Written By Sabrina A. Bandali, Alison FitzGerald, George Reid, Jessica Horwitz, Andrei Mesesan and Quinn Scarlett

On February 1, 2025, US President Donald Trump issued an Executive Order announcing a 25% tariff on imports of most Canadian goods and a 10% tariff on Canadian energy products in addition to any tariffs currently in place. The stated justification for the measures was an alleged national security emergency caused by illegal fentanyl imports and migrant entry across the Canadian border. The tariffs were originally announced for Tuesday, February 4, 2025, but the United States delayed their entry into force for a month. The tariffs came into effect on March 4, 2025.

The Executive Order threatens that should Canada retaliate against the United States in response to this action through import duties on United States exports to Canada or similar measures, the President may increase or expand in scope the duties imposed under this order to ensure the efficacy of this action.

The US government has also announced additional tariff measures in respect of Canadian-produced steel and aluminum products (scheduled for entry into effect March 12, 2025). President Trump has publicly stated that he may seek to apply additional tariffs to other specific products too, namely automobiles, pharmaceuticals and semiconductors. President Trump has directed the US Secretary of Commerce to investigate importations of lumber and related products, and of copper and its derivatives. The steel and aluminum tariffs, tariffs on specific products, and any tariffs that may result from the investigations into lumber and copper products would be additive to the tariffs implemented on March 4, 2025.

Finally, on April 2, 2025, the United States is scheduled to announce additional “reciprocal” tariffs against its trading partners—including Canada—which would be aimed at countervailing, among other measures, digital services taxes and value added taxes.

Canada's Response

Canada responded swiftly to the United States’ imposition of tariffs, announcing retaliatory tariffs that will be applied in two phases. In the first phase, effective 12:01 a.m. on March 4, 2024, the Government of Canada imposed a 25% surtax under the United States Surtax Order (2025-1) (March 4 Surtax Order) on C$30 billion worth of US goods.

The Schedule to the March 4 Surtax Order contains a complete list of tariff codes subject to the surtax, summarized in a searchable Department of Finance Canada (Finance Canada) Backgrounder. The announced first-phase surtax applies to a variety of products including but not limited to fruits, vegetables and juices, US-origin beer, wine and liquor, perfume, clothing, and shoes, as well as major consumer products such as household appliances and sports equipment, tires (although tires for use in OEM vehicle manufacturing and certain other uses were excluded), lumber and plastic products. See Appendix 1, below, for a summarized list of product categories that are subject to surtax as of March 4, 2025.

The March 4 Surtax Order does not apply to US-origin goods that were in transit to Canada on or before March 4, 2025.

For its second phase of retaliatory tariffs, the Government of Canada is considering the imposition of surtaxes on an additional list of US products valued in excess of C$200 billion, which will be narrowed to a value of approximately C$125 billion in response to public feedback. Finance Canada published the additional list of products under consideration for the surtax for a 21-day public consultation period. It includes a broad range of raw materials, industrial products and finished goods, such as motor vehicles, semi-trailers, boats and locomotives, steel and aluminum products, metals and minerals, plastics, aerospace products, tools and machinery, cameras and electronics, many agricultural products including certain fruits and vegetables, beef, seafood, pork, dairy and prepared foods, fabrics, and numerous other categories of made-up products and materials.

Effective consultation submissions will inform Finance Canada of the economic effects of the proposed tariffs on Canada to assist the Government of Canada to tailor the retaliatory tariffs to maximize pressure on the United States while seeking to limit—to the extent possible—harms to Canadians. Submissions will be accepted until March 25, 2025 via an online form.  

Applicable Rules of Origin

The surtax applies to goods that "originate in the United States" determined using the marking rules set out in the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations. US-origin goods that are exported to Canada from countries other than the United States are also subject to the surtax.

Remission Requests

To mitigate unintended negative consequences of its retaliatory tariffs, Canada announced a remission process whereby Canadian businesses can request relief from the surtax on an exceptional basis. According to the Finance Canada, the Government of Canada will consider requests for remission if:

1. Goods used as inputs cannot be sourced domestically, either on a national or regional basis, or reasonably from non-US sources.
2. There are other exceptional circumstances that could have severe adverse impacts on the Canadian economy, considered on a case-by-case basis.

Requests for remission will be assessed by Finance Canada—in consultation with other relevant federal departments—and could be subject to consultation with other interested parties, including domestic producers.

Further Retaliation Expected

The Government of Canada has stated its intention to continue to retaliate against the United States with additional surtaxes and other measures as long as the US measures remain in effect. The Canadian federal government as well as provincial, territorial and municipal governments have announced that further retaliatory measures are being considered and may be imposed, including restrictions on US companies' participation in local, provincial and federal procurements, and restrictions on the availability of US goods at government-controlled distribution centers. Prime Minister Trudeau has not yet announced export tariffs or quantitative restrictions on Canadian energy, energy products or critical minerals, but this option is under active discussion between the federal government and the provinces.

Mitigating the Impact of Tariffs: What You Can Do

US and Canadian companies—both importers and exporters—should take steps immediately to evaluate and manage commercial, financial and regulatory risks.

• Companies affected by the proposed second phase of retaliatory tariffs should consider making submissions to Finance Canada about the economic impacts of the proposed measure and suggest any reasonable alternatives that will help further the Government of Canada's goal of maximizing pressure on the United States while seeking to limit the harm to Canadians. Submissions can be made via an online form.
• As discussed in our previous blog, there are several mechanisms under existing trade promotion programs that businesses that import from the United States should consider in developing a strategy to reduce or delay payment of duties or taxes.
• Our Tariff Preparedness Diagnostic Toolkit may be of use to help businesses self-assess readiness for the coming tariffs and other trade measures.

For advice and assistance in understanding your supply-chain risks associated with the new US tariffs and Canadian surtaxes, please contact a member of the Bennett Jones International Trade and Investment group.

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Appendix 1: Summary Category List of Goods Subject to March 4 Canadian Surtaxes

This list is for summary purposes only and is not exhaustive. See the Department of Finance Website for the complete list of subject products by HS code.

Animals, Plants and Food Products

• Live Poultry
• Poultry meat and other meat
• Dairy products (milk, yogurt, whey, butter, cheese and curd)
• Eggs (fresh and other preparations)
• Natural honey
• Vegetables (tomatoes, beans), Nuts, and Fruits (oranges, mandarins, clementines, grapefruits, lemons and limes, watermelons, peaches, frozen berries)
• Coffee, tea and maté
• Spices (pepper, vanilla, cinnamon, cloves, nutmeg, mace, cardamoms, coriander, cumin, anise, ginger, saffron, turmeric and others)
• Cereals (wheat, rye, barley, oats, rice)
• Wheat flour
• Rape (canola) and colza seeds
• Vegetable saps and extracts
• Fats and oils (fish, ground nut, palm, sunflower, rape or colza), margarine
• Prepared meats and fish products (sausages, pastes, shrimp and prawns)
• Sugar and confectionary products (beet sugar, cane sugar, maple sugar and syrup, molasses other, chewing gum, chestnut cream, liquorice and toffee)
• Cocoa products (chocolate ice cream, other)
• Mixes and doughs (ice cream mixes and others), pasta (containing or not containing eggs), pizza and quiche
• Vegetable, fruit, nuts and other preparations (cucumber pickles, peanut butter, unfrozen orange juice)
• Sauces and preparations (soya sauce, ketchup, mustard), soups, ice cream, certain dairy substitutes
• Certain animal feeds
• Casein, albumins and milk protein substances

Beverages and Spirits

• Beverages (waters, juices, certain dairy drinks)
• Spirits (beer, wine, vermouth, cider and other fermented beverages, whisky, rum, gin, vodka, tequila and other liqueurs and spirits)
• Tobacco and Manufactured Tobacco Products and Substitutes
• Tobacco products (tobacco leaf, cigarettes, cigars and cigarillos, pipe tobacco and snuff, products intended for inhalation without combustion, nicotine gum and other products or oral application)

Minerals, Chemical Products and Cosmetics

• Silica sand and quartz sands
• Perfumes, toilet waters, beauty and make-up products, hair products, toothpaste and floss, shaving products, deodorant and bath salts, incense candles
• Soap products

Products of Plastic, Rubber, Leather, Wood and Paper

• Plastic products (of polymers of vinyl chloride, other self-adhesive products, baths, showers, sinks and wash basins, lavatory seats and covers, certain sacks and bags, tableware, kitchenware and other accessories, and other builders' ware of plastics)
• Rubber products (tires, tire treads, floor coverings and mats)
• Leather products (saddles, trunks, briefcases, handbags, wallets, other bags, coats and jackets, gloves, belts, articles of gut)
• Wood products (cut wood, wood sheets, other shaped wood, wood boards, plywood and panels, carpentry products such as wood windows, doors, shingles and panels)
• Wood pulp (mechanical and chemical)
• Paper products (envelopes, toilet paper, cartons, boxes, cases and bags, paper pads, registers, notebooks, binders, forms and albums, paper trays, dishes, cups and plates)
• Printed matter, including printed pictures and photographs

Textiles, Apparel and Footwear

• Carpets and textile floor coverings (of wool, fine animal hair, man-made, textile, or other materials)
• Apparel and clothing accessories, whether knitted or crocheted or not (coats and jackets, suits, ensembles, jackets and blazers, trousers, overalls, breeches and shots, shirts and blouses, underpants, pyjamas, robes and similar articles, t-shirts, vests, sweaters, baby clothes and accessories, track suits, ski suits, and swimwear, pantyhose, tights, stockings, and socks, gloves, mittens and mitts, and other clothing)
• Other made-up textile articles (blankets, linens, curtains, drapes and blinds, other furnishing articles, sacks and bags, tents, sails and camping goods, cloths, life-jackets, and other made-up articles, sets of fabric and yarn, worn clothes, and used or new scraps, rags, twine and rope, cordage or other textile materials)
• Footwear (including with uppers and outer soles made of plastic, rubber, leather, and textile materials)
• Hats and other headgear (including safety headgear)

Ceramics, Glass Products, Gems and Jewellry

• Ceramic sinks, wash basins, wash basin pedestals, baths, bidets, bedpans, flushing cisterns, urinals and similar sanitary fixtures
• Glassware of a kind used for table, kitchen, toilet, office, indoor decoration or similar purposes
• Precious Stones, Precious Metals, Metals Clad with Precious Metal and Articles Thereof; Imitation jewellry
• Precious stones and metals (diamonds, silver, platinum, jewellry and imitation jewellry and other articles)

Machinery, Appliances and Articles of Base Metals

• Iron and steel cooking appliances (stoves and grills) 
• Tools and cutlery (saws, pliers, pincers and tweezers, spanners and wrenches, drilling tools, hammers, planes, chisels and other cutting tools, screwdrivers, household tools, vices, tool sets, knives and blades, razors and razor blades, scissors and shears, other articles of cutlery, spoons, forks, ladles and similar kitchen and tableware)
• Miscellaneous metal products (locks, padlocks, hat-racks, hat-pegs, brackets and similar fixtures)
• Appliances and machinery (Fans, refrigerators, freezers and other refrigerating or freezing equipment, toasters and beverage heating machines, dish washers, snow-ploughs and snow-blowers, lawn mowers and other mowers, laundry and dry-cleaning machines, hand tools such as drills and saws, vacuum cleaners and parts, food grinders, shavers,  hair dryers, electric smoothing irons, microwave and other cooking ovens, coffee and tea makers, electric heating resistors and parts, and electronic cigarettes and vaping devices)

Vehicles and Aircraft

• Motorcycles 
• Unmanned aircraft (for carriage of passenger, remote controlled)

Miscellaneous Manufactured Articles and Art

• Revolvers and pistols, other firearms, cartridges
• Furniture (seats, metal, wooden, plastic, bamboo and rattan and other furniture, mattresses, quilts, bedspreads, sleeping bags, light fittings, chandeliers, and other lighting products)
• Games (operated by coins, banknotes, bank cards, token and other payment, and playing cards)
• Gas-fuelled pocket lighters
• Original paintings, drawings and pastels by artists