OTTAWA — U.S. President Donald Trump made good on his threat to increase broad-based tariffs on Canadian goods to 35 per cent on Aug. 1, while keeping a major carve-out that economists say has muted the impact of the trade war. Other duties on steel, aluminum and autos remain, copper has been added to the list and the softwood lumber dispute goes on.

Here is an updated guide to the various layers of tariffs on Canada to help you keep track of what’s officially on paper, not just what Trump’s saying out loud.

The ‘border security’ tariffs

There is currently a 35 per cent tariff on all Canadian goods except energy products and potash, which face a lower rate of 10 per cent. Those came into effect on Aug. 1.

Trump originally set the rate at 25 per cent and said those tariffs, which began on March 4, would remain in place until Canada convinced him it was doing enough to keep fentanyl out of the U.S. 

The U.S. president sent an open letter to Prime Minister Mark Carney on July 10, warning those tariffs would increase to 35 per cent on Aug. 1 unless both countries could reach an agreement by then. No deal was struck and the hike came as threatened. 

Trump imposed the tariffs through the International Emergency Economic Powers Act (IEEPA), a 1977 statute that no other president has ever used for this purpose. The U.S. Court of International Trade ruled in late May the IEEPA does not grant the president the authority to use tariffs in this way. The court struck down both the fentanyl-related duties, which are separate from the sector-specific tariffs on metals and autos, and the so-called reciprocal tariffs Trump slapped on most other countries. A U.S. appeals court has allowed the tariffs to remain while the case makes its way through the legal system. It is widely expected to go all the way to the Supreme Court.

A significant carve-out

The fentanyl-related tariffs do not apply to goods that move through the United States-Mexico-Canada Agreement (USMCA), the trilateral deal that Trump negotiated during his first term to replace the North American Free Trade Agreement. The USMCA is set to be reviewed by July 2026.

U.S. trade data shows only about 38 per cent of Canadian exports to the U.S. moved through USMCA last year, even though RBC Economics estimated about 94 per cent were eligible. Since most Canadian goods entering the U.S. already qualified for low tariffs under the “most-favoured nation” principle at the World Trade Organization, many businesses did not bother filling out the onerous paperwork needed to claim preferential tariff treatment through the USMCA.

Since Trump granted the carve-out on March 6, Canadian businesses have been rushing to do that paperwork. An analysis of the latest trade data from the U.S. Census Bureau by RBC Economics on Aug. 5 shows 92 per cent of Canadian goods exported to the U.S. crossed the border duty-free in June. In its July monetary policy report, the Bank of Canada assumed all energy exports and 95 per cent of other goods would fall within the USCMA exemption.

An April 2 executive order said if and when Trump lifts the fentanyl-related tariffs entirely, then goods not considered compliant with USMCA would face a 12 per cent “reciprocal” tariff. Energy products and potash would be duty-free. So would anything eligible for duty-free treatment through USMCA that is “a part or component of an article substantially finished in the United States.”

Steel and aluminum

As of June 4, all foreign steel and aluminum now face a steep 50 per cent tariff. That’s double the previous rate of 25 per cent, after Trump restored and increased national security tariffs on all imports of steel and aluminum in March. In Canada’s case, that meant removing an exemption the country received in 2019. Trump also expanded the tariffs to include downstream products such as stainless steel sinks and horseshoes.

There is no carve-out for USMCA-compliant steel and aluminum. If a good is subject to the steel or aluminum tariffs, however, then it will be exempt from the fentanyl-related tariff of 35 per cent.

Trump brought in the tariffs under Section 232 of the Trade Expansion Act of 1962, which is not affected by the case making its way through the courts.

Autos

There is a 25 per cent tariff on autos and vehicle parts, although a complicated series of exemptions has lightened the burden.

On March 26, Trump signed an executive order to apply 25 per cent tariffs to imported light-duty vehicles and major parts. The tariffs on completed vehicles took effect on April 3 and those on parts came into place on May 3. Trump brought in the tariffs under Section 232, which is the same legal authority he used for steel and aluminum.

The 25 per cent tariff applies only to the value of non-U.S. content in the vehicle, so long as the auto otherwise qualifies for preferential tariff treatment under USMCA. When it comes to auto parts, the 25 per cent tariff does not apply to anything traded through the USMCA. The commerce secretary has been tasked with figuring out a process for applying it only to non-U.S. content of those parts, but that has not yet happened.

Automakers are also able to claim an offset from those tariffs on parts worth up to 3.75 per cent of the value of vehicles that go through final assembly in the U.S. until April 30, 2026. The offset will drop to 2.5 per cent from May 1, 2026 to April 30, 2027, when it will be eliminated entirely.

The auto tariffs take precedence over others, so if a vehicle is hit with the 25 per cent auto tariff, then it is not also subjected to other tariffs. 

Copper

A 50 per cent tariff now applies to many copper products—excluding refined metal.

Trump imposed the duties on certain kinds of copper imports following a February investigation into perceived national security risks linked to the growing U.S. reliance on copper from foreign sources. The proclamation cited Section 232.

The tariffs, which took effect Aug. 1, do not apply to refined metal and other input materials, which is the largest source of imported copper. They do apply to semi-finished copper products—such as pipes, wires and tubes—and copper-intensive derivatives, including cables and electrical components. The duties do not stack with other tariffs and apply only to the copper content of a product. Any good hit with an auto tariff is exempt from the copper tariffs.

Low-value goods

The “de minimis” exemption that lets goods worth less than US$800 enter the United States duty-free is soon coming to an end.

On July 30, Trump signed an executive order to suspend the rule for all countries. E-commerce’s explosive growth has sent the volume of low-value packages skyrocketing, raising concerns among both Republicans and Democrats that it is being used to import contraband—including fentanyl.

The recently signed tax-and-spending legislation known as the One Big Beautiful Bill Act repealed the statutory basis for the de minimis exemption as of July 1, 2027, but the executive order moves up that timeline by nearly two years to Aug. 29.

The change means any parcels shipped to the U.S. outside the international postal network, such as through private-sector couriers such as DHL, FedEx or UPS, will soon be hit with all applicable tariffs and taxes.

There are potential discounts available for packages that move through the international postal system. Those will be subject to a duty equal to the effective tariff rate that Trump has slapped on the country of origin through IEEPA. In Canada’s case, that would be the fentanyl-related tariff currently set at 35 per cent. For six months, there will be the option to instead pay a set amount linked to the effective tariff rate in the country of origin. Since the rate in Canada is currently at 35 per cent, that amount is US$200 per item. 

Lumber

Duties on softwood lumber have also now climbed above 35 per cent.

On March 1, Trump asked the U.S. Commerce Department to investigate the national-security impacts of importing lumber and whether tariffs or quotas are needed. The executive order mentioned softwood lumber, which is a long-standing Canada-U.S. trade irritant.

The prices to harvest timber on government-owned land, known as stumpage, are set administratively in Canada. U.S. producers must pay market rates, so the U.S. argues the Canadian system amounts to a subsidy. Canada denies this. As a result of this dispute, the U.S. imposes two layers of tariffs on Canadian softwood lumber: anti-dumping duties and countervailing duties, which are also known as anti-subsidy duties. They are reviewed annually.

On Aug. 8, the U.S. Commerce Department hiked the countervailing duty to 14.63 per cent for most timber companies—a significant increase from the previous 6.74 per cent. The new rate is final and is based on imports in the 2023 calendar year. The updated anti-dumping duty of 20.56 per cent was announced July 25. The combined rate for most companies is now 35.19 per cent—more than double the previous rate of 14.4 per cent.

A warning against evading tariffs

The July 31 executive order that raised tariffs on Canadian goods to 35 per cent adds a new wrinkle to the trade war. It says any goods that U.S. Customs and Border Protection finds to have been transshipped through another country as a way to evade tariffs would be hit with a 40 per cent levy instead and could face other penalties. This would not affect any goods that qualify for the USMCA. The U.S. secretary of commerce, the secretary of homeland security and the U.S. trade representative will publish a list of countries and facilities they believe to be circumventing tariffs every six months.