Canada’s Tariffs Aimed at Causing ‘Maximum Impact’ in US End Today, Sept. 1

Duties imposed on the United States in response to Trump’s initial tariffs of 25 percent on Canadian goods have been lifted effective Sept. 1.

As a result, over 1,200 different types of U.S. goods coming into Canada could drop in prices in the coming weeks or months, covering a wide range, from food stuffs to motorcycles, from kitchenware to apparel.

Trump had implemented his first tariffs against Canada and Mexico in March, accusing the two countries of being springboards into the United States for illegal drugs and immigrants.

In response, Ottawa placed a surtax on C$30 billion worth of U.S. goods, the first phase of matching tariffs on C$155 billion worth of U.S. imports, said to be aimed at maximizing the damage to the United States while minimizing the impacts domestically. This was still the objective as of early last month. “We have always said that we will apply tariffs where they have the maximum impact in the United States and a minimum impact in Canada,” Carney said on Aug. 5, echoing statements he had first made in March after winning the Liberal leadership race.

Practically speaking, however, food inflation in Canada began tracking higher than the all-items consumer price index (CPI) around that time. Food inflation was 3.8 percent in April compared to a CPI dropping to 1.7 percent after Carney removed the consumer-facing portion of the carbon tax.

The Canadian counter-tariffs also became an issue with the Trump administration since they disregarded the Canada-United States-Mexico (CUSMA) free-trade agreement. U.S. Ambassador to Canada Pete Hoekstra called them a “huge irritant.”

Trump’s tariffs related to border concerns, which he increased to 35 percent against Canada on Aug. 1, come with a CUSMA exemption, leading to some 85 percent of goods being traded tariff-free.

When raising Canada’s rate to 35 percent, Trump had mentioned Canada’s counter-tariffs as an issue.

In a bid to restart stalled trade talks with Trump, Prime Minister Mark Carney announced on Aug. 22 that Canada will remove retaliatory tariffs effective Sept. 1 on U.S. goods that are covered by the USMCA. The announcement came a day after he spoke with Trump.

Canada had first imposed those tariffs thinking that other allies would follow suit, the minister responsible for Canada-U.S. relations Dominic LeBlanc told Radio-Canada last week. “But we realized that not a single country other than China went in this direction,” he said.

While Ottawa dropped its tariffs on hundreds of U.S. goods, it has maintained its retaliatory tariffs on U.S. steel, aluminum, and autos. Those surtaxes, however, are accompanied by a remission order that allows a host of government organizations and private companies in various sectors in Canada to qualify for an exemption.

The order applies to public entities such as the Department of National Defence, the Canadian Armed Forces, law enforcement agencies, and health organizations. Companies that import steel and aluminum to manufacture goods are also exempt.

Trump’s sectoral tariffs on metals and automobiles have been implemented on national security grounds and have particularly impacted Canada, where the industries in the two countries are deeply integrated. Carney said Ottawa’s intent in trade negotiations with the United States is now “squarely” focused on dealing with these tariffs.

Carney’s messaging concerning the United States has become less confrontational since the time of the federal election campaign. The prime minister is now saying that Canada has the “best” trade deal with its southern neighbour when considering the effective tariff rate and what other countries face.

Ottawa will now be waiting to see what unfolds in the courts in relation to Trump’s non-sectoral tariffs, which in the case of Canada is set at a rate of 35 percent. Other countries are impacted by the United States’ so-called “reciprocal tariffs.”

A 7–4 decision from the U.S. Court of Appeals on Aug. 29 said that these tariffs implemented by Trump, under the International Emergency Economic Powers Act, are mostly illegal. The decision won’t come into force until Oct. 14, allowing the Trump administration time to appeal to the U.S. Supreme Court.

White House trade adviser Peter Navarro told Fox News on Aug. 31 he is “very optimistic” that the Supreme Court will overturn the ruling.

Jack Phillips contributed to this report.