Tax Insights: Canada imposes surtaxes on imports of various US-origin goods — What Canadian businesses need to do now

Visit our Tariffs and Trade Policy Resource Centre

Issue 2026-32

In brief

What happened? 

On August 25, 2026, the federal government announced that, effective September 8, 2026, Canada will impose a surtax on US-origin goods covering $27.6 billion of imports at surtax rates of 15%, 25% or 50%. This is in response to the additional 50% tariffs that the United States imposed, effective August 22, 2026, on $27.6 billion of Canadian-origin goods (i.e. the section 338 tariffs).¹ This Canadian countermeasure targets listed US-origin goods at the tariff-item level. The targeted US‑origin goods include steel and aluminum, dairy products and ingredients, appliances, agricultural equipment, pulp and paper, electronics, consumer goods, construction materials and transportation products. Previously implemented Canadian surtaxes on steel, aluminum and automobiles continue to remain in effect.

The federal government also announced $7.5 billion² in new and enhanced support for affected businesses and workers, and enhancements are also being made to the existing Large Enterprise Tariff Loan facility.

Why is it relevant?

The surtax is expected to be paid by the Canadian importer of record and to apply in addition to regular customs duties and applicable taxes. The commercial responsibility for the surtax may ultimately depend on Incoterms, purchase agreements and tariff pass-through provisions. The surtax may also increase GST payable at importation — the net cash-flow effect will depend on whether and when the importer can recover that GST as an input tax credit.

Actions to consider

Canadian importers should promptly confirm tariff classification and origin, quantify landed-cost and import GST effects, preserve evidence for goods that are already in transit and assess remission and federal support opportunities. They should wait for the final implementation and customs-accounting requirements, which will be available when the implementing Order in Council, Canada Gazette registration and Canada Border Services Agency (CBSA) guidance are released.

In detail

Surtax on targeted list of US-origin goods

Effective 12:01 am on September 8, 2026, Canada will impose a 15%, 25% or 50% surtax on a variety of US-origin goods that are imported into the country. The targeted list³ of covered goods is concentrated in sectors such as steel and aluminum, dairy, appliances, agricultural equipment, pulp and paper, plastics and electronics. The surtax applies even if the goods are eligible for preferential treatment under the Canada-United States-Mexico Agreement (CUSMA). The surtax on US-origin goods is intended to be a dollar-for-dollar, rate-for-rate response against US section 338 tariffs, with the list of products drawn from those targeted by the US section 338 tariffs and the section 232 tariffs (i.e. the sectoral tariffs on steel, aluminum, copper, automobiles, etc.). 

In-transit goods

Covered goods that are already “in transit” to Canada when the countermeasure takes effect on September 8, 2026 will not be subject to the new surtax. However, the meaning of “in transit,” the evidence required to support that the goods are “in transit” and the accounting process have not yet been confirmed. Importers should therefore keep contemporaneous shipment and departure records instead of relying only on expected arrival dates for goods in transit.

Remission

Remission may be available (on a case-by-case basis) for businesses with affected inputs that cannot reasonably be sourced from Canada or a non-US supplier, or when exceptional circumstances create severe economic harm to the business. Eligibility for remission is not automatic. As of the date of publication, it has not been confirmed that the United States Surtax Remission Order (2025) will apply to this new countermeasure.

“Origin” of goods

Determining the “origin” of a good is critical. Supplier location, the country from which the invoice was issued and the shipping route do not, by themselves, determine whether a product is US-origin. For purposes of this surtax, origin is determined under the country-of-origin marking rules that apply to CUSMA countries. However, eligibility for CUSMA treatment does not exempt a product from the surtax — a good that qualifies for CUSMA preferential tariff treatment will still be subject to the Canadian surtax if it is US-origin and falls within the targeted list of covered goods. Classification and origin conclusions should be supported by product facts and supplier documentation. Any changes to a product’s classification or origin position (which may qualify for a lower rate) would need to be supported by the governing rules and product facts.

Intercompany and other transactions

For intercompany transactions, businesses should determine which entity contractually bears the tariff/surtax costs and whether incremental costs could affect tested-party margins, pricing policies or existing benchmarks. For transactions and deals, the tariff/surtax exposure may affect forecasted EBITDA, cash flow, inventory values, working capital, purchase-price mechanisms, representations and indemnities, and post-close sourcing plans.

Next steps for Canadian businesses

Canadian businesses that import from the United States should:

• map the last 12 months of imports by tariff classification, product description, supplier, country of origin, value for duty and importer of record
• if they are the importer of record, forecast the higher duties (including surtaxes), taxes and fees and work with their customs broker and surety provider to determine whether their customs bond remains sufficient
• match affected tariff items to the announced 15%, 25% and 50% surtax rates, then model the surtax and other duties, import GST, margin and working-capital effects
• identify shipments moving around September 8 and retain purchase orders, commercial invoices, bills of lading or air waybills, carrier records, departure evidence, routing details and expected arrival dates
• review contracts and Incoterms to determine who bears the cost of the surtax and whether price‑adjustment, change-in-law or pass-through clauses are available
• diversify sourcing by identifying and (where commercially feasible) shifting purchases from US suppliers to Canadian or other non-US suppliers and document any constraints that may support a case-by-case remission request
• develop and document a broader tariff-mitigation plan covering classification, origin, valuation, sourcing, supply-chain configuration and other available customs strategies; implement changes that are supported by the governing rules and commercial facts
• monitor for and review the implementing Order in Council, Canada Gazette and CBSA Customs Notices before final accounting or finalizing decisions

The takeaway

The short period before the September 8 effective date makes data readiness and shipment evidence the immediate priorities. Canadian businesses should not wait for the trade environment to settle before acting. They should understand their Canadian surtax and US tariff exposure, confirm CUSMA eligibility and potential duty stacking, quantify cash and margin effects, and review both Canadian and US customs‑bond sufficiency where relevant. They should also pursue support and defensible mitigation opportunities and begin evaluating market and supply-chain diversification. Final legal and administrative instruments should continue to be monitored before implementation.

Visit our Tariffs and Trade Policy Resource Centre for information to help your business navigate the current global trade environment.  

^{1 For more information on the additional 50% US tariff and a summarized list of the Canadian-origin commodity categories that are subject to these tariffs, see our Tax Insights “US imposes 50% tariffs on Canadian dairy, alcoholic beverages, motor vehicles and various other goods” (August 25, 2026 update).}

^{2 The $7.5 billion in new and enhanced supports include the Regional Tariff Response Initiative (an additional $1.5 billion), the Business Development Bank of Canada’s Pivot to Grow stream ($500 million), the Canada Strong Diversification Fund (an additional $2 billion) and $3.5 billion of rapid-response worker and employer supports.}

^{3 For a list of US products subject to the Canadian surtax, see Department of Finance “Complete list of U.S. products subject to counter tariffs” at www.canada.ca/en/department-finance/programs/international-trade-finance-policy.html.}