The United States (U.S.) is Canada’s largest trading partner, and U.S. trade-related actions can have significant impacts on Canada.
As Canada faces the prospect of U.S. tariffs in 2025, a summary of U.S. President Donald Trump’s comments about U.S. tariffs and the recently announced America First Trade Policy, the U.S. tariffs on certain steel and aluminum imports – including from Canada – in 2018, and Canada’s response to those tariffs could provide insights about potential future actions.
President Trump and Trade
On 25 November 2024, President-elect Donald Trump mentioned that he would sign an executive order on his inauguration day – 20 January 2025 – to impose a 25% tariff on imports from specific countries, including Canada, to address concerns relating to migration and drugs.
Following his inauguration, President Trump indicated a change in the date for imposing the U.S. tariffs on Canadian goods to 1 February 2025 and also directed members of his administration to take certain actions relating to U.S. trade policy.
In particular, President Trump signed the America First Trade Policy memorandum, which identifies a number of actions that must be completed by 1 April 2025, including the following:
- investigate the causes of the United States’ “trade deficits in goods, as well as the economic and national security implications and risks resulting from such deficits,” and recommend “response measures”;
- examine the feasibility of establishing an External Revenue Service to “collect tariffs, duties, and other foreign trade-related revenues”;
- review and identify countries’ “unfair trade practices,” and recommend appropriate actions;
- launch a public consultation process that results in recommendations concerning the United States’ participation in its trade agreement with Canada and Mexico, and prepare a report for the U.S. Congress about the agreement’s operation;
- evaluate “unlawful migration and fentanyl flows” from Canada, China, Mexico and other “relevant jurisdictions,” and recommend “appropriate trade and national security measures”;
- investigate whether any foreign country imposes discriminatory or extraterritorial taxes on U.S. citizens or corporations;
- review the exchange rate between the U.S. dollar and the currencies of major U.S. trading partners to “identify and address currency manipulation or misalignment,” and recommend measures to address currency manipulation or misalignment that hinders fair trade; and
- review the trade agreement between the United States and China to determine whether China is meeting its trade obligations, and recommend appropriate actions.
U.S. Steel and Aluminum Tariffs in 2018
On 16 February 2018, the U.S. Secretary of Commerce released reports indicating that U.S. imports of certain steel and aluminum goods “threaten to impair…national security” as defined by section 232 of the Trade Expansion Act of 1962.
In response, President Trump issued two proclamations on 8 March 2018, both of which became effective 23 March 2018 for all countries:
- a 25% tariff on imports of certain steel goods; and
- a 10% tariff on imports of certain aluminum goods.
On 22 March 2018, President Trump signed proclamations exempting Canada, Mexico and certain other jurisdictions from these steel and aluminium tariffs until 1 May 2018.
Pursuant to steel and aluminium proclamations signed on 30 April 2018, Canada, Mexico and the European Union had their temporary exemption extended until 1 June 2018. Other jurisdictions identified in the 22 March 2018 proclamations received a permanent exemption.
Steel and aluminum proclamations signed on 31 May 2018 ended the temporary exemption from tariffs for Canada, Mexico and the European Union. Consequently, on 1 June 2018, U.S. tariffs were imposed on certain steel and aluminum goods from these jurisdictions at the rates of 25% and 10%, respectively.
The U.S. tariffs on these Canadian goods ended on 19 May 2019. However, the United States said that tariffs would be reimposed if imports of certain Canadian steel and aluminum goods “surge meaningfully beyond historic volumes of trade over a period of time.”
On 6 August 2020, President Trump signed a proclamation relating to aluminum. Effective 16 August 2020, a 10% tariff was reimposed on U.S. imports of Canadian unwrought unalloyed aluminum.
Canada’s Countermeasures
Subsection 53(2) of the Customs Tariff allows Canada to implement countermeasures in response to foreign policies or practices that “adversely affect, or lead directly or indirectly to adverse effects on, trade in goods or services of Canada.”
On 31 May 2018, the Government of Canada published a notice of intent to impose trade-restrictive countermeasures on certain steel, aluminum and other goods imported from the United States. The “other goods” were selected with a view to supporting Canadian advocacy efforts in the United States.
The notice of intent launched a 15-day comment period to receive Canadians’ views about the proposed countermeasures. Their views about the goods listed in the notice, as well as the availability of alternative domestic or non-U.S. sources of supply for those goods, informed decisions about the final list of goods on which countermeasures were imposed.
On 28 June 2018, the Governor in Council issued two orders to impose surtaxes on specific U.S. goods, effective 1 July 2018:
- the United States Surtax Order (Steel and Aluminum), establishing a 25% surtax on imports of U.S. steel goods classified under 131 tariff items covering $5.59 billion in imports from the United States in 2017, and a 10% surtax on imports of U.S. aluminum goods classified under 19 tariff items covering $2.66 billion in imports from the United States in 2017; and
- the United States Surtax Order (Other Goods), establishing a 10% surtax on imports of U.S. goods under 79 tariff items covering $8.31 billion in imports from the United States in 2017.
These surtaxes were imposed in addition to any relevant customs duties under the Customs Tariff, and they were to remain in place until the United States eliminated “its trade-restrictive measures against Canada.”
In response to the United States’ reimposition of a 10% tariff on imports of Canadian unwrought unalloyed aluminum, on 15 September 2020, the Governor in Council issued United States Surtax Order (Aluminum 2020). Effective 16 September 2020, a 10% surtax was imposed on U.S. aluminum and aluminum-containing goods.
Ending the Canadian Countermeasures and the U.S. Tariffs
On 17 May 2019, Canada and the United States agreed to end the Canadian countermeasures and the U.S. tariffs that had been announced on 28 June 2018 and 8 March 2018, respectively. The countermeasures and the tariffs ended effective 19 May 2019.
On 15 September 2020, the U.S. Trade Representative announced that the United States would “resume tariff-free treatment” of imports of Canadian unwrought unalloyed aluminum, retroactive to 1 September 2020. A 27 October 2020 proclamation relating to aluminum officially ended the 10% U.S. tariff. On 9 June 2021, Canada’s 10% surtax on U.S. aluminum and aluminum-containing goods ended, with retroactive application to 16 September 2020.
Conclusion
If U.S. tariffs were to be imposed on Canadian goods exported to the United States, the impacts would likely not be felt equally across Canada, and the Government of Canada would probably implement countermeasures. During a comment period, it is expected that Canadians would have an opportunity to provide their views about the Government of Canada’s proposed countermeasures.
Additional Resources
House of Commons. Standing Committee on International Trade. Section 232 of the United States Trade Expansion Act: Implications of Tariffs for Canada. Fifteenth report. February 2019.
United States Congressional Research Service. Section 232 Investigations: Overview and Issues for Congress. 31 May 2020.
By Bashar Abu Taleb, Library of Parliament
Categories: Business, industry and trade, International affairs and defence