Trump Announces Global Reciprocal Tariffs of 10-50%, Canada Mostly Exempt for CUSMA-Compliant Goods

However, Canada still hit with 25% tariffs on Steel and Aluminum, Auto Sector will still feel impacts.

President Donald Trump announced sweeping new reciprocal tariffs on imports from all U.S. trading partners. Canada was largely spared, but significant impacts will still be felt by the Canadian economy, including in the auto industry.

Trump’s policy will put in place a baseline 10% tariff on all goods from all countries except those compliant with the CUSMA free trade agreement between Canada, the USA and Mexico which will be free of tariffs (non-compliant goods will continue to be charged at a 25% rate). In addition, a group of 60 countries, which the Trump administration labeled the “worst offenders,” will be charged a tariff at half the rate they supposedly levy against the United States – this includes China at 34%, the EU at 20%, Japan at 24%. Those reciprocal tariffs will go into effect April 9 at 12:01 am ET.

The 25% tariffs on Canadian steel and aluminum products remain in place, and the Canadian Auto Parts Manufacturers Association is flagging these tariffs apply to derivative products including auto parts.

President Donald Trump also confirmed that a 25% tariff on all foreign vehicles imported into the U.S. would go into effect on April 3. This tariff would also extend to some key auto parts, including engines, transmissions and electrical components. The tariff on vehicles imported into the U.S. under CUSMA is expected to apply only on the value of their non-American content. Parts imported under CUSMA trade agreement rules are expected to remain tariff-free for the time being, as U.S. officials determine a process for applying tariffs to the components of those cars that are not American made.

What it Means for the Canadian Economy

‍While there are no new tariffs for Canada in the announcement, the harm to Canada’s auto sector from going ahead with 25% tariffs could potentially shut down parts of the industry when it comes into effect on April 3. In addition, the damage to Canadian steel and aluminum sector from the 25% levies could be significant.  

However, it now looks like all other sectors in Canada will have access to the US economy under CUSMA at a zero percent tariff, while the EU, Japan, China and all other countries in the world will pay tariffs ranging from 10% all the way up to 49%. In order to claim the preferential 0% tariff under the CUSMA agreement, a certification of origin is required to prove that the goods were produced in North America.  

The impact on global trade flow of goods from today's announcement has the potential to impact Canada, and the entire global economy, as a negative shock. Countries around the world will need to find new outlets for goods that previously were destined for the US. Floods of imports are highly likely as the global rebalancing works through.

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