The US has imposed significant new tariffs on Canadian goods. New tariffs were announced on a broad range of Canadian products to address US dissatisfaction with Canada’s treatment of US dairy, alcohol, and motor vehicle exports, while separate tariffs were imposed by the US in response to Canada’s purported failure to enforce its prohibition on the importation of goods produced using forced labour.
These tariffs will impact a broad range of Canadian exports, many of which will no longer benefit from any exemption under the CUSMA and will therefore have significant impacts on Canadian businesses. As such, Canadian exporters should take steps to assess their exposure and prepare accordingly.
We provide key details concerning the tariffs and takeaways for businesses below.
Overview of the New Tariffs
The new US tariffs on Canadian goods were imposed in two major announcements, pursuant to two distinct legal authorities.
New Retaliatory Tariffs Related to Dairy, Alcohol, and Motor Vehicles Under Section 338 of the Tariff Act of 1930
On July 20, 2026, President Trump issued three new proclamations imposing 50% tariffs on certain Canadian goods in response to Canada’s allegedly discriminatory treatment of US dairy, alcohol, and motor vehicle exports.
These tariffs will take effect on August 19, 2026, and are being imposed pursuant to Section 338 of the Tariff Act of 1930, which authorizes the President to impose tariffs of up to 50% on goods of a foreign country to offset discriminatory measures of the foreign country that "burden or disadvantage" US commerce. Section 338 has never been used by a US President to impose tariffs, and the exercise of this authority in the present case raises legal questions that are likely to be tested in US courts.
Although the US proclamations directly reference Canada’s dairy, alcohol, and automotive sectors, it is important to note that the goods subject to tariffs extend far beyond those industries and cover a broad range of manufactured, industrial, and consumer goods, such as certain baking mixes, electronics, plywood, and articles of clothing.
Critically, these tariffs do not include an exemption for goods qualifying under the CUSMA, meaning that Canadian goods will be subject to tariffs even if they qualify as originating under the terms of the CUSMA. The only exemptions are for energy, potash, fish, critical minerals, and goods already subject to tariffs under Section 232 of the Trade Expansion Act of 1962, such as steel and aluminum products.
New Forced Labour Tariffs Under Section 301 of the Trade Act of 1974
On July 24, 2026, the United States imposed new 10% tariffs on Canadian goods. These tariffs were imposed pursuant to Section 301 of the Trade Act of 1974 further to the findings of a USTR investigation initiated in March 2026 that Canada and other US trade partners have failed to prevent the importation of goods produced using forced labour, resulting in US exports competing against artificially low-cost alternatives.
The new forced labour tariffs were introduced just as the 10% tariffs imposed under Section 122 of the Trade Act of 1974—which the US adopted following the US Supreme Court’s invalidation of the IEEPA tariffs in February 2026—expired after 150 days (the maximum time permitted under Section 122). These tariffs may provide the Trump administration with a more enduring and stable form of global tariff authority as Section 301 tariffs are not time limited or dependent on the approval of Congress, although they are presently being challenged in US courts.
Like their predecessors, the new forced labour tariffs do not apply to Canadian-originating goods under the CUSMA, goods already subject to Section 232 tariffs, and certain other goods (e.g., rare earths, pharmaceuticals, and aircraft parts).
Implications for Canadian Businesses
The new US tariffs will have major implications for Canadian businesses. In addition to the new Section 338 tariffs impacting a significant number of exports that were previously exempt from tariffs because they qualified as originating goods under the CUSMA, the introduction of new forced labour tariffs appears to have accelerated Canada’s efforts to strengthen its forced labour enforcement regime, including through the introduction of new Canadian forced labour legislation that is expected, once passed, to materially increase enforcement and seizure risk at the border.
More broadly, these new actions suggest that Canada-US trade relations have entered a particularly unpredictable period following the July 1, 2026, joint review and the failure of the parties to reach any comprehensive agreement. These actions also reaffirm that tariffs are likely to continue to constitute a key element of US trade policy, regardless of the legal checks imposed by US courts and growing concerns in the US about tariff-induced inflation.
While Canada has not indicated that it will impose any retaliatory tariffs, the Carney government has also not ruled out the possibility of responding in the future, and this may have further significant implications for Canadian importers.
Preparing for the Tariffs
In light of these new tariffs, businesses should:
- Ensure that contracts address the risks arising from tariffs and enhanced forced labour enforcement, including key contractual provisions governing force majeure, termination, tariff liability, audit rights, and labour standards.
- Review exports to the US against the list of goods that may be subject to new US tariffs under Section 338.
- Consider the application of potential exemptions, including exemptions from forced labour tariffs for CUSMA-originating goods.
- Continue preparing for new Canadian forced labour legislation and increased enforcement risk, including through supply chain mapping and supplier due diligence.
Fasken’s International Trade and Investment Law Group will continue to monitor Canada’s response to these tariffs, including any potential retaliatory surtaxes, quotas, exemptions, and other trade-related relief measures, and will provide updates on developments affecting Canadian exports.
