Trump Team Races to Hit Canada With New 10% Tariff Before July 24 Deadline

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Washington is moving with unusual speed to keep a tariff on Canadian goods from disappearing at midnight on July 24. The Trump administration’s temporary 10% global import surcharge is set to expire after 150 days, and the Office of the U.S. Trade Representative has proposed a replacement 10% duty on covered Canadian imports under Section 301 of the Trade Act.

The new case is formally tied to forced-labour enforcement, not the emergency-powers rationale rejected by the U.S. Supreme Court. Yet the proposal is narrower than the headline suggests: CUSMA-compliant Canadian goods, products already covered by Section 232 tariffs and a long list of specifically excluded items would be exempt. Ottawa is facing a real deadline, but not an across-the-board 10% tax on everything Canada sells to the United States.

The July 24 Clock Is Driving the Rush

The date is fixed by the legal tool Trump used after losing his broader tariff authority at the Supreme Court. Section 122 of the Trade Act allows a temporary import surcharge for no more than 150 days unless Congress extends it. Trump’s 10% surcharge began applying on February 24 and is scheduled to end at 12:01 a.m. Eastern time on July 24. With no easy extension expected from lawmakers, the administration needs another statute ready if it wants to prevent a gap in its tariff wall.

That is why the forced-labour investigation has moved so quickly. USTR opened 60 country investigations in March, issued its findings and proposed remedies in early June, accepted written comments until July 6 and held public hearings beginning July 7. As of July 17, the Canadian tariff remained a proposal rather than a final action. Trade lawyers cited by the Associated Press nevertheless expect Washington to complete the process with little or no gap between the expiring surcharge and a new Section 301 duty.

The Supreme Court Forced Washington to Change Legal Tools

The administration’s first sweeping tariff program relied on the International Emergency Economic Powers Act. In February, the Supreme Court ruled that the law did not authorize the president to impose tariffs, forcing the government to unwind the largest part of the program and refund duties collected from importers. Trump responded with the temporary Section 122 surcharge while directing officials to build replacement measures under longer-lasting trade statutes, including Sections 232 and 301.

The financial pressure is significant. U.S. tariff revenue had surged during 2025, but refunds reversed the flow after the court decision. In June 2026, the Treasury collected US$23.6 billion in gross customs duties while paying US$49.2 billion in refunds, producing a net customs outflow of US$25.6 billion. Treasury Secretary Scott Bessent has said alternative tariff authorities are intended to keep 2026 tariff revenue largely unchanged. That makes the July 24 race about more than trade leverage; it is also about replacing a revenue stream the administration had already built into its fiscal strategy.

Canada Is Not Facing a Blanket 10% Charge

The proposed Canadian duty comes with a major limitation: USTR’s notice explicitly excludes goods that qualify under CUSMA. It also excludes articles already subject to Section 232 tariffs, including major categories such as steel, aluminum, copper and autos where separate U.S. trade measures apply. Informational materials, donations, accompanied baggage and dozens of pages of listed products and inputs are outside the proposed action as well. The remaining target is therefore covered Canadian merchandise that does not qualify for CUSMA treatment and is not protected by another exemption.

That distinction matters in a trading relationship measured in hundreds of billions of dollars. U.S. goods trade with Canada totalled roughly US$719.5 billion in 2025, making even a relatively narrow tariff commercially important. Consider an Ontario parts supplier whose product crosses the border regularly: a valid CUSMA origin claim could preserve duty-free treatment, while incomplete origin documentation could expose the same shipment to the new charge. For many firms, the immediate threat is not simply a higher rate. It is the cost of proving eligibility, checking tariff classifications and deciding whether a product falls inside one of several overlapping U.S. tariff systems.

Forced-Labour Enforcement Is Washington’s Stated Case

Canada is not accused of having no forced-labour law. CUSMA Article 23.6 requires all three partners to prohibit imports made wholly or partly with forced or compulsory labour, and Canada amended its Customs Tariff when CUSMA took effect on July 1, 2020. Canada has also added supply-chain reporting obligations for certain companies and federal institutions. Washington’s argument is narrower: the prohibition exists, but USTR says Canadian enforcement has not been strong or transparent enough to stop suspect goods from entering the market.

USTR’s June report says Canadian authorities intercepted 50 shipments on forced-labour suspicions between 2020 and 2026 and ultimately prohibited two, compared with 6,386 shipments denied by U.S. Customs and Border Protection under the Uyghur Forced Labor Prevention Act in 2024 alone. The report also criticizes Canada for lacking tools such as a public entity list and a rebuttable presumption for goods linked to high-risk regions. Those figures represent the U.S. government’s case rather than an independent audit of every Canadian enforcement action, but they form the factual record Washington is using to justify the proposed tariff.

Ottawa Has a Defence, but Also a Vulnerability

Prime Minister Mark Carney has said Canada shares the U.S. objective of eliminating forced labour from supply chains and has emphasized that the proposed exemptions protect most Canadian products. Ottawa can also point to the legal ban adopted in 2020, CUSMA cooperation commitments and the federal supply-chain transparency law that took effect in 2024. Those measures distinguish Canada from countries without a comparable import prohibition, which is why USTR placed it in the proposed 10% tier rather than the 12.5% rate facing countries with weaker or nonexistent systems.

The vulnerability lies in measurable enforcement. A law on the books is less persuasive when border outcomes are sparse, public statistics are limited and trading partners believe rejected goods can be redirected through another North American market. That creates an uncomfortable dynamic for compliant Canadian businesses: a company may have carefully screened its suppliers, yet its exports can still become leverage in a government-to-government dispute about national enforcement. Ottawa’s strongest response is therefore not only to argue that the tariff is disproportionate. It is also to show more seizures, clearer standards, better public reporting and closer coordination with U.S. and Mexican customs authorities.

The First Bill Lands With American Importers

A U.S. tariff is collected from the importer when goods enter the United States; it is not a cheque paid directly by the Canadian government. Economic research on the 2018–2019 and 2025 U.S. tariffs found that most of the cost was passed through to prices paid by American importers, with recent estimates finding near-complete pass-through at the border. Importers can absorb part of that expense, raise prices, seek discounts from Canadian suppliers or switch sourcing. The burden is often shared across the supply chain rather than staying neatly on one side of the border.

For a Canadian exporter, the pain can arrive as a smaller order, a demand for a price concession or a customer asking whether production can be changed to meet CUSMA rules. Consider a non-CUSMA-compliant machinery component sold to a factory in Michigan. The American buyer would pay the duty at customs, but the Ontario producer might still lose margin or market share if the customer finds a domestic substitute. Because the proposal exempts CUSMA goods and many major sectors, it is unlikely to create a uniform 10% price shock. Its effects would be concentrated among specific products, firms and supply chains that fall outside the exemptions.

Section 301 Is More Durable—Not Untouchable

Section 301 gives USTR authority to respond when a foreign act, policy or practice is found to be unjustifiable, unreasonable or discriminatory and to burden U.S. commerce. Unlike the short-lived Section 122 surcharge, a Section 301 action can remain in place for years and can be renewed after review. It also requires a more structured process: investigation, consultations, findings, public comments, hearings and a final decision. That process reduces the president’s ability to change rates instantly, but it gives the resulting tariff a stronger administrative record.

The new strategy may still face litigation. Section 301 has survived many past challenges, particularly in cases focused on specific trade practices, but the forced-labour investigations cover 60 economies representing approximately 99% of U.S. imports. Critics told USTR that the proposal looks less like a tailored remedy and more like an effort to recreate the broad tariff regime struck down by the Supreme Court. Former U.S. trade officials have also warned that no administration has tested Section 301 on anything close to this scale. A court fight would not necessarily stop the duty from taking effect immediately, but it could prolong uncertainty for importers and exporters.

What Matters Between Now and July 24

The decisive document will be USTR’s final action notice. Businesses will need to check the confirmed tariff rate, the effective date, the final list of covered tariff codes, any changes to the CUSMA and Section 232 exclusions, and whether shipments already in transit receive temporary treatment. The June proposal is detailed, but comments and hearing testimony asked USTR to add exemptions, avoid stacking tariffs and reward countries that improve enforcement. Even small wording changes can determine whether a shipment worth millions of dollars is covered.

If the proposal is finalized largely unchanged, the result will be less dramatic than a universal 10% tariff on Canadian exports but still consequential for firms outside the CUSMA shield. Washington would replace an expiring temporary surcharge with a more durable duty tied to forced-labour enforcement, while preserving exemptions for much of the integrated North American economy. Canada’s immediate challenge is therefore precise: keep CUSMA-qualified goods protected, help exporters document origin correctly and demonstrate that its forced-labour import ban works in practice. The deadline is July 24, but the dispute over enforcement and tariff authority is likely to last much longer.

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