Trump Hits Canada With Another 10% Tariff—But CUSMA Goods Escape the New Levy

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Canada has been pulled into another round of Donald Trump’s tariff campaign, but the headline rate does not tell the whole story. The United States has imposed a 10% duty on certain Canadian imports as part of a sweeping action against 60 trading partners accused of inadequately enforcing restrictions on goods made with forced labour. Crucially, products that qualify under the Canada–United States–Mexico Agreement remain exempt.

The carve-out protects a large portion of cross-border commerce, yet it does not restore normal trading conditions. Canadian exporters must still prove that their products meet CUSMA’s origin rules, while steel, aluminum, automobiles, lumber and other goods remain exposed to separate U.S. measures. The result is a divided border: qualifying shipments can continue tariff-free, while businesses outside the agreement’s protection face another costly layer of uncertainty.

The 10% Tariff Took Effect as an Earlier Levy Expired

The new duty took effect at 12:01 a.m. Eastern time on July 24, immediately after Washington’s temporary 10% global tariff expired. That timing matters because the measure does not necessarily represent a fresh 10-percentage-point increase for every affected Canadian product. For many non-CUSMA goods, it effectively continues the tariff burden under a different section of U.S. trade law. Goods already in transit before the deadline received a limited grace period, provided they enter the United States before July 28.

Canada is among 17 economies assigned the lower 10% rate. Most of the remaining countries covered by the investigation face duties of 12.5%, while some U.S. trading partners have rates adjusted to reflect existing tariff commitments. Altogether, the 60 targeted economies account for approximately 99.4% of American imports. Washington has therefore rebuilt a near-global tariff floor, even though exemptions mean the headline rate will not be collected on every shipment entering the country.

The CUSMA Exemption Shields the Core of Continental Trade

The most consequential detail for Canadian businesses is the exemption for goods that meet CUSMA’s rules of origin. The trade agreement generally provides preferential access when enough of a product’s materials, processing or value originates within Canada, the United States or Mexico. A qualifying Canadian product can therefore avoid the new 10% levy, even while an otherwise similar product containing too much non-North American content may be charged at the border.

That distinction is enormous in a trading relationship worth hundreds of billions of dollars. U.S. goods trade with Canada totalled an estimated US$719.5 billion in 2025, including US$383 billion in American imports from Canada. Meanwhile, 71.7% of Canada’s merchandise exports went to the United States that year. For an Ontario machinery producer or Quebec food processor, preserving CUSMA treatment can determine whether an American order remains profitable. The agreement is no longer merely a source of modest customs savings; it has become a defensive barrier against broader U.S. tariffs.

Exporters Must Be Able to Prove Their Goods Qualify

CUSMA protection is not automatic simply because a product was shipped from a Canadian address. Businesses must determine whether the item satisfies the agreement’s product-specific origin requirements and provide the necessary certification. The United States does not require one standard certificate form, but a valid certification generally must contain nine required data elements, including information about the importer, exporter, producer, product and applicable origin criterion.

That administrative distinction can create two very different outcomes at the same border crossing. A Canadian company importing components from Asia, performing limited assembly and then shipping the finished product south may discover that its goods do not qualify. Another manufacturer using North American inputs and maintaining detailed supplier records may continue shipping tariff-free. Smaller businesses are especially vulnerable to mistakes because origin calculations can involve tariff classifications, regional-value formulas and documentation from multiple suppliers. In practical terms, the new tariff makes customs compliance more valuable—and potentially more expensive—than it was before the trade dispute intensified.

CUSMA Compliance Does Not Cancel Every Other U.S. Tariff

The exemption applies specifically to the new forced-labour-related tariff. It does not erase duties imposed through separate investigations or national-security actions. Products already covered by Section 232 tariffs, including steel, aluminum, copper and certain automotive goods, are excluded from the new levy largely because they already face their own tariff arrangements. Softwood lumber and buses are among the Canadian products that can also remain exposed under measures without a broad CUSMA exemption.

This creates a complicated patchwork rather than one uniform tariff rate for Canada. A CUSMA-compliant consumer product may avoid the new 10% duty, while a steel component can remain subject to a sectoral tariff imposed under entirely different authority. A vehicle may receive an exemption for the value of its U.S. content but still face charges on the remaining portion. The exemptions prevent some tariffs from stacking directly on top of each other, but they do not make the border duty-free. Businesses must now identify the product, origin, tariff classification and legal program before knowing the actual cost.

Washington Says the Dispute Is About Forced-Labour Enforcement

The Trump administration says the tariffs respond to countries that have failed to impose or effectively enforce bans on imports produced with forced labour. U.S. officials placed Canada in a smaller category of economies that already have a prohibition but are allegedly failing to enforce it effectively. The global scale of the underlying problem is substantial: International Labour Organization estimates indicate that approximately 27.6 million people were in forced labour on any given day in 2021.

Canada rejects the suggestion that it has ignored the issue. Imports produced wholly or partly through forced labour have been prohibited under the Customs Tariff since July 2020, when Canada implemented a CUSMA commitment. The federal Supply Chains Act, in force since January 2024, also requires certain companies and government bodies to report on efforts to identify and reduce forced- and child-labour risks. Ottawa introduced additional legislation in June 2026 intended to strengthen investigations and border enforcement. The disagreement is therefore centred on the effectiveness of Canada’s system, not the absence of Canadian laws.

Trump Is Rebuilding His Tariff System With Different Laws

The legal foundation of the new measure is as significant as the tariff rate. In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act did not authorize the president to impose tariffs. That decision invalidated the legal basis used for much of Trump’s earlier global tariff program and forced the administration to search for alternative powers already delegated by Congress.

Washington initially relied on Section 122 of the Trade Act for a temporary 10% worldwide tariff, but that authority was limited to 150 days. As the deadline approached, the administration turned to Section 301, a law commonly associated with investigations into allegedly unreasonable or discriminatory foreign trade practices. U.S. officials received more than 1,600 written comments and heard testimony from over 100 witnesses during the forced-labour proceedings. Section 301 has previously survived court challenges, but applying it simultaneously against 60 economies could still invite new litigation over whether the investigation and chosen remedy satisfy the law.

American Importers Will Pay the Duty at the Border

Although tariffs are presented as charges against foreign countries, the money is collected from American importers. Those companies must decide whether to absorb the cost, demand price concessions from Canadian suppliers, find another source or pass some of the expense to customers. An American distributor importing a C$100,000 shipment of non-CUSMA Canadian products could face a significant additional customs bill before warehousing, transportation and retail margins are considered.

Previous tariff episodes suggest that much of the burden eventually remains inside the United States. Federal Reserve research found that the 2018–2019 tariffs passed through fully and quickly to affected consumer-goods prices, while later research estimated that tariffs implemented through November 2025 had lifted core goods inflation substantially by February 2026. The effect of the latest Canadian tariff should be smaller because CUSMA products and several major categories are excluded. Still, exposed industries may experience higher input costs, delayed purchases or pressure to replace Canadian suppliers—even when the replacement is less efficient.

Canada Is Responding Cautiously as a Larger Threat Approaches

Canada’s initial response has been measured. Trade Minister Dominic LeBlanc described the action as expected, emphasized the CUSMA and product exemptions, and said Ottawa would continue engaging constructively with Washington. Canadian officials maintain that the country shares the goal of eliminating forced labour from supply chains and argue that recent legislation demonstrates continued progress. The Canadian Chamber of Commerce has taken a firmer position, saying Canada should not have been targeted.

The immediate 10% action is also competing for attention with a separate and potentially more damaging U.S. measure. Trump has announced 50% tariffs on nearly US$20 billion in selected Canadian imports, scheduled to take effect on August 19 under Section 338 of the Tariff Act of 1930. That dispute involves allegations that Canada discriminates against American vehicles, alcoholic beverages and dairy products. Prime Minister Mark Carney has said Canada will intensify negotiations and consider its options if those tariffs proceed. For exporters, the CUSMA carve-out provides meaningful relief—but not the stable trading relationship businesses had expected the agreement to guarantee.

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