Canada tariffs under Trump began on March 4, 2025, when the president used emergency economic powers to impose 25% duties on most Canadian goods and 10% on Canadian energy, citing fentanyl trafficking across the northern border. Rates climbed through the year and reached 35% in August 2025 before the Supreme Court struck the emergency-powers tariffs down in February 2026. Sector-specific duties on steel, aluminum, and automobiles remain in force under separate legal authorities, and a temporary 10–15% global tariff replaced the invalidated ones. Goods that qualify under the United States-Mexico-Canada Agreement (USMCA) have been exempt throughout.
How the Tariffs Started
Trump announced the plan on November 25, 2024, and signed a directive on his first day in office instructing his Cabinet to recommend trade measures tied to migration and drug flows.1ABC News. Timeline of the US-Canada Trade Dispute The legal vehicle was Executive Order 14193, which declared a national emergency under the International Emergency Economic Powers Act (IEEPA) and described Canada’s failure to curb fentanyl trafficking as an “unusual and extraordinary threat” to national security.2Federal Register. Imposing Duties to Address the Flow of Illicit Drugs Across Our Northern Border
The initial rates were 25% on most Canadian imports and 10% on Canadian energy, the lower energy figure reflecting the administration’s concern about gasoline prices, since Canadian crude is a major input for U.S. refineries.3Congressional Research Service. Tariffs on Canadian Imports Under IEEPA A one-month pause was announced on February 3 after Canada agreed to border enforcement measures. The duties took effect on March 4, 2025.
Two days later, Trump signed orders indefinitely suspending the tariffs for goods that comply with USMCA, the trilateral agreement that replaced NAFTA in 2020. That carve-out mattered enormously. A large share of Canadian exports qualify under USMCA rules of origin, so much of the trade continued crossing duty-free even as headline rates rose.3Congressional Research Service. Tariffs on Canadian Imports Under IEEPA
How the Tariffs Escalated Through 2025
On March 12, 2025, the U.S. imposed 25% tariffs on steel and aluminum under Section 232 of the Trade Expansion Act, a distinct legal authority from IEEPA. Canada announced retaliatory tariffs on roughly $20.7 billion of U.S. goods.1ABC News. Timeline of the US-Canada Trade Dispute The steel and aluminum rates were doubled to 50% on June 2, 2025.4CBC News. Trump Tariffs Canada List
Tariffs on imported vehicles took effect at 25% on April 3, 2025. Canada responded on April 9 with 25% duties on non-USMCA-compliant American vehicles.1ABC News. Timeline of the US-Canada Trade Dispute Auto parts followed in May and trucks in November. The auto sector, whose components cross the border multiple times during assembly, was hit hardest: by year-end, auto manufacturing accounted for 29% of all U.S. duties collected from Canada, and Canadian production was down 3%.5RBC Economics. Tracking the Impact of US Tariffs on Five Targeted Canadian Industries
Softwood lumber, already carrying anti-dumping and countervailing duties, saw combined rates reach 35.16%, with an additional 10% global tariff layered on in October 2025. Canadian lumber production fell 4%, and forestry employment dropped by a similar margin.5RBC Economics. Tracking the Impact of US Tariffs on Five Targeted Canadian Industries
On July 31, 2025, Trump signed an executive order raising the general IEEPA tariff from 25% to 35%, effective August 1. The White House cited both fentanyl trafficking and Canada’s own retaliatory tariffs. Goods transshipped through Canada to evade the duty faced a 40% rate, and USMCA-compliant goods remained exempt.6The White House. Fact Sheet: President Donald J. Trump Amends Duties CBC News noted that because of the USMCA exemption, “the vast bulk of Canada’s exports can still cross the border tariff-free.”7CBC News. Trump Tariffs Canada Deadline
How Canada Retaliated
Canada’s counter-tariffs came in phases. On March 4, 2025, it imposed 25% duties on C$30 billion of U.S. goods. Another 25% wave on March 13 covered a further C$30 billion in steel, aluminum, and consumer products.8Canadian Federation of Independent Business. US Tariffs In April, Canada added 25% duties on non-USMCA-compliant American vehicles.
Then Canada pulled back. A planned “Phase 2” of retaliation worth C$125 billion was cancelled. Effective September 1, 2025, Canada removed counter-tariffs on most U.S. imports, acknowledging that the U.S. was letting the majority of Canadian goods in tariff-free under USMCA.9Government of Canada. Complete List of US Products Subject to Counter Tariffs The retaliatory duties that remained applied to steel, aluminum, and autos, sectors where U.S. tariffs offered no USMCA carve-out.
The Canadian government also cushioned domestic firms through a tariff remission process, deferrals of GST and corporate income tax for affected companies, and support packages announced in November 2025 for the steel and lumber industries, including subsidized inter-provincial freight rates and reduced import quotas for steel from non-free-trade-agreement countries.10Al Jazeera. Canada Announces New Support for Lumber, Steel Industries Hit by Tariffs
What the Tariffs Cost
The Bank of Canada estimated in January 2025 that a 25% reciprocal-tariff scenario would cut Canadian GDP growth by 2.5 percentage points in the first year and leave national output “permanently lower.”11Bank of Canada. Monetary Policy Report In Focus The Penn Wharton Budget Model projected that Trump’s broader tariff program would reduce U.S. GDP by roughly 6% over the long run and cost a middle-income household about $22,000 over a lifetime.12Penn Wharton Budget Model. The Economic Effects of President Trump’s Tariffs
By mid-2025 the effects were visible. Canadian steel and iron exports fell 8.5% in the six months after the tariffs hit. Canada recorded its widest monthly trade deficit on record in April 2025. Manufacturing contracted by about 1.5% in the first half of the year. National unemployment held near 7.0%, but job creation in export-exposed industries was flat, and mining, oil, and gas employment fell 7.4%.13TD Economics. Tariff-Exposed Industries
Canadian trade patterns shifted too. By mid-2025, Canadian exports to non-U.S. markets reached a record 31.7% share, and the U.S. share of Canadian exports slipped below 70% for the first time.13TD Economics. Tariff-Exposed Industries
The Supreme Court Ruling
Through 2025, U.S. importers, small businesses, and state governments challenged the tariffs, arguing IEEPA did not give the president authority to impose duties. Two cases reached the Supreme Court: Learning Resources, Inc. v. Trump and Trump v. V.O.S. Selections, Inc., the latter filed by businesses and twelve states in the Court of International Trade.14Supreme Court of the United States. Learning Resources, Inc. v. Trump
On February 20, 2026, the Court ruled 6-3 that IEEPA does not authorize the president to impose tariffs. Chief Justice John Roberts wrote the majority opinion, joined by Justices Sotomayor, Kagan, Gorsuch, Barrett, and Jackson. The reasoning was that Article I, Section 8 of the Constitution vests the power to lay and collect duties in Congress, and that IEEPA’s authority to “regulate… importation” does not encompass the power to tax. The Court observed that in IEEPA’s fifty-year history, no president had ever invoked it to impose tariffs.15SCOTUSblog. Learning Resources, Inc. v. Trump Justice Kavanaugh, joined by Justices Thomas and Alito, dissented.16SCOTUSblog. A Breakdown of the Court’s Tariff Decision
What Replaced the IEEPA Tariffs
Trump signed an executive order that same day terminating the IEEPA tariffs. Customs and Border Protection stopped collecting them at midnight on February 24, 2026.17White & Case. United States Terminates IEEPA-Based Tariffs Following Supreme Court Decision The administration immediately pivoted. A proclamation imposed a temporary global tariff under Section 122 of the Trade Act of 1974, which permits up to 15% for a maximum of 150 days. USMCA-compliant goods remained exempt.18White & Case. Trump Administration Imposes Section 122 Tariff
The administration signaled that Section 301 of the Trade Act would be its “principal replacement pathway” for country-specific duties and opened investigations into major trading partners’ practices. Section 232 tariffs on steel, aluminum, and automobiles were untouched by the ruling and remain in force.19The White House. Ending Certain Tariff Actions
Refunds for tariffs already paid have been slow. The total owed to importers across all IEEPA tariffs (not only those on Canada) is estimated at roughly $166 billion. The administration began accepting refund requests in late April 2026 but conceded in court filings that its systems could process only about $127 billion. The Court of International Trade ordered the head of Customs and Border Protection to appear at a June 2026 hearing to address compliance.20The New York Times. Trade Court Customs Chief Tariff Refunds CBP is building an automated refund platform called CAPE, though as of March 2026 key components were only 40% to 80% complete.21PwC Canada. US Court IEEPA Tariff Refunds
Where Things Stand Now
As of mid-2026 the tariff picture for Canadian goods is a patchwork drawn from several legal authorities. The IEEPA tariffs are gone. In their place sits a temporary 10–15% global tariff under Section 122, scheduled to expire in July 2026. Sector-specific duties remain: 50% on steel and aluminum under Section 232, 25% on automobiles and parts, and elevated rates on softwood lumber, copper, and other goods.22Center for Strategic and International Studies. USMCA Review 2026
The USMCA exemption still runs across all of these regimes, and its importance has grown. As of April 2026, nearly 84% of Canadian and Mexican imports by value were claiming USMCA preferential treatment as importers restructured supply chains to qualify.23Penn Wharton Budget Model. Effective Tariff Rates and Revenues Canada maintains 25% counter-tariffs on U.S. steel, aluminum, and autos, having dropped the rest in September 2025.9Government of Canada. Complete List of US Products Subject to Counter Tariffs
The USMCA Review Ahead
The mandatory USMCA joint review begins in July 2026 under Article 34.7. If all three parties agree to renewal, the pact continues for another sixteen years. If they do not, it enters annual reviews and faces potential expiration in 2036.24Congressional Research Service. USMCA Joint Review U.S. Trade Representative Jamieson Greer told Congress in December 2025 that he is “not prepared to recommend renewal of the USMCA to the president without changes,” and the U.S. is leaning toward continuing the agreement without formal renewal while seeking concessions.25Brookings Institution. USMCA Forward 2026 The U.S. and Mexico held their first bilateral negotiating round in Mexico City on May 28-29, 2026.26Office of the United States Trade Representative. United States and Mexico Announce Bilateral Negotiating Rounds
Canada has moved to strengthen its position. Prime Minister Mark Carney pledged a “step change” in defense spending, and the government announced in March 2026 that Canada had reached the NATO 2%-of-GDP target, with plans to spend half a trillion dollars on defense over the next decade and reach 5% by 2035.27Office of the Prime Minister of Canada. Prime Minister Carney Announces Canada Has Achieved NATO 2% Defence Spending Canada also rescinded its Digital Services Tax on large technology companies to keep negotiations on track,28Government of Canada. Canada Rescinds Digital Services Tax and softwood lumber quotas and critical minerals cooperation are on the table as additional bargaining chips.22Center for Strategic and International Studies. USMCA Review 2026
Carney has said the era of “steadily increased integration” with the United States is over and that there is “little evidence” Canada will secure a deal that avoids all tariffs. Whether the July 2026 review preserves the North American free trade framework or begins its unwinding is the question that will define what tariffs Canadian goods face next.