President Trump’s tariffs on imports from Canada rank among the highest globally. Yet, thanks to exemptions negotiated during Trump’s initial term under the US-Canada Agreement (USMCA), many imports from Canada have been spared the brunt of these tariffs.
Under the USMCA, products that are significantly sourced from North America can be traded without tariffs. It’s noted that about 90% of products crossing the northern border could qualify for this benefit.
This includes minerals, most agricultural goods, seafood, and certain items, like playing cards, which avoid the hefty 35% tariffs. The rules about origins under the USMCA exempt many products produced in the U.S., Canada, or Mexico—even when some parts are sourced from elsewhere.
“In theory, anything could qualify for the USMCA if the necessary parts come from Canada, Mexico, or the U.S.,” pointed out Customs Trade Attorney Ted Murphy. “If you find yourself ineligible today, you can always adjust to qualify tomorrow.”
However, compliance hasn’t always been consistent. According to the Royal Bank of Canada (RBC), only 38% of Canada’s exports to the U.S. complied with treaty rules in 2024, although nearly all but 6% were ultimately able to meet the requirements.
“It’s possible that the effort wasn’t worth the reward,” Murphy noted regarding the lack of compliance. “Trump’s approach shifted the cost-benefit analysis for exporters.”
Currently, with businesses rushing to declare imports to avoid elevated tariffs, RBC has estimated that effective tariffs on Canadian goods in June were around 2.4%, marking it as the lowest among U.S. trading partners.
The effect of a 35% tariff is complicated by sector-specific tax regulations—like the 25% tariff on all foreign cars.
Additionally, there’s a 50% tariff on steel and aluminum products, with around 60% of tariff revenue collected from Canada reported in June.
Major Canadian sectors that typically benefit from exemptions under the USMCA are facing new tariffs. These include energy and oil at 10% and wood at about 25%. There’s a possibility that these rates could go up in the coming days.
Meanwhile, certain products, like dairy, have also been a point of contention. President Trump has expressed strong views against Canada’s strict regulations on American dairy imports, suggesting they may impose taxes on those products in Canada. For the moment, maple syrup and related equipment appear to be safe from tariffs, at least according to industry sources.
The unpredictable nature of U.S. tariffs has raised concerns for Canadian exporters, as noted by trade expert Gaphel Kongtsa from the Canadian Chamber of Commerce. This uncertainty casts doubt on the established stability needed for smooth trade transactions.
Kongtsa pointed out that small businesses might struggle with USMCA compliance, especially if they lack the resources to navigate complex U.S. import rules.
Nathan Janzen, an economist at RBC, mentioned that while Canada currently has a relatively stronger tariff position, it could be negatively impacted by a potential U.S. economic downturn.
“There are worries that increasing U.S. tariffs could create a significant amount of uncertainty, especially if U.S. economic growth begins to falter,” he said.
Recently, U.S. Trade Representative Jamieson Greer advocated for higher tariffs, reinforcing Canada’s position in ongoing negotiations.
“If actions are taken and retaliation occurs, the U.S. must ensure the effectiveness of its strategy,” he stated during an appearance on CBS.
Previously, Prime Minister Justin Trudeau had agreed to mutual tariffs in response to Trump’s policies. Since then, Prime Minister Mark Carney, taking office in late April, has sought to avoid escalation and instead engage in dialogues with the White House.
Trump has cited Canadian tariffs as a necessary measure against what he sees as the influx of fentanyl across the border. In June, Customs and Border Protection reported 3.37 pounds of fentanyl seized at the Canadian border.
Although the USMCA shields most Canadian products, it’s expected to undergo a review for re-approval in July 2026, during which the White House may pursue significant changes, particularly regarding the auto and manufacturing sectors.
Commerce Secretary Howard Lutnick commented that Trump will absolutely aim to revisit aspects of the USMCA, emphasizing his focus on protecting American jobs and the desire to produce more goods locally rather than in Canada or Mexico.
Murphy suggested that the current tariffs might serve as leverage in future trade negotiations as the reauthorization of the USMCA approaches.
“There’s a theory that we could be headed for a trade dispute with Canada down the line, but we aren’t there yet,” he concluded.
