are being imported. US tariffs are imposed on the US importer of record and a Canadian surtax applies to the Canadian importer of record.

Identifying the importer of record helps determine whether US tariffs are paid by your US customer or your company itself if you’re using a non-resident importer (NRI). Similarly, it also helps identify who is responsible for paying Canadian surtaxes—namely, the Canadian customer or US seller.