Canada has made significant changes to its retaliatory tariffs on US origin goods, most notably by eliminating the 25 per cent surtax on a wide variety of US origin goods first imposed in March 2025. Canada also introduced a number of targeted exemptions, including some that apply retroactively. However, Canadian retaliatory tariffs remain in place on US origin steel, aluminum, and motor vehicles.
These changes will have major implications for Canadian importers and may mark a shift in Canadian trade policy as economic growth cools and the 2026 Canada-United States-Mexico Agreement (CUSMA) review draws closer. We discuss the key changes and their implications below.
Background: Canada's Retaliatory Surtax Regime
Canada responded to the imposition of US tariffs targeting Canadian exports through the imposition of surtaxes on US goods. Surtaxes were imposed pursuant to three Orders:
- The United States Surtax Order (2025-01) imposed a 25 per cent surtax on a wide range of US goods including agrifoods, consumer goods, and building materials valued at approximately $30 billion.
- The United States Surtax Order (Steel and Aluminum 2025) imposed a 25 per cent surtax principally, but not exclusively, on many US steel and aluminum goods.
- The United States Surtax Order (Motor Vehicles 2025) imposed a 25 per cent surtax on non-CUSMA compliant vehicles imported from the US, as well as a 25 per cent surtax on the non-Canadian/non-Mexican content of CUSMA compliant vehicles.
Key Changes to Canada's Surtax Regime
On August 29, 2025, Canada published the Order Amending and Repealing Certain Orders Made Under the Customs Tariff (United States Surtax) (the "Order"). The Order makes the following key changes:
- Repeals the United States Surtax Order (2025-01)as of September 1, 2025, eliminating the 25 per cent surtax on approximately $30.3 billion in annual imports.
- Eliminates the 25 per cent surtax on all non-steel and non-aluminum goods originally listed in the United States Surtax Order (Steel and Aluminum 2025), covering approximately $14.4 billion in annual imports.
- Retroactively eliminates surtaxes on various items, such as reusable steel containers temporarily imported into Canada; vintage cars; and certain goods purchased abroad by travelers. Given that they are retroactive, importers who have paid surtaxes on these items are eligible to submit corrections to claim refunds.
These changes, while significant, leave in place surtaxes on many steel and aluminum items, as well as on non-CUSMA compliant vehicles and the non-Canadian/non-Mexican content of CUSMA compliant vehicles imported from the US.
Additionally, the amendments as well as statements from the government imply, but do not explicitly confirm, that Canada will not reimburse surtaxes paid on covered imports since March 4, and that remission applications previously filed (as well as new remission applications for goods that continue to be subject to surtax) will continue to be processed and assessed.
Reasons for the Changes
Changes to Canada's surtax regime were made further to Prime Minister Carney's August 22 announcement that Canada would align its retaliatory tariffs to mirror the tariffs imposed on Canadian exports. Since CUSMA compliant goods are exempted from tariffs imposed under the International Emergency Economic Powers Act, but may still be subject to sectoral specific tariffs targeting steel, aluminium, and copper products, the changes to Canada's surtax regime similarly allow many CUSMA compliant goods to enter Canada surtax free while maintaining tariffs on steel, aluminum, and autos.
The move also appeared designed to strike a concessionary note, as the Prime Minister noted that although key Canadian exports remain impacted by tariffs, Canada still has privileged access to the US market and that everything must be done to protect this access, particularly as the parties build towards CUSMA review in 2026 and a renewed trade and security relationship.
Finally, the changes are also consistent with Canada's recent efforts to blunt the impact of retaliatory surtax on Canadian businesses, who are simultaneously struggling with the loss of access to the US market. While Canada previously expanded the availability of remission to minimize the negative effects of the surtaxes, reportsindicate that Canada's economy is contracting, driven principally by goods-producing industries, and the narrowing of retaliatory surtaxes will offer many Canadian businesses benefits.
Key Takeaways
Importers should review the list of items subject to surtax as of September 1, 2025 to determine potential liability and assess their eligibility for a refund of any surtax paid for importations that have been retroactively eliminated. Importers who continue to be impacted may avail themselves of legal tools to minimize surtax liability. These importers should therefore:
- Review supply chains to identify vulnerabilities and alternate sources of supply for products.
- Assess their eligibility for remission of surtax.
- Determine eligibility for duty deferral and drawback.
- Review contracts of supply for provisions that may be relevant to either passing on costs, termination, or suspending obligations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
