Trade relations between the United States and Canada have long been characterized by deep integration and mutual economic benefit. However, with the US imposing tariffs of up to 25% on Canadian imports, the stability of this relationship has been put to the test.
- On March 4, the U.S. Imposed tariffs on Canadian goods under the International Emergency Economic Powers Act. Canada responded by imposing 25% tariffs on $30 billion in goods imported from the U.S., including spirits, appliances, apparel, footwear, motorcycles, cosmetics, and certain pulp and paper products.
- On March 12, the U.S. imposed tariffs on all steel and aluminum products. Canada responded by applying 25 percent reciprocal tariffs on a list of steel products worth $12.6 billion and aluminum products worth $3 billion, as well as additional imported U.S. goods worth $14.2 billion, for a total of $29.8 billion. The list of additional products affected by counter tariffs includes tools, computers and servers, display monitors, sports equipment, and cast-iron products.
- On April 3, U.S. tariffs of 25 percent on Canadian automobiles came into effect. They apply to the non-U.S. content of the goods if they are CUSMA-compliant. Canada responded by imposing, on April 9, 25 percent tariffs on non-CUSMA-compliant U.S.-made vehicles and on the non-Canadian and non-Mexican content of CUSMA-compliant U.S.-made vehicles.
- Following the initial imposition of Canadian surtaxes on March 4, the government outlined a framework for exceptional relief from Canada’s retaliatory surtaxes. The framework outlines the conditions under which the government will consider providing relief, including i) to address situations where goods used as inputs cannot be sourced domestically, either on a national or regional basis, or reasonably from non-U.S. sources, and ii) to address, on a case-by-case basis, other exceptional circumstances that could have severe adverse impacts on the Canadian economy.
Key Risks for Businesses
- Rising Costs of Goods: Tariffs can significantly increase the cost of imported goods, making Canadian products more expensive for U.S. buyers—and vice versa. This could lead to contract renegotiations, increased prices for consumers, and tighter profit margins for businesses.
- Disruptions in Supply Chains: With U.S.-Canada trade being deeply interconnected, tariffs may cause delays and inefficiencies, especially in sectors like automotive and agriculture that depend on seamless cross-border operations.
- Overlooking Exemption Opportunities: Some goods may qualify for tariff exemptions or exclusions—but businesses need to act early and apply in time. Missing these opportunities could mean paying more than necessary.
- Legal and Contractual Fallout: It’s crucial for companies to review existing contracts to identify who bears the burden of added costs. Proactively renegotiating terms can help reduce financial exposure and ensure compliance.
Canada announces new support for Canadian businesses affected by U.S. tariffs
April 15, 2025 – Ottawa, Ontario – Department of Finance Canada
The Minister of Finance, the Honorable François-Philippe Champagne, today announced new measures for Canadian businesses and entities affected by the tariff dispute between Canada and the United States. These measures include the remission of some of the countermeasure tariffs announced by Canada in response to unjustified tariffs imposed by the U.S. on Canadian products.
First, Minister Champagne announced a performance-based remission framework for automakers, designed to incentivize continued production and investment in Canada. In recognition of the integrated nature of the North American automotive sector, this will allow automakers that continue to manufacture vehicles in Canada to import a certain number of U.S.-assembled, CUSMA-compliant vehicles into Canada, free of the countermeasure tariffs that Canada has imposed.
The remission granted to these companies is contingent on these automakers continuing to produce vehicles in Canada and on completing planned investments. The number of tariff-free vehicles a company is permitted to import will be reduced if there are reductions in Canadian production or investment.
Second, the Minister announced that the government intends to provide temporary 6-month relief for goods imported from the U.S. that are used in Canadian manufacturing, processing and food and beverage
packaging, and for those used to support public health, health care, public safety, and national security objectives. This provides immediate relief to a broad cross-section of Canadian businesses that must rely on U.S. inputs to support their competitiveness as well as to entities integral to Canadians’ health and safety, such as hospitals, long-term care facilities and fire departments. The remission is provided on a time-limited basis to provide businesses and entities with additional time to adjust their supply chains and prioritize domestic sources of supply if available.
Third, the new Large Enterprise Tariff Loan Facility (LETL), as announced by the Prime Minister in March, is now accepting applicants. This program will support eligible large businesses—including those that contribute to Canada’s food security, energy security, economic security and national security—that are facing difficulties in accessing traditional sources of market financing, by providing access to liquidity. This will help employers that were viable before the recent U.S. trade actions to help sustain their operations and return to financial stability. Companies will be required to make efforts to maintain jobs and sustain business activities in Canada. Those that were already involved in insolvency proceedings before this crisis will not be eligible.
In the weeks and months ahead, additional measures will be brought forward, as needed, to support businesses and workers. The federal government will also continue to work closely with provinces and territories to ensure complementary supports are in place across all jurisdictions.
Strategic Measures for Businesses
To navigate the uncertainty of impending tariffs, organizations should adopt a proactive approach by implementing the following strategies:
Understand Tariff Regulations and Legal Frameworks
- Canadian businesses should familiarize themselves with the Customs Tariff Act and the Canada Border Services Agency’s (CBSA) guidelines to determine potential liabilities and relief and relief options.
- U.S. companies must consider the broad authority grantedto the president under the International Emergency Economic Powers Act (IEEPA), which allows tariffs to be imposed with minimal procedural hurdles.
Assess and Adjust Supply Chains
- Diversifying suppliers to include non-U.S. and non- Canadian sources can reduce dependency on a single trade partner.
- Companies should evaluate stockpiling critical inventory before tariffs are imposed to buffer against cost increases.
Review Contractual Obligations and Rights
- Businesses should conduct a comprehensive review of trade contracts to determine liability for tariff-related
- Exploring legal avenues for price adjustments and renegotiations can help mitigate the impact on financial stability.
Utilize Trade Compliance Strategies
- Ensuring accurate documentation of product origin and valuation can help companies minimize tariffs where possible.
- Leveraging trade programs such as duty drawbacks or tax deductions can offset some of the financial burdens.
Engage in Advocacy and Industry Collaboration
- Canadian businesses should actively participate in government consultations on retaliatory tariff lists to ensure their concerns are addressed.
- Cross-border industry collaboration can strengthen lobbying efforts against economically damaging tariffs.
Explore Exemptions and Relief Programs
- Reviewing past exemption precedents and preparing necessary documentation can improve chances of obtaining tariff relief.
- Businesses should stay informed about new government policies and programs that may provide financial support during trade disputes.
Final Thoughts
The ongoing tariff tensions between the U.S. and Canada serve as a stark reminder of the fragility of international trade relationships. As political winds shift, businesses must remain agile, informed, and prepared for potential disruptions. Those that take the necessary steps to adapt now will be best positioned to thrive in a rapidly changing economic environment.