As the ongoing trade conflict between the United States and Canada has continued to develop over the past few months, there have been significant developments as we leave the dog days of summer and move into the fall. These include the expansion of the US section 232 tariffs on steel and aluminum products (most notably on downstream derivative products) as well as the elimination of the de minimis exemption for low-value imports into the United States. The US judicial system has also continued its review of the Trump Administration's tariffs, with the Court of Appeals for the Federal Circuit issuing a ruling on the validity of tariffs imposed under the International Emergency Economic Powers Act ("IEEPA").
Meanwhile, effective September 1st, the government of Canada has repealed its general retaliatory surtaxes on most US products, while maintaining those on US steel, aluminum, and autos. This significant change, along with the exemption from US tariffs for CUSMA-originating goods, leaves sector-specific duties in place while maintaining the vast majority of trade between the United States and Canada tariff-free.
Expansion of section 232 tariffs
On August 19, 2025, the United States expanded the scope of section 232 steel and aluminum tariffs by adding 407 additional Harmonized Tariff Schedule codes to the list of products classified as steel or aluminum derivative goods – that is, not just steel and aluminum but certain products that contain steel and aluminum. The new tariffs apply to merchandise entered for consumption, or withdrawn from warehouse, on or after August 18, 2025, with no exception for goods already in transit.
This expansion significantly broadens the range of downstream finished products subject to section 232 tariffs on their steel or aluminum content. The newly covered items span sectors whose products would not ordinarily be considered steel or aluminum "derivative products," including dairy products, perfumes and cosmetic preparations, and furniture and household goods.
The tariffs only apply to the steel and aluminum content of the products; however, importers will be required to separately value such content and provide a breakdown of how they allocate the total value of the product to demonstrate such value. This imposes additional costs and risk, as importers not only have to allocate out the costs, but are also operating under the threat that US Customs and Border Protection may take a contrary view and seek a higher duty amount plus interest. This is likely to have substantial negative impacts on Canadian and global industry exports, as well as on US supply chains and end-market pricing.
End of the US de minimis exemption
Up until very recently, the United States allowed for shipments of goods under USD $800 to be imported without the payment of duties or taxes or formal customs entry. These shipments are known as de minimis shipments – as they are viewed as falling below the minimum threshold for customs formalities to be appropriate.
On August 29, 2025, the United States suspended this de minimis tariff exemption for imports, pursuant to an executive order signed by President Donald Trump on July 30, 2025. These imports are now subject to the prevailing IEEPA tariff rate, in addition to any other applicable duties. The order provides a six-month transitional period for packages carried by foreign postal services, which may elect to apply a flat-rate tariff of USD $50 to $200 per package, depending on the applicable IEEPA tariff rate, in lieu of an ad valorem duty. For Canada, the flat-rate tariff is set at USD $200, reflecting its 35% IEEPA tariff rate.
CUSMA-compliant goods may continue to enter tariff-free. However, because the election to identify the appropriate rate is on the carrier, and said carrier may not have the desire or capability to individually determine and declare shipments to pay the appropriate rate, it is important for any Canadian exporters claiming tariff-free treatment under CUSMA to be sure to arrange for the goods to be properly declared and accounted for to avoid being charged the flat rate.
This change is expected to significantly affect cross-border e-commerce and retail supply chains, particularly for direct-to-consumer businesses that sell into the United States and US consumers that rely on small-value shipments.
US Court of Appeals confirms IEEPA tariffs unlawful
Throughout the summer, a number of US-based importers have sought to have the IEEPA tariffs declared unlawful. Previously, on May 28, 2025, the Court of International Trade had ruled unanimously that the tariffs were unlawful; a ruling which the Trump Administration promptly appealed to the US Court of Appeals for the Federal Circuit.
In a decision issued on August 29, 2025, the US Court of Appeals for the Federal Circuit issued a 7-4 ruling which held that the so-called "Liberation Day" and "reciprocal" tariffs imposed by executive orders under the purported authority of IEEPA were not authorized by IEPPA, affirming the decision of the Court of International Trade. The Court stayed its decision until at least October 14, 2025, to allow the government to seek review at the Supreme Court.
Unsurprisingly, on September 3, 2025, the US government filed a petition for a writ of certiorari to the Supreme Court of the United States and a motion to expedite both consideration of the petition and, if certiorari is granted, briefing and argument on the merits. In its petition, the government argued that the rulings of the Court of Appeals and the Court of International Trade cast "a pall of uncertainty" over ongoing trade negotiations. The government has requested that the Supreme Court decide whether to accept the case by September 10, and, if accepted, establish a tight schedule leading to oral argument in the first week of November. The Court of Appeal's decision will remain stayed until the Supreme Court either denies review or issues a judgment.
Importantly for Canadian exporters and producers, this ruling does not affect non-IEEPA tariffs, such as those implemented under section 232 for sectors including steel, aluminum, copper and autos. Additional sectors may be added, as investigations are ongoing with respect to a number of products, including timber and lumber, semiconductors, trucks and truck parts, commercial aircraft and engines, critical minerals and pharmaceuticals. Given the nature of the controlling opinion, it is also unknown if the ruling will block future potential IEEPA tariffs, or the use of IEEPA to eliminate the de minimis exemption.
If IEEPA-based tariffs are permanently invalidated, section 232 investigations could serve as the primary mechanism for imposing tariffs going forward. This may come in the form of an increased number of investigations into specific sectors, or attempts to shoehorn new products into existing tariffs in a way similar to the expansion of "derivative products" under the steel and aluminum section 232 tariffs. The Trump Administration has indicated that other authorities may also be used to support future tariffs.
Canada drops most retaliatory tariffs
On August 22, 2025, Canada announced a repeal of its 25% retaliatory tariffs on most US goods which had previously been targeted, which Prime Minister Mark Carney characterized as "matching" US exemptions in an effort to reset trade negotiations between the two countries. The list of goods now subject to these retaliatory tariffs has been cut down from about 1,800 items to about 300 items.
Although the announcement referenced "US goods specifically covered under CUSMA," the Order Amending the United States Surtax Order (2025-1) and the United States Surtax Order (Steel and Aluminum 2025) amended the United States Surtax Order (2025-1) to remove product listings before repealing it all together. The Canada Border Services Agency has also updated its Customs Notice 25-10 on US surtaxes accordingly.
The practical result of this move is that effective September 1, 2025, retaliatory surtaxes have been lifted on all US imports into Canada except for certain goods in the steel, aluminum, and automobiles sectors. This move does go beyond the stated goal of the Canadian government to "match" US moves by creating a similar "CUSMA-exemption." However, doing so does provide significant assistance to Canadian importers, who will no longer be as reliant on obtaining proper CUSMA documentation, and they will similarly not be as exposed to potential verifications on origin.
The removal of the retaliatory duties may have preserved the "CUSMA exemption" which allowed most goods of Canadian origin to be imported into the United States without paying duties. Over 85% of Canada‑US trade remains tariff‑free under CUSMA, including near-complete exemptions for energy exports and broad coverage of other goods. Exporters to the United States should ensure they are meeting the required rule of origin for the goods sold into the US market, and complete a proper certificate of origin in order to avoid the application of the US IEEPA tariff of 35%. Of course, sector‑specific US tariffs, namely 50% on steel and aluminum and 25% on automobiles and copper, continue to affect key Canadian industries and exports.
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