The United States is proposing a new 10-per-cent tariff on Canada and other trading partners in an attempt to rebuild the tariff wall that was struck down by the U.S. Supreme Court earlier this year.
However, the proposed tariff appears to maintain an exemption for Canadian products that comply with the rules of the continental trade agreement – a carve-out that would significantly reduce the bite of the tariffs.
Late Tuesday evening, the U.S. Trade Representative’s Office published a statement laying out tariffs of between 10 per cent and 12.5 per cent on 60 countries. The office said the tariffs are being imposed because of countries’ failure to curb imports of products made with forced labour – an allegation Canada and other U.S. trade partners have disputed.
USTR names Canada among six economies it says have “failed to effectively enforce a prohibition on the importation of goods produced with forced labor.” The other five on the list are Ecuador, the European Union, Indonesia, Mexico, and Pakistan. These countries face a 10-per-cent tariff.
However, the Federal Register document spelling out the proposed tariffs notes that they would not apply to “USMCA-compliant goods of Canada or Mexico.” This echoes the exemption that Canadian and Mexican products had to earlier baseline tariffs the Trump administration imposed.
Another 54 countries, which the U.S. says have failed to impose and enforce a forced labour prohibition, face a higher 12.5-per-cent tariff.
Opinion: Is Canada even serious about confronting forced labour?
Prime Minister Mark Carney said the “vast, vast, vast majority of Canadian trade” would be unaffected by the new levy and the state of play would be “the same as before.”
He also promised changes to Canadian laws and regulations against the use of forced and child labour in the country’s supply chains to make the rules more effective. Such changes, he said, would be unveiled over the coming weeks. “We support the overall objective” of eliminating forced labour, he told reporters before a caucus meeting on Parliament Hill on Wednesday. “We’re working towards making it more effective.”
The proposed tariffs do not come into force immediately. There will first be a public comment and review period, in which the tariff proposals may change. Written comments are due on July 6 and hearings will happen on July 7.
The proposed Section 301 levies are an attempt by the Trump administration to recreate the tariff regime that the U.S. Supreme Court partly dismantled in February.
Through much of last year, U.S. President Donald Trump relied on the International Emergency Economic Powers Act (IEEPA) to place tariffs on dozens of trading partners in an attempt to restructure the global trading order and squeeze concessions from other countries.
But this tool was taken away from the administration in February when the Supreme Court found that Mr. Trump was acting beyond the powers granted to him under the act by Congress.
The administration responded by implementing a new round of temporary tariffs under Section 122 of the Trade Act of 1974, which allow the President to levy tariffs for up to 150 days. These tariffs, which have maintained the carve-out for USMCA-compliant goods, are set to expire on July 24
USTR also launched two Sec. 301 investigations: One into forced labour and one into “structural excess capacity” in manufacturing. Canada is not subject to the latter investigation.
The U.S. has used Sec. 301 tariffs against China for years, and they are seen by trade experts as a more legally durable basis for the administration’s tariff regime.
Speaking to reporters on Tuesday, before the Sec. 301 tariff announcement, Dominic LeBlanc, Canada’s minister responsible for Canada-U.S. trade, said that the possibility of new tariffs was “something that we have been preparing for.”
“We have made submissions to the United States that we think are very significant in addressing the concerns that the United States has raised [about forced labour] for a number of months,” Mr. LeBlanc said in Washington, after meeting with U.S. Trade Representative Jamieson Greer earlier in the day.
LeBlanc offers ‘specific proposals’ to end trade war, calls for USMCA to be renewed for 16 years
In the meeting, he said, he discussed Canada’s commitment to dealing with forced labour with Mr. Greer.
Mr. LeBlanc would not say how Canada would respond to 301 tariffs, including whether it would retaliate, but said he would continue trying to land a trade deal with the U.S.
“We don’t get panicked by turbulence. We’re not going to take off our seatbelt, walk around the aisle, break down the cockpit door and start pushing buttons in front of the pilots,” he said.
Ottawa is negotiating along two lines. It is trying to get the United States to lower sectoral tariffs on autos, industrial metals and wood products, while aiming to successfully renew the USMCA agreement. The trilateral trade deal is up for mandatory review on July 1, although all three countries have said they expect negotiations to continue beyond that date.
On Wednesday, the Canadian government moved to defuse one trade irritant with the U.S. by backpedalling on requirements that foreign streaming services pay for Canadian content.
Culture Minister Marc Miller ordered the Canadian Radio-television and Telecommunications Commission to review an order issued last month for foreign streamers and Canadian broadcasters to spend money to either buy or produce Canadian-made programs.
The Online Streaming Act of 2023, under which the CRTC issued its requirements, has been a source of complaint for the U.S. government. The law was meant to update Canadian content requirements for the age of digital media.
