Key Updates
Summary
On February 1, President Trump signed executive orders imposing additional tariffs on Canada, Mexico, and China under the International Emergency Economic Powers Act (IEEPA) in response to an emergency declared at the border related to fentanyl, drug trafficking, and illegal immigration concerns. As to Canada, the order provides the following:
- Legal basis: International Emergency Economic Powers Act (IEEPA) (Order)
- Rate: The order confirms 25% on “all articles that are products of Canada” as defined in a forthcoming Federal Register (FR) notice, except 10% “energy or energy resources” defined in the same forthcoming FR notice. Sections 2(a), (b).
- Timing: The tariff applies to “goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern time on February 4, 2025, except that goods entered for consumption, or withdrawn from warehouse for consumption, after such time that were loaded onto a vessel at the port of loading or in transit on the final mode of transport prior to entry into the United States before 12:01 a.m. eastern time on February 1, 2025, shall not be subject to such additional duty, only if the importer certifies to CBP as specified in the Federal Register notice.” Sections 2(a), (b).
- Other important details:
- The order confirms that rates are cumulative with all other tariffs that would apply to the imported goods. Section 2(c).
- No de minimis treatment will be available for shipments under $800 under 19 USC 1321. Section 2(h).
- No drawback will be available for these duties (but drawback is otherwise still available). Section 2(g).
- Duty inversion benefits will not be available for the duties under this order with respect to merchandise entered into the United States from foreign trade zones. Section 2(f).
- No exclusions/exemptions, including for USMCA originating goods, except a very narrow category of items expressly exempted from the President’s authorities under IEEPA in 50 USC 1702(b). Those items include communications, donations intended to relieve human suffering, certain “informational materials,” and “transactions ordinarily incident to travel” like personal baggage. Section 2(j).
- The order also states that if Canada retaliates, “the President may increase or expand in scope the duties imposed under this order to ensure the efficacy of this action.” Section 2(d).
Retaliatory Actions
Canada has announced retaliation against the U.S. action. Specifically, Prime Minister Justin Trudeau announced retaliatory tariff and non-tariff measures.
- Tariff amounts: 25% tariffs on $155 billion worth of American goods, enacted in two stages (see below).
- Scope of tariffs: More details are awaited, with initial scope summarized below. The tariffs are applied to U.S. origin products, consistent with Canada’s USMCA marking rules.
- Day 1: Immediate tariffs on $30 billion worth of U.S. products as of Tuesday, February 4th. The announcement indicated that Day 1 targets will include (but not be limited to) the following categories: orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and pulp and paper. HS codes to which the tariffs apply are listed in an Order-in-Council.
- Day 21: Further tariffs on $125 billion worth of U.S. products starting Sunday, February 21st, to allow Canadian companies and supply chains to find alternatives. These will be subject to a public consultation process. Day 21 targets will include (but not be limited to): passenger vehicles and trucks, including electric vehicles, steel and aluminum products, certain fruits and vegetables, aerospace products, beef, pork, dairy, trucks and buses, recreational vehicles, and recreational boats.
- Additional measures: Canada is also considering several non-tariff measures, including some related to critical minerals, energy, and other partnerships. Certain non-tariff measures have already been announced by provinces. Nova Scotia announced earlier today that it was doubling the cost of tolls at the Cobequid Pass for commercial vehicles entering from the U.S., removing all U.S. alcohol from provincial liquor stores, and promising to cancel existing contracts with U.S. firms and limiting access for provincial procurement for American businesses. British Columbia announced similar measures on U.S. alcohol and provincial procurement opportunities.
Additional Documentation
