Tax Insights: Canada to counter against US tariffs on steel and aluminum

June 01, 2018

Issue 2018-22

In brief

On May 31, 2018, US Commerce Secretary Wilbur Ross announced that the United States will impose, starting June 1, 2018, a 25% tariff on imports of certain steel products, and a 10% tariff on imports of certain aluminum products, from Canada (US tariffs). 

Canada intends to counter these US tariffs with surtaxes or similar trade-restrictive countermeasures on US-origin imports of up to CA $16.6 billion, which is proportionate to the 2017 value of Canadian exports affected by these US tariffs.1 The Canadian government will also consider further measures.

The proposed countermeasures will come into effect on July 1, 2018, and will remain in effect until the United States rescinds their new tariffs. The Canadian government is seeking comments from interested parties until June 15, 2018. 

In detail

Background

In March 2018, the United States began imposing tariffs on imports of certain steel and aluminum products, citing reasons relating to “national security,” but provided exemptions for Canada and Mexico. The exemptions were to expire on June 1, 2018.

The Canadian government tried to reach a mutually beneficial resolution. However, with negotiations for the North American Free Trade Agreement (NAFTA) going nowhere, it appears that the United States has decided to take a hardline approach with Canada.

The affected goods

As a result, Canada has proposed a financially proportionate response to the US tariffs of up to CA $16.6 billion dollars. They have listed the affected goods in two tables, which are available on the Department of Finance’s website.2 The proposed duties on imported goods listed in Table 1 are 25%, and 10% on those goods listed in Table 2.

Proposed 25% tariffs: Table 1 

Table 1 is available in the Department of Finance’s May 31, 2018 Notice.3

Products included in Table 1 and subject to the 25% proposed tariffs primarily include iron and steel products found in tariff headings 72.06 to 73.04.

Proposed 10% tariffs: Table 2 

Table 2 is available in the Department of Finance’s May 31, 2018 Notice.4

Table 2 primarily covers the difference between the amount of the tariffs imposed on goods listed in Table 1 and the total 2017 value of Canadian exports affected by the US tariffs.

The goods listed in Table 2 range from yogurt in Chapter 4 of the Customs Tariff, to other food or beverage products found in Chapters 9, and 16 – 22. 

Other affected goods are found in the following chapters of the Customs Tariff:

  • Chapters 33 – 35 (for certain cosmetics, soaps, candles and glues to name a few)
  • Chapters 38 – 39 (for certain chemical products and plastics)
  • Chapter 44 (for certain wood products) 
  • Chapters 48 – 49 (for certain paper/paperboard products and printed products) 
  • Chapter 73 (for certain articles of iron or steel, including beer kegs)
  • Chapter 76 (for certain aluminum products and articles of aluminum)
  • Chapters 84 – 85 (for certain machinery and mechanical/electrical appliances, and equipment)
  • Chapters 89 – 90 (for certain boats, ships and certain automatic regulating/controlling instruments or apparatus)
  • Chapters 94 – 96 (for certain furniture, toys and pens, among other miscellaneous manufactured articles)

How PwC can help 

Canadian importers and exporters should prepare for the anticipated changes when the countermeasures become effective July 1, 2018.

Furthermore, interested parties have until June 15, 2018, to make their concerns known to the Canadian government before the implementation of the proposed tariffs on US-origin imports.

PwC can work with your company to:

  • review your imports/exports and supply chain to identify potential cost increases as a result of the new tariffs
  • make representations to the Canadian government on how the proposed countermeasures may negatively impact your business
  • assess your customs compliance and identify potential issues or opportunities

 


1.  “Notice of intent to impose countermeasures action against the United States in response to tariffs on Canadian steel and aluminum products,” Department of Finance Canada (May 31, 2018).
2.  See note 1.
3.  See note 1.
4.  See note 1.

Contact us

Jaime Seidner

Partner, PwC Canada

Tel: +1 416 687 8492

Jody McLean

Manager, PwC Canada

Tel: +1 416 869 2459

Cynthia Lei

Senior Associate, PwC Canada

Tel: +1 416 941 8383 ext 13867

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