Introduction

On April 2, 2025, United States President Donald Trump announced a sweeping set of tariffs on what he called "Liberation Day," aiming to reshape the international trading system built by the United States after the Second World War under the trade liberalization framework of the GATT/WTO.  The Trump Administration has stated that the measures will protect American industries and workers, but critics fear they will lead to higher prices and economic instability in the United States and around the world.

In the White House Rose Garden, President Trump announced new reciprocal tariffs, which were invoked under the same International Economic Emergency Powers Act (“IEEPA“) authority that he used for earlier tariffs on Canada and Mexico.  The new tariffs impose tariff rates from 10 to 50% on imported products from every country, but new tariffs were not assigned to products from Canada and Mexico. Both countries were spared the burden of additional tariffs.

For Canada and Mexico, the existing fentanyl/migration IEEPA orders remain in effect, and are unaffected by this order. This means CUSMA qualifying goods enjoy duty free treatment, non-CUSMA are subject to a 25% tariff, and non-CUSMA qualifying energy and potash are subject to a 10% tariff. In the event the existing fentanyl/migration IEEPA orders are terminated, CUSMA qualifying goods will continue to receive preferential treatment (0% tariff), while non-CUSMA qualifying goods will be subject to a 12% reciprocal tariff.  The 25% tariffs on steel, aluminum and certain derivatives remain unchanged, and the 25% tariff on certain autos and auto parts came into effect on April 3.

Details on the reciprocal tariffs

Under the President’s Executive Order, tariffs will remain in place until President Trump determines that the national emergency he has identified is resolved. President Trump also retains the power to increase tariffs if trade partners retaliate or decrease tariffs if perceived imbalances improve.

Distinct, individually calculated reciprocal tariffs on the affected 60 countries with which the United States indicates it has trade deficits will come into effect on Wednesday, April 9 at 12:01 AM EDT.

The Trump administration asserts that it calculated an aggregate value of tariffs imposed on U.S. goods by each country, which is said to include the sum of real tariff rates, plus the value of currency manipulation and non-tariff barriers imposed against U.S. imports in each country. Beginning April 9, a tariff of approximately half that value will be imposed on imports from each country. For example, the administration calculated that the European Union imposes an effective tariff rate of 39% on U.S. imports. The U.S. will in turn impose duties of 20% on goods of EU origin.

The blanket 10% reciprocal tariffs that apply to other countries, excluding Canada and Mexico, is slated to begin on Saturday, April 5, 2025, at 12:01 AM EDT.

Non-CUSMA qualifying goods

Under the fentanyl/migration order against Canada that was originally established under the IEEPA by Executive Order 14193 of February 1, 2025, and amended by Executive Order 14197 of February 3, 2025, and Executive Order 14231 of March 6, 2025, goods imported into the United States from Canada or Mexico that do not qualify for duty free treatment under CUSMA are subject to tariffs of 25%. Energy and energy resources and potash imported from Canada—and not qualifying as originating under CUSMA—is subject to a lower 10% duty. CUSMA qualifying goods are not subject to additional tariffs.

In accordance with the Executive Order issued on April 2, 2025, if the fentanyl/migration orders against Canada are suspended, then Canada would be subject to a 12% tariff, but it would not apply to CUSMA qualifying goods or to energy or potash. The fact that the Executive Order on reciprocal tariffs addresses tariffs with Canada in this comparatively favourable manner may suggest that the U.S. Administration has recognized the partnership with Canada and is planning to negotiate with Canada following the election to lift the fentanyl orders and renegotiate CUSMA.

Steel and aluminum tariffs

President Donald Trump announced 25% tariffs on steel and aluminum imports from Canada and all other countries through a Presidential Proclamation relying on his authority under Section 232 of the Trade Expansion Act of 1962. This proclamation was signed on February 10, 2025, aiming to protect U.S. national security by addressing the perceived threat posed by excessive imports of these materials. 25% steel and aluminum tariffs took effect on March 12, 2025, and there is no exemption for CUSMA qualifying steel and aluminum products.

Steel and aluminum tariffs remain unchanged by the announcements on April 2, 2025.

Auto tariffs

President Trump confirmed that 25% tariffs on automotive imports would come into effect at 12:01AM ET on April 3, 2025. These tariffs were originally announced by a Presidential Proclamation on March 26, 2025, pursuant to section 232 of the Trade Expansion Act of 1962, which allows for such measures in response to national security threats.

All imported autos are subject to this 25% tariff, beginning on April 3. The tariff will not apply to the U.S. content in the good, if the U.S. content overall exceeds 20%.

However, core automotive parts (as detailed in the Presidential Proclamation) that are CUSMA qualifying are not subject to tariffs as of April 3. In his March 26 Proclamation, the President instructed Customs and Border Patrol (CBP) and the Secretary of Commerce to determine a method of quantifying the U.S. content in those core parts, the corresponding portion of which would be exempt from the automotive tariffs. That determination must be rendered by CBP and the Secretary of Commerce no later than May 3, 2025.

Pursuant to a process established by the Trump administration, the scope of automotive parts captured by the 25% tariff can be expanded in future.

Non-tariff barriers

The Executive Order argues that non-tariff barriers also “deprive U.S. manufacturers of reciprocal access to markets around the world.” The 2025 National Trade Estimate Report on Foreign Trade Barriers (“NTE”) details a great number of non-tariff barriers (NTBs) to U.S. exports and the world on a trading-partner by trading-partner basis.  The list is long and includes a variety of non-tariff measures ranging “from customs barriers and shortcomings to trade facilitation, technical regulations, to sanitary and phytosanitary measures that unnecessarily restrict trade without furthering safety objectives, including IP protection, discriminatory licensing requirements and regulatory standards affecting cross-border data flows and discriminatory practices affecting trade in digital products.” In the case of Canada, the NTBs are said to include:

  • Agricultural supply management, particularly dairy
  • The October 21, 2024, the Canadian Border Services Agency (CBSA) launch of the Assessment and Revenue Management (CARM) system.
  • The Ministerial exemptions for bulk imports of fresh fruits and vegetables in packages exceeding certain sizes (typically50 kilograms)
  • The provinces liquor control boards for wine, beers, and spirits
  • The Alberta Electric System Operator (AESO) providing separate and unequal points of access to the Alberta energy market for Montana energy producers.
  • Compositional standards for cheese
  • Canada’s zero plastic waste agenda
  • Quebec’s Bill 96 and its impact on non-French language federally registered trademarks for products manufactured after June 1, 2025, when the relevant provisions of the legislation enter into force.
  • Restrictions on U.S. seeds exports
  • IP Protection - poor enforcement with respect to counterfeit or pirated goods at the border and within Canada.
  • Canadian content rules (broadcasting)
  • Amendments to Canada’s Broadcasting Act which gives the CRTC the authority to impose conditions on the operation of online streaming platforms.
  • Digital Services Taxation
  • Mandatory bargaining Code under the Online News Act requiring designated platform services companies to engage in negotiations with Canadian news providers to pay the news businesses for content accessed via certain services offered on the companies.

President Trump also made specific reference to the market distortions of value-added taxes and currency manipulation in his public remarks.

While Prime Minister Carney has publicly stated that agriculture supply management and Bill 96 are non-negotiable, the focus on NTBs by President Trump is a signal of the types of issues the U.S. will likely bring to the table in the context of a CUSMA renegotiation, including cultural exemptions that have been traditionally excluded from previous Canada-U.S. trade negotiations.   

Reactions to U.S. tariffs

In Congress

On Wednesday, President Trump’s tariffs on Canada faced opposition in the United States Congress. Senator Tim Kaine of Virginia, with the support of other Senate colleagues including Democratic Senator Amy Klobuchar and Republican Senator Rand Paul, has been actively working to pass a resolution aimed at blocking President Trump's tariffs in Canada. Senator Kaine's resolution challenges President Trump's use of the IEEPA to declare an emergency at the border with Canada, which was a basis for imposing tariffs on Canadian imports. Senator Kaine argues that the tariffs are unjustified and harmful to American consumers, potentially raising prices on groceries, building supplies, agricultural products, and more.  

Senator Kaine secured bipartisan support in the Senate to send a strong message to the administration, with the resolution passing by a vote of 51-48. The resolution must now pass the Republican-led House of Representatives, which will prove challenging. Even if the resolution passed in both Houses of Congress, President Trump has the power to veto it, which Congress would be unlikely to overcome.

In Canada

Prime Minister Mark Carney paused his campaign and returned to Ottawa on Wednesday to meet with his Canada-U.S. Relations Council and Canada-US Cabinet Committee to discuss Canada’s response.

In brief remarks to the media on April 2, the Prime Minister stated that President Trump’s tariffs announcement “fundamentally changes the international trading system.” The Prime Minister emphasized that while the new tariffs of April 2 may not apply to Canada, earlier tariffs on Canadian goods remain in place, with automotive tariffs coming into force. Prime Minister Carney also noted that tariffs may be imposed on strategic sectors such as pharmaceuticals, lumber, agriculture, and semi conductors.

Prime Minister Carney provided a fulsome response after meeting with Canada’s First Ministers on the morning of April 3. He stated that First Ministers are “united” and “determined.” The Prime Minister announced that Canada is responding with “carefully calibrated and targeted counter tariffs” by matching the American approach, levying 25% duties on vehicles imported from U.S. that are not compliant with CUSMA, and on U.S. content of CUSMA qualifying vehicles from the U.S. Important to note that these tariffs will not apply to auto parts or Mexican vehicle content. The Government is developing a framework for auto producers to get relief from Canadian retaliatory tariffs if they maintain production and investment in Canada.

The Prime Minister committed that the approximate $8 billion raised by these tariffs pre-remission will go to affected workers and companies, on top of the already announced $2 billion fund committed by the Liberals to developing a “made-in-Canada” auto sector if they form the government following the current election.

The Prime Minister referred to earlier announcements about supports for workers and companies affected by Canadian tariffs, including facilitating streamlined access to employment insurance for workers who may be laid off because of tariffs. The Prime Minister also restated his commitment to postpone tax payments and GST/HST remittances for affected businesses, introduce new measures to provide liquidity and financial assistance, and increase funding for regional development agencies.

Conclusion

President Trump has stated that with this latest trade policy, the U.S. would “pry open foreign markets and break down foreign trade barriers.” However, the President’s announcement of tariffs triggered fears of economic downturn and potential recession in the United States, and potentially around the world.

It is worthy to note the North American stock averages plunged in early trading on Thursday.  The Dow Jones Industrial Average fell by over 1,200 points (approximately 3.6%) shortly after the opening bell. The S&P 500 and Nasdaq indices also saw sharp drops of over 4% and nearly 5%, respectively. The S&P/TSX composite index was down 712.67 points. Hours earlier, Japan’s Nikkei 225 index plunged more than 4.1%, South Korea's Kospi stock average fell more than 2.5% and Australia's ASX 200 dipped about 2% when President Trump revealed his much-anticipated tariff plan. 

Closer to home, Stellantis has announced that it will shut down its plant in Windsor for 2 weeks, from April 7 to April 21, resulting in a temporary layoff for more than 3,500 workers.  A month-long pause is expected at the Stellantis plant in Mexico and over 900 layoffs are expected at the Stellantis Michigan plant.

The imposition of U.S. tariffs on global trading partners has far-reaching economic implications. Tariffs will almost certainly lead to increased consumer prices, as the cost of imported goods rises.  An ongoing cycle of tariffs and counter-tariffs will have monumental effects on global markets, affecting business confidence and investment decisions.

While President Trump’s reciprocal tariffs are presumably intended to protect domestic industries, their broader economic impact will be significant and disruptive—rupturing integrated supply chains and threatening to stall economic growth worldwide. 

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