Tempering Tariff Turmoil

Space Mountain. Leviathan. The Tilt-A-Whirl. The Scrambler. Your favourite amusement park ride most aptly describes the dizzying, tumultuous series of international trade announcements in the escalating dispute between the United States of America (U.S.) and Canada over the past several weeks. New tariffs, suspended tariffs, increased tariffs, reciprocal tariffs, surtaxes, countermeasures—it has been a wild ride for businesses on both sides of the border. Given the uncertainty surrounding the imposition and duration of the U.S. tariffs on Canadian imports, as well as the various countermeasures implemented by Canada and its provinces in response, it is imperative for Canadian businesses to prepare for the potential implications of these measures in what could be a prolonged trade dispute.

Immediate Tariff Impacts

The U.S. tariffs will have far-reaching consequences for many Canadian industries, impacting supply chains, production costs, and market competitiveness. Canadian businesses must prepare for both the immediate and long-term effects of the back-and-forth trade measures. The potential impact will be particularly acute in industries specifically targeted by the U.S., such as steel and aluminum production and the automotive sector.

As of March 12, 2025, Canadian steel and aluminum exports to the U.S. face a 25% tariff, which came only after the current U.S. administration walked back a threat to impose a tariff rate of 50% the previous day. In retaliation, the Canadian government has announced reciprocal tariffs on approximately $29.8 billion worth of American imports, including steel and aluminum, to take effect on March 13. The latest U.S. tariffs are separate from the general 25% tariff introduced on March 4 for goods imported from Canada that are not covered under the Canada-United States-Mexico Agreement (CUSMA)—a measure which, in turn, drew the imposition of a 25% retaliatory surtax on roughly $30 billion worth of specified goods imported into Canada from the U.S.

Further rounds of tariffs have already been announced by both nations for April 2, which will only exacerbate the situation if the ongoing trade dispute cannot be resolved. For the latest developments on specific U.S. tariffs and Canadian countermeasures, please see the News & Insights section of the Ryan Canada website.

Steel, Aluminum, and Automobiles

The U.S. tariffs on steel and aluminum place significant pressure on Canadian producers that rely on U.S. markets. Roughly 60% of U.S. imported steel and aluminum is sourced from Canada, and the tariffs will immediately decrease the competitiveness of Canada’s producers in this sector, leading to lost contracts and declines in demand.

The high level of integration in the North American automotive supply chain makes this sector particularly vulnerable to tariffs. Fabricators throughout the supply chain will be significantly impacted by the steel and aluminum tariffs in place, and the rising cost of Canadian-produced parts and vehicles could lead to production slowdowns and workforce reductions.

American manufacturers and retailers relying on Canadian imports of steel, aluminum, automotive and other parts made from those metals, and vehicles will also be adversely affected by the increased cost and potential supply-chain disruptions. Future tariffs specifically targeting the Canadian automotive industry have also been threatened.

Be Proactive

In evaluating the risk of tariffs, organizations must consider how they could impact supply chains, pricing structures, and operational costs. Once the full exposure has been assessed, businesses should take a strategic and proactive approach to mitigating any risks posed by current and potential future tariffs.

Key actions to consider as part of a tariff mitigation plan include:

  • Implementing strategies to adjust sourcing, pricing, and workforce planning;
  • Evaluating the possibility of streamlining production processes; 
  • Exploring alternative markets, including identification of new trade partners to reduce dependency on U.S. customers and suppliers;
  • Leveraging government support by accessing tariff mitigation programs and sector-specific funding initiatives;
  • Reviewing the accuracy of Canadian import documentation, including tariff classification and country of origin; and
  • Assessing eligibility for Canadian duty, drawback, and remission programs.

Certain measures to lessen the impact of tariffs, such as relocation, sourcing new suppliers, establishing alternative markets, and redesigning production processes, will most likely require substantial implementation time. However, there are also steps that an organization can take immediately to help alleviate the ongoing tariff threat, including leveraging government support and reviewing the application of duty to imports. 

Leveraging Government Support 

Staying informed about potential Canadian government support amidst potential escalation in the trade dispute can help businesses navigate economic uncertainty and maintain long-term competitiveness in the global market. Various government funding programs are already in place to support Canadian businesses in improving competitiveness, diversifying markets, and upgrading labour skills. Businesses should develop a funding strategy to reduce the potential impact of tariffs and the resulting economic uncertainty by utilizing government incentives to maximize competitiveness.

​First and foremost, businesses should be aware of the new federal Trade Impact Program, administered by Export Development Canada. This government initiative has allocated $5 billion over two years to assist exporters in accessing new international markets and managing economic uncertainties. The Trade Impact Program is designed to address various challenges, including losses from non-payment, currency fluctuations, cash flow constraints, and obstacles to business expansion, with a view to enhancing the resilience and competitiveness of Canadian exporters in the global marketplace. ​

In addition, the FedDev Ontario program offers no-interest, repayable contributions ranging from $125,000 up to $10 million per project for incorporated businesses undertaking eligible projects to develop, commercialize, or produce innovative products; improve productivity; or scale up to enter new markets. Furthermore, the Canada Job Grant offers employers in various provinces funding to cover up to two-thirds of training costs for employees, up to a maximum of $10,000 per trainee. Funding and eligibility under the latter program vary by province, with employers typically required to contribute a portion of training costs and ensure trainees meet certain qualifications. 

For further information on existing government funding programs that can assist businesses impacted by tariffs can be found on the Ryan Canada website at https://funding.ryan.com/news/.

Help for Certain Sectors

The Canadian federal government is expected to introduce sector-specific financial support programs to help affected businesses manage the challenges posed by U.S. tariffs, a measure consistent with previous trade disputes. For instance, Canada’s steel and aluminum industries were previously impacted by U.S. tariffs in 2018, and the federal government responded by allocating $100 million to the Steel and Aluminum Initiative in support of small and medium enterprises in those sectors.

These types of programs can help Canadian businesses by providing direct financial support and contributing to investment in productivity improvements, innovation, and supply chain diversification. Indeed, the federal government has already announced its intention to expand existing programs and introduce new ones, as required, and direct the revenue raised from its reciprocal tariffs to those impacted by the economic fallout.

Review Import Documentation

Because of the size and extent of the latest tariffs, it has never been more important for an organization to verify its tariff classification and country of origin coding on imports into Canada from the U.S. An incorrect tariff code or origin declaration can be the difference between a duty-free or low-tariff import and the application of a 25% surtax at the Canadian border.

Furthermore, the complexity of Canada’s Customs Tariff can make it risky to rely solely on a customs broker to determine correct tariff classifications. Businesses are advised to carefully review all Canadian imports, as misclassified items can lead to a significant amount of overpaid duty and the incorrect application of tariffs. Customs duty experts can provide a thorough review of an organization’s imports to confirm the accuracy of the customs documentation, including classification, tariff treatment, and valuation, ensuring that duties are not overpaid while bringing any potential compliance issues to light.

Duties and Drawback Relief

Canada’s Duties Relief and Duty Drawback Programs remain available for relief from Canadian duty, subject to the provisions of CUSMA.

Under the Duties Relief Program, qualified companies may import commercial goods without paying duties, provided those goods are eventually exported. Companies can manufacture or use the commercial goods in a limited manner before export.

The Drawback Program helps Canadian companies compete in export markets by removing the impact of domestic duty from their commercial goods. This program grants a drawback (refund) of duties paid on imported goods if the goods are: 

  • Eventually exported in the same condition; or
  • Consumed or expended through a manufacturing process for goods eventually exported.

Remission Orders

A request can be made for a remission order to provide relief from, or a refund of, Canadian tariffs, duties, taxes, penalties, or interest paid under certain circumstances. Typically, tariff remission order requests will be considered when:

  • Goods to be used as inputs cannot be sourced domestically or reasonably from a non-U.S. origin; or
  • There are exceptional circumstances that could significantly damage the Canadian economy.

For instance, in 2018, a remission order was used to refund or relieve Canadian surtaxes imposed on steel and aluminum from the U.S. in a situation similar to the current trade dispute.

Indeed, the federal government has already announced a framework for the submission of remission order requests related to current tariffs on goods imported from the U.S. Extensive, detailed information regarding the importer’s operations, use of the imported item(s), and the potential impact of the tariff remission, along with evidence substantiating an inability to source the item(s) from non-U.S. suppliers, must be included in the submission. 

Next Steps

Tempering the potential impact of U.S. tariffs and the Canadian government’s response requires a thorough understanding of Canada’s customs duty regime and available government funding and relief programs. Ryan can support businesses seeking relief by reviewing import documentation for accuracy; recovering overpaid customs duty; assessing eligibility for government relief and funding programs; preparing documentation, applications, and remission order requests; and responding to government queries.

Importers have been on this dark ride for a while, and with stomachs getting queasy on both sides of the border, let us hope it ends soon.

Sebastian Drozdziewicz
Senior Manager, Customs Duty
Ryan
sebastian.drozdziewicz@ryan.com

Alena Barreca
Marketing Specialist, Government Grants
Ryan
alena.barreca@ryan.com