5 things to know if Canada hits back against Trump tariffs
Retaliatory tariffs risk ultimately being paid for by Canadians, not the U.S.
U.S. President Donald Trump has threatened to impose a punishing 25 per cent tariff on everything imported to the U.S. from Canada. In return, the Canadian government says it would impose retaliatory tariffs of its own on U.S. goods entering Canada.
"Our job is to make sure we're ready for every scenario," Finance Minister Dominic LeBlanc told CBC News on Monday when it appeared Canada would be spared tariffs in the short term.
Trump said Monday night that those tariffs could be coming Feb. 1. Here's what would happen if Canada takes a retaliatory route.
How does Canada impose tariffs?
Canada has a complicated system of tariffs — essentially a tax on imports from around the world. There are so many different tariffs for different goods from different countries that the manual the Canada Border Services Agency (CBSA) uses to calculate tariffs is more than 1,400 pages.
Under Section 53 of the Customs Tariff Act, cabinet is empowered to adopt an order in council to impose tariffs or change tariff rates. Generally, a change is proposed by the finance and foreign affairs ministers and is subject to approval by the Treasury Board cabinet committee. This law means Parliament does not have to approve each new tariff.
The change is then published in the Canada Gazette.
Is consultation required?
Legally, no. In practice, yes.
The government has reportedly identified potential counter-tariffs on $37 billion in goods that could be imposed quickly and is considering a consultation period of 15 to 30 days.
The government is reportedly also looking at additional retaliatory tariffs on $110 billion in goods.
When the government imposed a 100 per cent surtax on electric and hybrid vehicles from China last year, it was preceded by a month-long consultation in July 2024 on potential responses to unfair Chinese trade practices. It received 232 submissions, including from industry and labour organizations, businesses, provinces, non-governmental organizations and individual Canadians.
Ian Lee, a business professor at Carleton University, says changes to things like taxes and tariffs can have big consequences for Canadian businesses. Lee says that's why it has been standard practice over the years for the Finance Ministry to hold consultations with Canadians and business groups when they are contemplating tax changes.
"That's so that there aren't all kinds of screw-ups and injustices and problems caused that are going to take even more effort to fix or to correct," he said.
How long does it take?
Once the government decides to impose a tariff, it can take effect quite quickly. For example, the federal government adopted an order in council on Sept. 20 to impose the surtax on electric and hybrid vehicles produced in China and scheduled the measure to go into effect Oct. 1. Goods that were already in transit when the measure went into effect were exempted.
The CBSA has not yet responded to questions on how long it takes the agency to begin imposing tariffs once they are adopted by the government. Companies importing goods also have to make changes to their systems.
How are they enforced?
When goods arrive in Canada, whether by air, truck, boat or train, it is up to the CBSA to calculate how much is due in tariffs.
When there is a change in the tariff rates, the CBSA issues a customs notice to advise importers.
Importers fill out forms listing the goods they are bringing into Canada, then CBSA officers evaluate the forms and determine how much has to be paid.
Rebecca Purdy, spokeswoman for the CBSA, says the time it takes for the agency to implement new tariffs can vary. She said the new tariff has to be entered into the CBSA Assessment and Revenue Management (CARM) system and systems that deal with things being imported by mail. It also has to notify importers, draft information for the CBSA's 1-800 line for businesses and prepare guidance for border services officers.
"The time needed to implement such measures depends on the scale and scope of the surtax measures," Purdy explained. "What we can tell you is that the CBSA will be ready to administer a surtax concurrently with the government of Canada imposing them."
What impact would there be on Canadians?
The impact of tariffs could vary widely, depending on the product and the market within Canada.
Lee says some Canadian businesses hit with tariffs on U.S. imports at the border may decide to absorb the cost of those tariffs — at least for a while. Other businesses may decide to pass along the cost of the tariff to buyers and end consumers.
Some may decide to source goods from other countries that aren't subject to a Canadian tariff, he added.
"There isn't one size fits all," Lee said.
While the tariff may result in fewer sales to Canada for American businesses, Lee says in the end, it is Canadian consumers who risk paying higher prices for imported U.S. goods hit by a Canadian tariff — not Americans.
"When all these Canadians are cheering, 'Yeah, let's sock it to the Americans....' Well, we're not socking it to the Americans, we're socking it to Canadians."
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