Canada Tariffs have induced an intensified trade war between the U.S. and Canada continues to bubble beneath the surface of President Trump’s second term. The swift increase in duty rates and the issues associated with national security claims, exemption orders, and industry impacts form a compelling story with economic, political, and human consequences.
From Baseline Duties to a Federal Frenzy
In early 2025, President Trump proclaimed a national emergency under the International Emergency Economic Powers Act (IEEPA), outlining what he called Canada’s “failure” to control fentanyl moving across the northern border. In an executive order dated March 4, established:
- 25% tariffs on most imports from Canada,
- 10% on energy and potash,
- With USMCA‑compliant goods excluded.
The increase in Tariffs Canada didn’t stop there. On July 31, Trump signed a new executive order increasing non‑covered Canadian import tariffs from 25% to 35%, effective August 1, 2025, and goods transshipped through third-country ports were subject to 40% duties. The only exception was the same: products complying with the United States‑Mexico‑Canada Agreement (USMCA) were exempt from the IEEPA tariffs.
The Tariff Rate
| Date | Category of Products | Rate | Notes |
| 4th March, 2025 | Most Canadian Goods | 25% | Under IEEPA, non-USMCA items |
| 4th March, 2025 | Canadian energy and potash | 10% | Lower baseline rate |
| 31st July, 2025 | Non-USMCA Canadian goods | 35% | Transshipment evasion rate: 40% |
| 31st July, 2025 | USMCA‑qualified goods | 0% | Exempt from IEEPA tariffs |
What’s with the Escalation? Trump Canada Tariffs Explained
Illicit Drugs as a Reason
The Trump administration calibrated the tariff escalation into a national security argument by pointing to Canada’s perceived failure to prevent the smuggling of fentanyl. Yet, only about 1% of U.S. fentanyl seizures have been traced back to being trafficked from Canada – a claim that Canadian officials felt was misleading.
Reference to Trade Imbalance and Dairy Discontent
Trump and his trade entourage, including U.S. Trade Representative Jamieson Greer, referred to Canadian tariffs on U.S. agricultural goods, especially dairy and poultry, in some cases exceeding 200%, as proof of structural trade imbalance, on top of all that.
As well, Greer has defended this argument as a legitimate use of his authorities as President by asserting IEEPA and trade law, portraying the tariffs as measured efforts to restore reciprocity.
Exemptions: The USMCA Silver Lining
Despite unprecedented rate increases, these tariffs or duties still do not apply to 95% of Canadian exports to the US.
Because of the framework created through the USMCA, many Canadian goods—lumber, automotive parts, energy, and others—are exempt, assuming they meet the rules‑of‑origin standards set under USMCA.
For example:
If an automobile has 75% or more North American parts, then it is compliant with USMCA.
USMCA qualifying goods are subject to no IEEPA tariff, while non-compliant goods are subject to a 35% tariff.
The Canadian companies have increased their claim and research efforts regarding the exemptions, and firms reported immediately filed claims after reporting the tariff threat.
Effects on Canadian Industries & Citizens
Manufacturing and Auto Hub
The manufacturing communities in Canada, primarily in Ontario, have roughly 1.7 million employees who are dependent on cross-border trade with the US.
Exports of auto parts and metal in Canada are going to be more sensitive to tariffs:
If a product is not USMCA compliant and/or has US content per product, it would be subject to the full 35% duty.
Steel and aluminum had 50% Section 232 tariffs already, and in June of 2025, the tariffs tightened that much more.
Consumer Sentiment: Buy Canadian
In light of the threats, many Canadians began to look more towards home. There were boycott movements and an increasing incidence of apps that encourage consumers to buy locally, including forgoing services and purchasing US brands as a political statement, or just as a hedge against tariffs on consumers.
Job Losses Investment Chill
There are already thousands laid off in sectors like auto and metals. Supply chains are changing, and there is only one cancelled project and expansion, and investment returned as uncertainty exists around the duration of the tariffs, and the policy of who owns what at the border.
Canada’s Response & Ongoing Responses
Strengthening Trade Defence
Canadian Trade Minister Dominic LeBlanc similarly reminded people that USMCA provides a buffer against the majority of exports, as approximately 95% of Canadian goods are not subject to new duties under the current rules.
Prime Minister Mark Carney lashed out against Trump’s tariffs in public and has assured Canadians tthatprotect industries and jobs, particularly those in steel, aluminium, lumber, and automobiles.
Diplomacy Still Exists
Despite there being no agreement reached before the August 1 deadline on the negotiations in Washington, Canada is still available for discussions. Recent talks have been focused on relaxing tariffs and establishing long-term certainty for investment.
Canadian officials are also traveling next week to Mexico City to participate in trilateral discussions with their Mexican counterparts, including President Sheinbaum, discussing how to respond and work together to restore trade stability across North America.
Why “Trump Expands Exemptions From Trade Restrictions” Makes Sense?
While the headlines focused on the high tariffs, the important story here is in the exemptions:
A 35% tariff applies if you are not compliant with the USMCA.
But nearly all of the key Canadian exports remain exempt if they comply with the rules of origin.
Trump even suggested that moving your manufacturing to the US would allow the Canadian organization to be factory exempt entirely – an extension of the exemption story.
In this framing, Trump’s escalation is not one of just punishment, but he was doing so to induce compliance with its objectives – part of the leverage was the exemptions.
Broader Impacts: Trump Canada Tariffs in Global Perspective
International Spillovers in Trade Policy
Canada is not alone. As of early August 2025:
- Brazil is facing a 50% tariff,
- India is facing about 25%,
- EU, Japan, and South Korea, approximately 15% of the deals were not completed
However, the USMCA is a template of how tariff exemptions can dampen a wider disruption in trade.
Legal Ground: IEEPA & Trade Authority
Trump’s team claims legal basis for the tariffs under IEEPA and other authorities. U.S. Trade Representative Greer has said they have a legal authority because of the rising threats of asymmetric trade actions and economic disparities, and national security, even if these national security claims are based on geopolitical concerns representing tensions and issues outside economic indicators.
Conclusion
The ongoing trade dispute is more than an economic issue; it is a geopolitical issue. The tariffs are a means of foreign policy to pressure Canada on issues beyond merely trade matters. The White House has connected tariffs with concerns regarding fentanyl and border security, thereby linking the economic fortunes of Canadian industries with the resolution of complex – and highly sensitive – political issues. Canada Tariffs need to be resolved at the earliest.
As discussions carry on, the questions will focus on whether a new deal can be arrived at to remove the tariffs and restore predictability. The USMCA allows for trade and offers a ground for unilateral actions based on national security. The present situation illustrates how the terms of a trade relationship can change dramatically and unpredictably. For businesses, consumers, and policymakers in both countries, the way forward is uncertain – but the historical lens shows that not only are trade disputes costly, they require the mixing of diplomacy with economic strategies that are skilled and careful.
FAQs (Frequently Asked Questions)
1. What are the Trump Canada Tariffs?
It refers to the U.S. trade restrictions against Canada for aluminum and steel based on national security claims made by Trump as President. Canada and the U.S. later reported having exemptions to ease tensions between the countries.
2. What do Tariffs in Canada Mean for Trade?
It is expected that tariffs in Canada will raise the cost for consumers and businesses when importing goods. Tariffs also affect trade policy and can conflict with trade relations with our other trading partners, especially the U.S.
3. What are the Current US Tariffs on Canada?
Since Trump’s presidency, the U.S. has had some tariffs on Canadian exports, specifically metals, and has raised or reduced tariff enforcement on metals without actual reductions. Various tariffs that were removed are also still subject to U.S. trade negotiations.
4. Why did Trump Impose Tariffs on Canadian Steel and Aluminum?
Trump cancelled NAFTA and charged tariffs based on national security, claiming metal imports from Canada were threatening U.S. industry under Section 232 of the Trade Expansion Act.
5. How did Canada react to the U.S. Tariffs Under Trump?
In response to the tariffs imposed on them, Canada retaliated by imposing equivalent tariffs on several U.S. products, including whiskey, ketchup, and motorcycles, to pressure the U.S. into moving its tariffs.
6. Do Tariffs between Canada and the U.S. Impact Consumers?
Yes, the tariffs can increase the cost of imported goods. Costs are then borne by consumers and can impact the prices of products in both nations.
7. Which Industries Were the Most Impacted by the Canada Tariffs of Trump’s Presidency?
President Trump’s tariffs hit some industries harder than others. The metals, automotive, agriculture, and manufacturing industries were significantly impacted due to dependence on cross-border trade and cross-border materials.
8. Are There Exemptions to the Canada Tariffs?
There were exemptions depending on the products and industries that are subject to Canadian tariffs, determined on national interest, supply chain requirements, and bilateral negotiations.
