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On March 12, 2025, 25% tariffs on imports of steel and aluminum and downstream products into the United States from all countries ― including Canada ― came into effect. In response, the next day Canada imposed a 25% retaliatory surtax on $29.8 billion of U.S. goods, including many unrelated to aluminum and steel products. These are in addition to the Canadian retaliatory tariffs on $30 billion of other U.S. goods that have been in effect since March 4.
Background: U.S. tariffs to date
On February 1, U.S. President Donald Trump signed executive orders imposing a 25% tariff on all goods and 10% tariff on energy or energy resources originating in Canada and imported into the U.S. Initially set to begin on February 4, 2025, implementation was delayed to March 4 further to talks between Trump and then Canadian Prime Minister Justin Trudeau.
This was followed by presidential executive orders of February 10 and 11 in relation to steel and aluminum. These executive orders ended exemptions to section 232 tariffs on steel and aluminum imports negotiated by Canada and other nations during the first Trump presidency. By way of justification, the White House released an initial "fact sheet" indicating that the tariff on aluminum was being increased to 25%, and existing exemptions to steel and aluminum tariffs were being cancelled, "to protect America's critical steel and aluminum industries, which have been harmed by unfair trade practices and global excess capacity." For further details please see our February 12, 2025 client alert What Businesses Need to Know About the New U.S. Steel and Aluminum Tariffs and Canada's Response.
On March 3, 2025, the day before the blanket tariffs of 25% were scheduled to go into effect, the White House released a further "fact sheet" confirming that Trump was "proceeding with implementing tariffs on Canada and Mexico .... to combat the extraordinary threat to U.S. national security, including our public health posed by unchecked drug trafficking."
Owing to pressure from a variety of constituencies, including U.S. automakers, on March 6, 2025 Trump issued an executive order exempting imports from Canada and Mexico entering on the U.S. on a USMCA compliant basis from the 25% blanket tariff on goods other than energy and reducing the tariff rate on non-USMCA compliant imports of potash to 10%. While it is expected that these measures will be temporary, there is no end date stipulated in the executive order. For further details on these measures, please see our March 7, 2025 client alert, The Tariff Merry-go-round: Concessions and Refutations.
The new U.S. aluminum and steel tariffs
The latest round of U.S. tariffs on aluminum and steel as well as their downstream derivative products came into force on March 12, 2025, further to the February 10 and 11 executive orders discussed above. Further, the suspension of the blanket tariffs for goods qualifying as originating under the USMCA does not apply to or affect these steel and aluminum tariffs, which continue in force.
In addition, these tariffs apply to steel and aluminum products from Canada on top of the blanket 25% or 10% tariffs currently in force for Canadian products not claimed as qualifying under the USMCA rules of origin.
Importantly, U.S. Customs guidance indicates that these tariffs will not apply if the derivative steel or derivative aluminum products are processed from steel or aluminum melted/smelted and poured/cast in the United States.
The Canadian response: new dollar-for-dollar retaliatory tariffs
In response to the imposition of steel and aluminum tariffs by the U.S., Canada has adopted a "dollar-for-dollar" approach and imposed a 25% reciprocal tariff on a list of steel products worth $12.6 billion and aluminum products worth $3 billion, as well as additional imported U.S. goods worth $14.2 billion, for a total of $29.8 billion as set out in the United States Surtax Order (Steel and Aluminum 2025).
These tariffs, which came into effect at 12:01 am on March 13, apply to a different set of goods than those currently subject to the 25% tariff on approximately $30 billion in U.S. imports to Canada ("Phase 1" of the Canadian response), as set out in greater detail in our March 4, 2025 client alert, "Trade War Underway: Trump Tariffs Unpaused and Canada's Retaliatory Measures"
These newly-targeted products include U.S. steel, aluminum, and additional imported U.S. goods including tools, smartphones, head/ear phones, computers and servers, display monitors, sport equipment, watches, and cast-iron products. The surtax on these items will apply to steel, aluminum and certain other goods imported for commercial and personal purposes, even when exported from a country other than the U.S. into Canada.
Importantly, as set out in Customs Notice 25-11: United States Surtax Order (Steel and Aluminum 2025) ("CN 25-11") outlining the application of the surtax, Customs Tariff Chapter 72 and 73 goods ― iron and steel, and articles of iron or steel ― are subject to the March 13 retaliatory tariffs even if they are imported under Chapter 98 or 99, pursuant to which they would ordinarily be entitled to the Most-Favoured-Nation zero customs duty rate. In contrast, the surtax does apply to aluminum and other goods identified in Schedule 1 to CN 25-11 that are eligible for classification under Chapter 98 or Chapter 99, apart from certain listed exemptions set out in sections 7 and 8.
Canada has also left the door open for further tariffs, noting in its news release regarding the United States Surtax Order (Steel and Aluminum 2025) that it is currently assessing the impact of U.S. tariffs on aluminum and steel and "may impose further counter-tariffs" in response.
Canada's Phase 2 tariff measures
Consultations continue on "Phase 2" of the Canadian response to the U.S. imposition of tariffs, with the government seeking views from businesses, stakeholders, and Canadians on the measures announced in the Notice of Intent to Impose Countermeasures in Response to United States Tariffs on Canadian Goods (the "Notice"). Comments will be accepted until April 2, 2025 and may be provided by electronic form or by email, "to provide additional information not included in the form, as well as any additional views or comments... on Canada's tariff response."
As set out in greater detail in our client alert Canada Responds to U.S. Tariffs – What Businesses Need to Know", the Notice identifies $125 billion in imports of additional goods from the United States on which tariffs might be imposed. The range of goods covered by Phase 2 is extremely broad, potentially covering nearly every type of good and industry that may import U.S. origin goods into Canada.
Non-tariff retaliation continues
Retaliatory non-tariff responses at the provincial level have also continued. Ontario Regulation 25/25 came into force on March 10, 2025, enabling the imposition of a surcharge on the transmission of electricity to the U.S. On March 10, the Ontario Minister of Energy and Electrification ordered that an initial surcharge of $10 per megawatt-hour ― 25% per cent of the average value of the electricity ― be imposed on exports of electricity to the U.S. This surcharge was lifted on March 11, 2025 on the basis that the U.S. Secretary of Commerce had "agreed to discuss a renewed USMCA ahead of the April 2 reciprocal tariff deadline," but the Minister expressly noted that Ontario reserved the right to reimpose the surcharge at any time.
On March 12, 2025, Nova Scotia announced that it had cancelled its first contract with a U.S. software provider further to a review of provincial contracts with U.S. entities. On March 13, 2025, the government of British Columbia introduced Bill 7, the Economic Stabilization (Tariff Response Act) in the legislature. Among other things, it creates a mechanism to apply a toll for vehicles travelling across British Columbia to Alaska and requires public sector entities to procure from British Columbia and Canada, and then the rest of the world, in preference to the U.S.
Conclusion
With near-daily shifts, the U.S.-Canada trade relationship continues to be precarious and unstable and pose considerable challenges for businesses confronting the changing landscape. Key strategies to mitigate risk include supply chain review, developing tariff compliance strategies, and re-assessing market positioning. We encourage businesses to provide feedback on the proposed Phase 2 retaliatory tariffs, particularly in cases where they may have an unintended and disproportionate impact. Companies should consider whether any exemptions may apply, as well as whether they can seek to make use of any relief mechanisms, including the process for obtaining remission on Canada's retaliatory surtaxes.
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