Canada-U.S. Trade War

Under CUSMA, Canadian exports must meet "rules of origin" requirements to qualify for tariff-free access. Goods that are grown or harvested in Canada are automatically compliant. However, manufactured products must meet specific criteria to qualify. To avoid the certification process, many businesses choose to pay the "Most Favoured Nation" (MFN) tariff, which has recently increased from 2.5% to 25% for certain goods, and as of August 1, the U.S. has increased this tariff from 25% to 35 %.

Please refer to CBSA’s “ how to certify the origin of goods” for more information.

Yes, even if your business has a U.S. holding company or a U.S. subsidiary, you may still be subject to U.S. tariffs.

If your goods are “CUSMA-compliant”, they qualify for tariff-free access. Goods that do not meet CUSMA requirements are subject to a 10% tariff. These tariffs are typically paid by the importer to U.S. Customs and Border Protection (USCBP).

De minimis treatment allowed for low-value imports (under $800) to enter the U.S. without being subject to tariffs or duties. De minimis treatment has been eliminated, effective August 29. See White House Executive Order for more details.

While CUSMA eliminates most tariffs on goods traded between Canada, the U.S., and Mexico, it does not prevent the application of certain tariffs outside the agreement. In fact, CUSMA includes a clause on essential security, which states that nothing in the agreement precludes any of the parties from applying measures that it considers necessary for the fulfilment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

For this reason, the U.S. can impose tariffs national security reasons.

No, tariffs are taxes imposed on physical goods as they cross the border. They do not apply to intangible property, such as software or technology licenses, or to cross-border services.

The legality of the tariffs has been questioned since they were first announced, and several court cases are now underway in the U.S. President Trump has relied on a U.S. law called the International Emergency Economic Powers Act (IEEPA). This law gives the U.S. President broad authority to take economic action during a declared national emergency. In the case of tariffs targeting Canada and Mexico, the Trump administration has argued that issues like border security, migration, and fentanyl trafficking justify using emergency powers.

On May 28, 2025, the U.S. Court of International Trade ruled that the way the tariffs were imposed under IEEPA likely goes beyond what the law allows. The court stated that the President does not have unlimited authority to impose tariffs on nearly every country. The White House quickly appealed the decision and asked the courts to pause enforcement. The U.S. Court of Appeals for the Federal Circuit granted that request, meaning the tariffs can still be collected for the time being. The court process is ongoing. Oral arguments in the case began on July 31, 2025, and further rulings are expected as the case moves forward.

On February 20th, 2026, the court ruled that tariffs imposed under the IEEPA law were illegal. In Canada’s case, this included a 35% tariff on goods that were not CUSMA-compliant. Globally this also included “liberation day” tariffs that had been applied to other countries (which excluded Canada and Mexico). In response, President Trump announced new global tariff of 10% under a different U.S. law.

Section 122 of the U.S. Trade Act allows temporary tariffs of up to 10%, but these tariffs can only be imposed for 150 days unless Congress approves an extension.

CFIB is monitoring the situation closely and will update members as more emerges.

Starting February 24th 2026, U.S. Customs and Border Protection (CBP) will stop collecting the IEEPA 35% tariff on non-CUSMA compliant goods. The new 10% global tariffs will take effect Tuesday, February 24th, 2026, and will include Canada. CUSMA-compliant goods remain exempt, while non-compliant goods will face a 10% tariff (instead of the previous 35%).  Tariffs on steel, aluminum, copper, some automotive parts, lumber and other wood products remain in place under different U.S. rules (Section 232).

Businesses that paid the International Emergency Economic Powers Act (IEEPA) tariffs may be eligible for refunds. Tariffs charged without legal authority are considered invalid. If your business paid tariffs that are later overturned, the government cannot legally keep that money, and refunds are generally owed.

The court did not provide direction on how or when those refunds should be issued. At this stage, it’s still unclear how the U.S. administration and U.S. Customs and Border Protection (CBP) will handle refunds for the IEEPA tariffs.

What this means for small businesses:

• Businesses (importer of record) that paid these tariffs may be entitled to refunds.
• The process for claiming refunds has not yet been clearly defined.
• It’s a good idea for businesses to look over customs paperwork and affected shipments to figure out what they paid.
• Businesses that believe they are affected should monitor developments closely as guidance from U.S. authorities and the courts evolves.

CFIB will continue to monitor the situation and share updates as more information becomes available.

Unfortunately, the Department of Finance was unable to specify a review timeframe due to the unprecedented volume of requests and the multiple procedural steps involved. Each remission request is evaluated on a case-by-case basis by the Department of Finance, which may require to consult other stakeholders. Any approved remission must receive the Minister of Finance’s sign-off and final approval from the Governor in Council before taking effect. Once your request is assigned to an analyst, they will contact you directly to verify all application details.

The Canada Border Services Agency (CBSA) is fully prepared to collect tariffs, and the process remains unchanged. Tariffs will continue to be administered through the CBSA Assessment and Revenue Management (CARM) system, following the same procedures as before. Importers should declare goods as usual, ensure compliance with CBSA regulations, and pay any applicable surtaxes through CARM or their customs broker. Learn more on our CARM is here webpage.

Canada has invested over $1 billion in new equipment and security measures to combat drug trafficking and illegal immigration, which aims to address U.S. concerns and avoid Trump’s tariffs. Specifically, Canada has increased investment in technology (such as, new drones and helicopters), increased personnel, and enhanced intelligence sharing. The government has also introduced new policies and programs to improve security and efficiency. Despite these investments and efforts, Trump is proceeding with tariffs, stating that Canada hasn't done enough.

See here for more detail on Canada’s Border Plan.

No. Goods that are simply transiting through the U.S. on their way to Mexico should not be impacted by tariffs. As long as the goods do not undergo any changes or enter U.S. commerce, they are not subject to the U.S. tariffs. However, if the goods are processed or enter the U.S. market before continuing to Mexico, they may be subject to the applicable tariffs.

In general, “Product of Canada” means the product is almost entirely Canadian, with about 98% or more of production costs incurred in Canada, while “Made in Canada” means the product is mostly Canadian, with at least 51% of production costs incurred in Canada (and often includes imported materials). In both cases, the product must have undergone its last major transformation in Canada, and businesses are encouraged to add clarifying wording such as “Made in Canada with imported parts” when appropriate.

The de minimis rule allows low-value imports (valued at or under $800) to enter the U.S. duty-free. However, under a new Executive Order, this exemption will no longer apply to goods from the People’s Republic of China (PRC) and Hong Kong, effective May 2, 2025, at 12:01 a.m. EDT. As a result, all covered goods from these regions will now be subject to applicable duties and tariffs. The new policy applies to all imported goods valued at or under $800 that would have otherwise qualified for the de minimis exemption. This includes shipments arriving through private carriers (e.g., couriers, freight forwarders) as well as postal shipments.

For shipments arriving through the international postal network:

• Starting May 2, 2025, items containing goods valued at or under $800 will be subject to a duty of either 30% of their value or $25 per item, whichever is greater.
• After June 1, 2025, the per-item duty will increase to $50.
• These duties replace any other previously imposed tariffs or duties on affected goods.

This policy is currently targeting goods from China and Hong Kong. Imports from other countries that qualify for the de minimis exemption will continue to receive duty-free treatment.

Work-Sharing is an agreement between employers, employees and the Government of Canada (Service Canada). The Work-Sharing Program helps employers and employees avoid layoffs, when there is a temporary decrease in the normal level of business activity that is beyond the control of the employer.

The Government of Canada has introduced special measures to better support employers and their employees in the wake of U.S. tariffs threats. These special measures, including expanded employer and employee eligibility, are in effect from March 7, 2025, until March 6, 2026.

Eligibility has been expanded:

• to businesses that have been in operation in Canada for 1 year
• to include non-profit and charitable organizations experiencing a reduction in revenue levels as a direct or indirect result of the tariffs
• to include cyclical or seasonal employers
• to employers experiencing a decrease in work activity over the past six months of less than 10% and allowing utilization of Work-Sharing to exceed 60%
• to employees who are not year-round, permanent, full-time or part-time employees, specifically seasonal or cyclical employees
• to employees assisting the employer recovery efforts

For more on the Work Sharing program, please visit this webpage.

Canada has 15 free trade agreements (FTAs) covering 51 countries¹. These agreements provide Canadian businesses with preferential market access, reduced tariffs, and stronger trade rules. Here’s an overview of some of Canada’s key FTAs:

¹ Global Affairs Canada (GAC), Canada’s State of Trade 2022: The Benefits of Free Trade Agreements: A review of trade and investment in the previous year and a look at how free trade agreements have benefitted Canada.

 Explore Canada’s other free trade agreements. https://international.canada.ca/en/global-affairs/services/trade/agreements-negotiations/investment-agreements