
On February 1, 2025, the United States government announced the implementation of tariffs on all Canada-origin, Mexico-origin and China-origin goods entering the United States. These tariffs are being applied under the International Emergency Economic Powers Act (IEEPA) and will take effect on February 4, 2025 at 12:01 AM against Canada-origin goods, but will be delayed one month for Mexico-origin goods. Currently, there is no expiry or revisitation date on the tariffs and no opportunity for tariff exemption. A fact sheet from the U.S. government can be found here.
The U.S. tariff rates are as follows:
• 25% tariff on all Canada-origin goods entering the U.S. (with the exception of energy resources).
• 10% tariff on all Canada-origin energy resources entering the U.S.
• 25% tariff on all goods entering the U.S. from Mexico (effective date to be determined after one month pause).
• An additional 10% tariff on all China-origin goods entering the U.S. (this tariff is above and beyond the existing tariffs against imports from China that have been imposed since 2018).
The 25% tariff will also be applied to low-value goods that fall within the current US$800 de minimis threshold, which have traditionally been exempt from customs duties (i.e., e-commerce parcels).
Canada’s response to U.S. tariffs
The Canadian government has also announced reciprocal tariffs on U.S. goods entering Canada.
Canada will apply a 25% tariff on an extensive list (valued at $155 billion) of U.S.-origin goods entering Canada, in response to the near-universal 25% tariff on Canada-origin goods entering the United States. An announcement from the Canadian government can be found here.
Those currently importing goods from the United States may be impacted by this action and, if so, be required to pay substantially higher duties than they are currently paying on those imported goods.
The Canadian government has provided a list of products, broken down by their eight-digit Harmonized System (HS) code. A 25% tariff will be applied to these goods effective February 4, 2024 at 12:01 AM. The list includes (but is not limited to) products such as orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and pulp and paper. Additional imported goods will be subject to the new tariff later this month after consultation with Canadian industry, and a list of impacted products will be made available at that time.
It’s important to note that, while inconsistent with the spirit of the United States-Mexico-Canada Agreement (USMCA), the application of these tariffs does not dissolve or pause the trade agreement. There is still value in using the USMCA to import goods as doing so exempts importers from having to pay the standard Most-Favored Nation (MFN) tariff in addition to the new tariffs being applied. Goods being shipped into the U.S. under the USMCA, won’t have the MFN rate applied; only the 25% tariff, but will still require the relevant documentation under the agreement.