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No Responses August 12, 2025

35% Tariff Incoming – What Canadian Exporters Must Know

 

U.S. Imposes 35% Tariff on Canada as of August 1 2025 – What Importers and Exporters Need to Know

The United States has announced that starting August 1, a 35% tariff will be applied to certain goods entering the U.S from Canada. This move is expected to affect cross-border trade, impact costs, supply chains, and competitiveness for Canadian exporters and U.S. importers.

Key points

  • 35% Tariff Rate – Up from the previous 25%, applying to imports from Canada.
  • 40% Transshipment Duty – New penalty for goods rerouted through third countries to evade tariffs.
  • USMCA-Origin Goods Exempt – Duty-free access remains for products that meet USMCA rules of origin.
  • Lower Rate for Energy & Potash – 10% tariff continues for these sectors.
  • Retaliation Clause – U.S. may raise tariffs further if Canada imposes countermeasures.

At Orbit Brokers, we work closely with importers & exporter every day, and we know how disruptive sudden changes in trade policy can be. Here’s a deeper look into what’s happening and how your business can prepare.

 

Why This Tariff Is Being Imposed

The U.S. government says the new tariff is part of its effort to protect domestic industries and address trade imbalances. By increasing the cost of Canadian imports, the U.S. hopes to make American-made goods more competitive in its own market.

Trade tensions between the U.S. and Canada are not new—similar measures have been seen in the past on steel and aluminum tariffs and softwood lumber. However, a blanket 35% tariff is one of the more aggressive trade measures in recent years.

The tariff applies broadly to most Canadian imports except:

  • Products under HTSUS 9903.01.11–.15.
  • Personal-use goods in accompanied baggage.
  • Goods meeting USMCA rules of origin.
  • Canadian energy and potash export will be still subjected to 10% traffic which was affected earlier.
  • Products made in the United States by Canadian firms will remain exempt from these tariffs.

 

Industries and Products Likely to Be Affected

While the official list of products is still being finalized, industries most at risk include:

  • Automotive & Parts – Vehicles, engines, and components shipped from Canada to the U.S.
  • Steel & Aluminum – Raw materials and fabricated products.
  • Agriculture – Meat, dairy, grains, and produce.
  • Wood & Paper Products – Lumber, plywood, paper, and packaging materials.
  • Machinery & Manufacturing Equipment – Heavy machinery, tools, and industrial components.

 

Potential Impact on Canadian Businesses

The 35% tariff will raise landed costs for U.S. importers of Canadian goods, which could:

  • Reduce demand for Canadian products in the U.S. market.
  • Force Canadian exporters to lower their prices to remain competitive, affecting profitability.
  • Cause supply chain delays as businesses re-evaluate sourcing strategies.
  • Increase administrative costs for customs clearance and compliance.
  • If US Customs and Border Protection (CBP) determines that goods have been transshipped to avoid Canadian tariffs, a 40% duty will apply instead of the 35% rate with possible penalties under U.S law and loss of duty-free status under USMCA

Learn more about Canadian HS Codes and Classification  and US HS Code and Classification to determine if your products could be affected.

 

Orbit Brokers Can Help

At Orbit Brokers, we are here to help you navigate this challenging trade environment. Our team can:

  • Verify Your HS Codes – Ensure your products are classified correctly to determine if they are subject to the tariff.
  • Identify Duty Relief Opportunities – Programs like Duty Drawback and duty deferral may help offset costs.
  • Assist with Compliance – Avoid costly penalties and delays by meeting all customs requirements.
  • Advise on Trade Strategy – Explore alternative sourcing, routing, and market diversification options.

Steps to Take Now

  1. Review Your Product Classification – This is essential to know if your goods will be affected.
  2. Assess Financial Impact – Factor in the tariff into pricing, budgets, and contracts.
  3. Plan Your Supply Chain Strategy – Explore alternative suppliers or shift focus to other export markets.
  4. Work with a Trusted Customs Broker – Stay compliant and up to date on changes.

 

Stay Ahead of Trade Changes

Trade policy can change rapidly, and staying informed is the best way to protect your business. Orbit Brokers is committed to providing clear, timely, and actionable advice to help you minimize disruption and keep your cross-border operations running smoothly. For more information, please contact us.

 

 

 

Ruth Vegas is the author of this blog and a customs professional at Orbit Brokers. With a background spanning role such as Customs Rater, Air and Ocean Coordinator, and Import Analyst, she has in-depth expertise in air, ocean, truck, courier, and vehicle imports. Ruth is dedicated to helping clients navigate Canadian customs with clarity and confidence.