U.S. President Donald Trump signed an executive order that amends tariffs on hundreds of countries, starting to be implemented this Friday. This amendment raises the penalties on export of Canadian products to 35%, an increase from the current 25%. It imposes different and higher tariffs on all other trading partners. Depending on the country and the nature of the goods, the new rates go up between 10% to a whopping 41%.
The executive order, signed on Thursday, modifies tariffs first set under a separate but similar executive directive signed by Biden in April. Under this new decree, countries that are not on this updated list will be subject to an extra duty of 10%. 05B took on increased significance given their applicability to goods that have been transshipped to avoid otherwise applicable duties. Now, these same goods will be hit with an additional 40% tariff.
The updated directive specifies that the modified rates will apply to goods “entered for consumption on or after 12:01 a.m. eastern daylight time 7 days after the date of the order,” as outlined by the White House. This short timeline puts swift and significant pressure on importers to make changes to their operations to meet the new requirements.
These tariffs on Canada are different from other tariffs that were included in the U.S.-Mexico-Canada Agreement (USMCA). Which is why this strange agreement was made during Trump’s very first term in office. The USMCA does more than practically speak about encouraging trade among the three nations. It’s fighting to prevent any unnecessary restrictions that might result from these tariff revisions.
Countries negotiating trade and security agreements with the United States are likely to see these new higher rates. This would be true until the contracts are executed. The executive order shows a pretty clever strategy by the Trump administration. As they roll out these tariffs, they are looking to use these trade discussions to their own advantage.
The global trade environment is changing. The administration’s response appears to be doubling down on using these tariff changes to reinforce their domestic economic agenda. New, punitive duties on Canadian exports would cause serious harm across key industries. Producers as much as consumers will be impacted.