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| Metric | Value |
|---|
| US Import Rank | #3 |
| 2024 Import Value | $422.2 billion |
| % of US Imports | 12.6% |
| 2024 Tariff Rate | 0% (USMCA-compliant) |
| Current Tariff Rate | 0-50% (varies by product/compliance) |
| Trade Agreement | USMCA (CUSMA in Canada) |
| US Trade Balance | -$63.3 billion deficit |
Trade Agreement
USMCA (CUSMA in Canada)
Entered into force: July 1, 2020
Key Provisions:
| Area | Requirement |
|---|
| Auto Regional Value Content | 75% North American content |
| Auto Labor Value Content | 40-45% from workers earning $16+/hour |
| Steel/Aluminum Origin | 70% must originate in North America |
| Dairy Access | 14 Tariff Rate Quotas for US dairy |
| Digital Trade | Prohibition on data localization |
Dairy Provisions
| Metric | Detail |
|---|
| US market access | 14 TRQs covering milk, cheese, cream, butter, etc. |
| Canada’s system | Supply management preserved |
| Over-quota tariffs | 241-298% |
| TRQ fill rate | Only ~25% utilized |
Bill C-282 (June 2025): Canada enacted legislation preventing future TRQ increases in trade negotiations.
2026 Joint Review
- First mandatory review: July 1, 2026
- If parties don’t agree to extend: USMCA terminates in 2036
2024 Baseline Tariff Structure
| Product Category | 2024 Rate | Notes |
|---|
| USMCA-compliant goods | 0% | Vast majority of trade |
| Steel | 0% | Exempt under quota |
| Aluminum | 0% | Exempt under quota |
| Softwood lumber | 14.54% | AD/CVD combined |
| Dairy (over-quota) | 241-298% | Supply management |
Average Effective Tariff (2024): 0.1%
2025 Tariff Changes
Timeline
Feb 1, 2025 Trump announces 25% tariff (fentanyl/immigration)
Mar 4, 2025 IEEPA tariffs: 25% general, 10% energy/potash
Mar 7, 2025 USMCA exemption granted
Mar 12, 2025 Section 232 steel/aluminum: 25% (no USMCA exemption)
Jun 4, 2025 Steel/aluminum raised to 50%
Aug 1, 2025 Non-USMCA goods raised to 35%
Oct 2025 Softwood lumber Section 232: +10%
Current Tariff Structure (January 2026)
| Product Category | Current Rate | Authority |
|---|
| USMCA-compliant goods | 0% | USMCA exemption |
| Non-USMCA goods | 35% | IEEPA |
| Steel | 50% | Section 232 (no exemption) |
| Aluminum | 50% | Section 232 (no exemption) |
| Softwood lumber | ~45% | AD/CVD + Section 232 |
| Energy/potash | 10% | IEEPA (lower rate) |
| Dairy (over-quota) | 241-298% | Unchanged |
Exemptions
USMCA Exemption (Effective March 7, 2025)
Coverage:
- Goods qualifying under USMCA rules of origin
- Canada claims 100% of energy exports qualify
- Canada claims 95% of other exports qualify
- As of August 2025: 81-85% of trade enters duty-free
NOT Exempt:
- Steel and aluminum (50% regardless of USMCA)
- Non-compliant manufactured goods (35%)
- Softwood lumber (subject to AD/CVD + Section 232)
Energy and Potash
- 10% tariff (lower than general 25-35%)
- Nutrien claims all Canadian potash is CUSMA-compliant (tariff-free)
- Oil and natural gas at reduced rate
Economic Effects
Impact on Canadian Economy
| Metric | Impact |
|---|
| Q1 2025 GDP | +2.2% (pre-tariff inventory surge) |
| Q2 2025 GDP | -0.4% (export decline) |
| Goods exports to US | Down 15%+ (April 2025) |
| Forestry/logging jobs | Down 4% |
| Wood manufacturing | Down 1% |
Regional Impacts
British Columbia:
- Estimated 124,000 job losses by 2028
- Largest declines in natural resources and manufacturing
Ontario:
- Auto sector most affected
- Manufacturing contracted ~1.5%
Alberta:
- Energy sector relatively protected (10% rate)
- Some diversification to other markets
Consumer Impacts
| Impact | Estimate |
|---|
| New home cost increase | +$9,200 average |
| Consumer goods | Higher prices on non-compliant imports |
Key Products Affected
Steel and Aluminum
| Metric | Detail |
|---|
| Canada’s share of US aluminum imports | 50% |
| Canada’s share of US steel imports | 20% |
| Current tariff | 50% |
| USMCA exemption | None |
Softwood Lumber
| Metric | Detail |
|---|
| Canada’s share of US consumption | 25-30% |
| Annual trade value | $8-10 billion |
| 2024 combined duty | 14.54% |
| 2025 combined duty | ~45% (AD/CVD + Section 232) |
Automobiles and Parts
| Status | Tariff |
|---|
| USMCA-compliant vehicles | 0% |
| Non-USMCA vehicles | 25% |
| USMCA-compliant parts | 0% |
| Non-compliant parts | 25% |
Energy
| Product | Status |
|---|
| Oil | 10% (or 0% if USMCA-compliant) |
| Natural gas | 10% (or 0% if USMCA-compliant) |
| Electricity | Subject to provincial disputes |
Canada’s Retaliation
Phase 1 (February 4, 2025)
- 25% tariffs on $30 billion CAD of US goods
- Products: poultry, dairy, vegetables, beverages, spirits, tobacco, plastics, rubber, steel articles, aircraft parts
Phase 2 (March 13, 2025)
- Additional $29.8 billion in products
- Products: computers, sports equipment, cast iron products
Total Response Package
- $155 billion CAD in announced measures
- Largest trade retaliation in Canadian history
September 2025 Adjustment
- Canada removed most counter-tariffs recognizing USMCA exemption
- Tariffs on steel, aluminum, and autos remain in effect
Ontario Electricity Dispute (March 2025)
| Date | Event |
|---|
| Mar 2025 | Ontario imposes 25% tax on electricity exports to US |
| Mar 2025 | Trump threatens to double steel/aluminum tariffs to 50% |
| Mar 2025 | Ontario suspends electricity tariff |
| Mar 2025 | Trump withdraws 50% threat |
This episode demonstrated the ongoing tensions even after the USMCA exemption was granted.
Significant Events
| Date | Event | Impact |
|---|
| Feb 1, 2025 | Trump announces 25% tariffs | Markets react, peso/CAD drop |
| Mar 4, 2025 | Tariffs take effect | Immediate trade disruption |
| Mar 7, 2025 | USMCA exemption granted | Relief for compliant goods |
| Jun 4, 2025 | Steel/aluminum to 50% | Major impact on metals |
| Oct 7, 2025 | Trump-Carney meeting | Signals optimism |
| Oct 23, 2025 | Trump terminates negotiations | Via social media |
| Jan 2026 | USMCA review discussions | Scheduled to begin |
Negotiation Breakdown (October 2025)
- Oct 7: Trump meets PM Carney, says sides “came a long way”
- Oct 16: Ontario Premier Ford posts Reagan anti-tariff ad
- Oct 23: Trump terminates negotiations via Truth Social
- Talks remain frozen as of January 2026
Current Status (January 2026)
What’s Working
- USMCA exemption protects ~85% of trade
- Energy trade relatively protected
- Most goods remain duty-free
Outstanding Issues
- Steel/aluminum at 50% (no exemption)
- Softwood lumber at ~45%
- Trade negotiations frozen since October 2025
- 2026 USMCA review approaching
Outlook
The USMCA has largely protected US-Canada trade, but significant pain points remain. The steel and aluminum tariffs hurt Canadian producers, and the approaching 2026 review creates uncertainty. The breakdown in negotiations in October 2025 leaves many issues unresolved.
Sources