Canada to Remove Retaliatory Tariffs on CUSMA‑Compliant U.S. Goods

(CANADA) Canada will lift most of its retaliatory tariffs on U.S. goods on September 1, 2025, restoring duty-free trade on items that meet the Canada-U.S.-Mexico Agreement (CUSMA) rules, Prime Minister Mark Carney announced in Ottawa. The move, unveiled on August 22, is designed to restart stalled talks with Washington and return the bulk of cross-border goods to tariff-free status after months of escalating measures that shook supply chains and rattled company budgets on both sides of the border.

President Trump welcomed the step as “nice” and said it would help revive broader trade and security discussions, signaling a potential thaw after a tense first half of the year.

What the decision does — scope and exclusions

• Tariffs are removed for U.S. goods that qualify under CUSMA’s rules of origin, affecting roughly 80–85% of bilateral trade by value, according to Canadian officials.
• Exclusions: Autos, steel, and aluminum remain subject to duties.
  • Canada is keeping a 25% counter-tariff on these sectors.
  • The United States maintains tariffs of up to 50% on steel and aluminum.
• This split approach—broad relief with targeted pressure—reflects Ottawa’s attempt to rebuild trust around CUSMA while retaining leverage in the disputed industries.

Background: how we got here

• Ottawa’s earlier tariff regime responded to U.S. measures in early 2025 that targeted Canadian steel, aluminum, and many other items.
• Canada’s initial response covered about CA$30 billion (US$20.6 billion) in U.S. goods and drew criticism from the U.S. Embassy in Ottawa.
• Prime Minister Carney has argued Canada was matching U.S. actions and that the American measures violated the spirit of CUSMA, forcing Canada to act.
• On the announcement day he said the September 1 change “re-establishes free trade for the vast majority of goods,” a message aimed at exporters and consumers affected by higher prices and disrupted delivery schedules.

Immediate economic and business impacts

• From September 1, eligible U.S. goods entering Canada under CUSMA should move without the extra duty burden, lowering landed costs and helping normalize order cycles.
• The Bank of Canada noted a surge in stockpiling early in 2025 as companies tried to beat tariff deadlines, followed by a drop in exports. If the change is sustained, it could ease pressure on:
  • inventories
  • freight capacity
  • cash flow for wholesalers and retail chains

Important: Autos, steel, and aluminum remain tariffed. Buyers of those goods will continue to face higher costs until the dispute is resolved.

Sectoral implications — metals, autos, and supply chains

• The carve-outs on autos, steel, and aluminum keep the core battleground intact. These industries:
  • supports jobs across border communities and manufacturing hubs
  • tie together smelting, finishing, parts, and final assembly
• With the 25% Canadian counter-tariff still in place, Canadian buyers of U.S. metals face heavy costs, and U.S. buyers of Canadian metals remain influenced by Washington’s measures.
• Automakers that move components and finished vehicles daily will likely remain cautious until talks deliver clarity for relief.

Views from industry and analysts

• Former Ministry of Finance advisor Julian Karaguesian called the rollback on CUSMA-compliant products consistent with Canada’s strategy of matching U.S. tariffs while giving small and mid-sized firms room to breathe.
• Small importers, who often run on tight margins, may benefit the most because they had limited ability to hedge or switch suppliers.
• Analysts note that a full rebound depends on progress in metals and autos negotiations and on speed of logistics normalization. Still, restoring 80–85% of trade to duty-free status allows many firms to plan with more confidence for fall and winter.

Practical effects for shoppers, manufacturers, and supply chains

• Canadian shoppers may see some price relief as distributor costs fall, though:
  • goods with long lead times might show relief later in the fall
  • products tied to steel/aluminum content, and imported vehicles, will likely remain more expensive
• Manufacturers who hedged by buying ahead may:
  • use expensive inventory bought earlier this year, then shift to tariff-free shipments
  • renegotiate contracts to reflect the new duty-free reality for compliant goods
• Transition from policy to lower input costs is not immediate—paperwork, insurance, and freight bookings take time to adjust.

CUSMA rules of origin — what importers must do

• The rules of origin determine when a product counts as North American and therefore qualifies for zero duties.
• Ottawa’s message: check your supply chain, confirm certificates, and be ready to move eligible goods duty-free on September 1.
• Firms with tight timelines should sync with customs brokers to avoid errors that could trigger audits or border delays.

Trade–mobility link: business travel and cross-border workers

• Tariff removal does not change immigration or CUSMA business travel rules, but travel demand typically rises when duty-free trade restarts.
• Analysis by VisaVerge.com suggests project pipelines (maintenance, IT rollouts, quality checks) often revive when tariffs lift.
• Practical tips for cross-border workers:
  • carry clear job letters, contracts, and evidence of professional qualifications
  • expect busier border crossings and build extra time into travel plans
  • align HR, legal, and operations so travelers have required documentation

Business checklist before September 1

1. Confirm CUSMA origin status for each product line; verify supplier certificates and retain records.
2. Update customs instructions with brokers to apply zero tariffs on eligible items starting September 1.
3. Reprice contracts and purchase orders to remove temporary tariff surcharges where relief applies.
4. Keep separate workflows for autos, steel, and aluminum (these remain tariffed).
5. Monitor official updates from Global Affairs Canada and CBSA for coding notes and compliance guidance.
6. Train staff in purchasing, logistics, and finance on new entries and audit-ready documentation.
7. Communicate with customers about delivery timelines and expected price changes.
8. Review risk plans for mixed loads with steel/aluminum content; consider splitting entries to avoid delays.

Official guidance and resources

• Global Affairs Canada and the Canada Border Services Agency are expected to publish detailed guidance before the effective date, including coding updates and broker notes.
• For policy documents and agreement text, see Global Affairs Canada’s CUSMA resources: https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cusma-aceum/index.aspx

Operational and risk-management recommendations

• Assume the remaining disputes could flare; keep alternative suppliers in view for parts with steel or aluminum content.
• Prepare for origin audits as volumes rise under CUSMA treatment—records must match actual sourcing.
• For mixed loads, have brokerage teams split entries where possible to avoid delays on tariffed items.
• Finance teams should adjust price lists and set reserves for potential duty reassessments when origin claims are complex.

Political and community implications

• Ottawa’s move signals an attempt to restore CUSMA while reserving bargaining chips in autos and metals.
• The White House’s early welcome opens space for broader talks on trade and security.
• Border communities reliant on same-day cross-border delivery should experience fewer surprise duty bills and smoother customs handoffs, aiding local trucking firms and warehouses.

What to watch next

• Publication of detailed customs guidance by Global Affairs Canada and CBSA (technical memos, coding changes).
• Working-level sessions between Ottawa and Washington to try to separate the metals/auto disputes from the broader commercial relationship.
• Speed and accuracy of implementation at ports and border crossings—errors on initial shipments can be costly.

Key takeaway: With tariffs on CUSMA-compliant goods dropping to zero on September 1, 2025, most trade between Canada and the U.S. returns to duty-free status. Autos, steel, and aluminum remain under tariffs, so firms in those supply chains should keep contingency plans active. Execution over the coming weeks will determine how quickly costs fall and normal trade rhythms return.

Prime Minister Carney framed the change as a return to CUSMA’s core promise for most goods, and President Trump’s quick welcome hints at room for progress. The next days will show whether the trade lane can steady even as metals and autos remain under tariff. For families, students, and workers, a smoother fall is now within reach—if policy and practice stay aligned and if both governments keep talks moving on the last big hurdles.