Federal government announces retaliatory tariffs and industry supports

Includes tariffs on $27.6 billion of U.S. products and a $7.5 billion support package.‍

Following the imposition of the 50% ‘section 338’ tariffs by the United States on August 22 on approximately $28 billion worth of Canadian products, the Canadian federal government has now issued a decisive response, including dollar-for-dollar and rate-for-rate retaliatory tariffs as well as a $7.5 billion support package to help businesses and workers weather the storm caused by trade disruptions.

Canada's approach to composing the retaliatory package appears designed principally to mirror recent U.S. tariff actions, and to ensure that companies in Canada can remain competitive and have greater access to the domestic market for their products while they face reduced access to the US market. The Canadian list is drawn from products targeted by the U.S. Section 338 and Section 232 measures and is therefore aligned to the corresponding pre-existing

U.S. treatment of Canadian goods. Goods were reportedly selected based on previous consultations, requests from industry, and the federal government's previous experience with managing tariffs and remissions. That said, the Canadian government is already facing criticism from a number of stakeholders for a lack of substantive consultations on the product coverage reflected in the list issued today, and who therefore were taken by surprise by the inclusion of certain products (e.g. seafood).

It’s worth noting that the structure of the Canadian package differs from some of the broader retaliatory approaches contemplated in previous Canada-U.S. trade disputes. The policy objective of strategic reciprocity is a materially different approach from the broader retaliatory concepts that were wielded by Canada during the NAFTA/CUSMA renegotiation period, where very politically-sensitive items, like Florida orange juice, were deliberately targeted.

Under the retaliatory policy unveiled today, effective September 8, Canada will impose counter-tariffs of 15%, 25% and 50%, covering $27.6 billion in imports. The retaliation focuses on sectors that are most impacted by US tariffs, including steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics.

50% tariffs apply to $15.5 billion worth of products, and include goods such as steel and aluminum products, clothing and furniture. 25% tariffs will apply to $9.6 billion worth of US imports, targeting appliances, food, and certain steel and aluminum derivatives. $2.5 billion worth of US goods will face a 15% tariff, and will focus mainly on tools and industrial equipment.

Companies that are facing tariffs from Canada on their imports can apply for remissions.

For sectors facing the impacts of tariffs, the federal government has also announced new support measures totaling $7.5 billion. This package involves new funding for existing programming, liquidity resourcing, as well as greater access to employment insurance and labour supports for businesses.

The key new measures include:

• $1.5 billion in additional funding for and new liquidity supports through the FedDev Regional Tariff Response Initiative.
• A $500 million liquidity stream under the Business Development Bank of Canada's (BDC) Pivot to Grow Program.
• A $2 billion new 'Canada Strong Diversification Fund' under the Strategic Response Fund for capital investments.
• A $3.5 billion set of Rapid Response Supports for Workers and Employers.
• Expanded eligibility and financing options to the $10 billion Large Enterprise Tariff Loan facility.

A key item to watch will be the reaction of the Trump Administration, and specifically if it triggers threats of an additional, escalatory round of US counter-tariffs.