On February 1, 2025, Canada announced its retaliatory response to the United States' recent tariff measures, escalating the ongoing trade tensions between the two nations. The first round of Canadian tariffs is set to take effect on Tuesday, February 4, 2025, with significant implications for key industries, including agriculture, automotive, and technology sectors, potentially causing ripple effects across supply chains and cross-border operations.

Speaking to the American people, Prime Minister Trudeau remarked that "Canada has critical minerals, reliable and affordable energy, stable democratic institutions, shared values and the natural resources you need. Canada has the ingredients necessary to build a booming and secure partnership for the North American economy, and we stand at the ready to work together." The Prime Minister reassured Canadians that "Canadian government, Canadian businesses, Canadian organized labour, Canadian civil society, Canada's premiers, and tens of millions of Canadians from coast to coast to coast are aligned and united."

U.S. tariffs

  • The United States has imposed 25% tariffs on products of Canada and a 10% tariff specifically targeting Canadian energy imports. These tariffs will be effective on February 4, 2025.
  • The Federal Registry notice defining "products of Canada" has not yet been published. Energy products are defined in Executive Order 14156 (January 20th) to include "crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals, as defined by 30 U.S.C. 1606 (a)(3)."
  • No exemptions or exemption process has been included in the Executive Order imposing the tariffs. Further, the Executive Order restricts the use of de minimis treatment for imports that are less than $800.

Canadian retaliatory tariffs

In response, Canada announced retaliatory tariffs on $155 billion worth of American products. In accordance with the United States Surtax Order (2025):

  • The first stage will impose 25% tariffs on $30 billion of U.S. imports effective February 4, 2025.
  • A second round of tariffs affecting an additional $125 billion of U.S. imports will be imposed on February 25, 2025.
  • This two-tiered approach is designed to allow Canadian companies and supply chains time to find alternatives and to allow for consultations on the list of products.

First round goods affected

The first round of Canadian tariffs imposed by Ottawa will target a wide array of American goods, including:

  • Agricultural products: Live poultry (fowls, ducks, turkeys), poultry meat (fresh, chilled, frozen), offal
  • Dairy & food products: Cheese, yogurt, processed meats, canned vegetables, and baked goods
  • Alcohol & beverages: Whiskey, bourbon, wine, beer, and non-alcoholic beverages
  • Iron & steel products: Pipes, tubes, sheets, wire, and structural components
  • Aluminum products: Raw aluminum, foil, sheets, and bars
  • Machinery & equipment: Agricultural machinery, industrial machines, mechanical appliances, and parts
  • Automotive: Vehicle engines, transmissions, parts, and accessories
  • Consumer goods: Furniture, mattresses, household appliances, apparel, and footwear
  • Plastic & rubber products: Packaging materials, plastic sheets, tires, hoses
  • Chemical products: Industrial chemicals, fertilizers, and cleaning agents
  • Wood & paper products: Lumber, plywood, paper, and cardboard
  • Electronics & electrical components: Cables, transformers, household electronics
  • Glass & ceramic products: Glassware, ceramic tiles, and sanitary fixtures
  • Textiles & fabrics: Cotton fabrics, synthetic fibers, and textile products
  • Jewelry & precious metals: Gold, silver, jewelry items, and coins
  • Tools & hardware: Hand tools, fasteners, locks, and metal fittings
  • Recreational products: Sporting goods, musical instruments, and games
  • Medical & scientific equipment: Instruments, devices, and lab equipment

The full list of affected products is extensive and is available on the Department of Finance's website.

Second round goods affected

The second round of tariffs will target further American goods, including:

  • Aerospace, vehicles & boats: Including aerospace products, passenger vehicles and trucks, including electric vehicles, heavy trucks, buses, recreational vehicles, and recreational boats.
  • Manufacturing products: Including steel and aluminum products.
  • Agricultural & food products: certain fruits and vegetables, beef, pork, dairy,

Further details on the affected products for the second round will be even more extensive and is expected to be released in the coming days.

Non-tariff measures

Canada is also considering additional non-tariff measures in collaboration with provinces and territories, potentially affecting critical minerals, energy, procurement, and other partnerships. Although a 15% export tariff on Canadian energy exports was considered, it is not expected to be implemented at this time.

Remission requests

The Department of Finance has introduced a formal process for requesting tariff remission on certain goods imported from the United States. Canadian-registered companies may apply under two specific circumstances:

  1. Lack of domestic supply: If an importer can demonstrate that the goods are not reasonably available from Canadian producers.
  2. Exceptional circumstances: If imposing tariffs would result in disproportionate economic harm, such as severe financial distress, supply chain disruptions, or threats to critical industries.

Review and consultation process

Requests will be assessed on a case-by-case basis, considering factors such as economic impact, supply chain constraints, and industry-specific concerns. The Department of Finance may consult with domestic producers to verify claims regarding supply availability before granting remission.

Submission requirements

All applications must follow a standardized format and include:

  • Detailed product descriptions (including HS codes)
  • Sourcing efforts (proof of attempts to procure from Canadian suppliers)
  • Economic rationale (financial impact of tariffs and potential harm)
  • Supporting documentation (contracts, invoices, or expert analysis)

Only businesses registered in Canada can submit requests. Companies seeking tariff relief should ensure their applications are well-documented and aligned with the prescribed format.

For full details and the submission template, visit the Department of Finance website.

Provincial measures

  • Nova Scotia: Will limit access to provincial procurement for American businesses, seek to cancel existing contracts, double toll costs at the Cobequid Pass, and direct the Nova Scotia Liquor Corporation to remove all U.S. alcohol from shelves on February 4.
  • British Columbia: The BC Liquor Distribution Branch will immediately cease purchasing American liquor from certain states. The BC government and crown agencies have been directed to exclude ."U.S. suppliers from any new purchasing or procurement agreements.
  • Ontario: Expected to introduce measures banning the sale of American liquor and wine at Liquor Control Board of Ontario stores.
  • Other provinces are expected to announce similar measures.

Strengthening internal trade

In response to the external tariff pressures, Canadian federal, provincial, and territorial leaders convened on January 31, 2025, at the Committee on Internal Trade (CIT) meeting to discuss measures aimed at bolstering the domestic economy. The Honourable Anita Anand, Minister of Transport and Internal Trade, announced initiatives to eliminate regulatory barriers to internal trade, enhance labour mobility, and standardize regulations across Canada. Key actions include:

  • Mutual recognition of goods and services: A good or service sold in one jurisdiction can be sold in another without additional regulatory requirements.
  • Improved labour mobility: Registered workers will be able to operate across provinces and territories without delays.
  • Enhancements to the Canadian Free Trade Agreement: Reducing exceptions and addressing sectoral priorities to streamline internal trade.

These initiatives are expected to lower prices, boost productivity, and create new market opportunities for Canadian businesses, helping to offset the impact of U.S. tariffs and strengthen Canada's economic resilience.

Potential U.S. response

The U.S. tariff order includes provisions allowing for further tariff increases on Canadian imports if retaliatory measures are imposed. As of now, there is no official word on the U.S. response to Canada's retaliatory tariffs.

Strategic considerations

Businesses engaged in cross-border trade should:

  1. Review supply chains: Identify goods subject to new tariffs and assess cost implications and any potential for mitigation or exemption.
  2. Evaluate contractual obligations: Review existing contracts for potential renegotiation opportunities, price adjustment clauses, or change of law / force majeure clauses that may mitigate tariff-related impacts.
  3. Monitor legal developments: Stay informed and seek advice on the impact of the tariffs in view of the specific legal instruments to be announced, potential negotiations, further retaliatory measures, and other government action.

Our International Trade & Customs and Government Affairs teams are closely monitoring this situation and is available to advise on specific impacts to your business. For further information or assistance, please contact us directly.