Trump’s Tariffs on Canada: What You Need To Know

What are tariffs?

A tariff is a tax imposed by a country on goods that are imported from other countries. Like a sales tax, it’s added to the price of foreign goods at the border and charged to the person or company that is importing the goods. Governments use them to:

• Protect their own industries and sectors by raising prices on imported products from elsewhere
• Reduce trade deficits (the amount by which a country’s imports exceed the value of its exports) by making imports pricier
• Leverage in negotiations, as an incentive for countries to come to the table and negotiate deals

The proposed Trump‑led tariffs apply broadly to goods that don’t have exemptions in the current trade deal known in Canada as the Canada-United States-Mexico Agreement (CUSMA) including metals, autos, energy products, pharmaceuticals, and more.

What U.S. tariffs does Canada already face?

After taking over the U.S. presidency, Trump originally announced a 25 percent tariff on all Canadian goods and a 10 percent tariff on Canadian energy resources in early 2025, citing the need for stronger fentanyl control at the border. Those tariffs were paused for 30 days following assurances from Canada that its government would take appropriate action to curb the flow of fentanyl from Canada to the U.S. The tariffs were reimposed in March 2025 and later raised to 35 percent in August 2025.

That 35 percent fentanyl tariff no longer applies. On February 20, 2026, the U.S. Supreme Court ruled in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (IEEPA) does not authorize the president to impose tariffs, striking down the fentanyl-related tariffs on Canada along with the broader "reciprocal" tariffs imposed on other countries. Within days, Trump replaced them with a new 10 percent global tariff under Section 122 of the Trade Act of 1974, effective February 24, 2026, with CUSMA-compliant goods exempted. That measure was itself temporary: Section 122 tariffs expired at their 150-day statutory limit on July 24, 2026, and a replacement took effect the same moment. All Canadian-origin goods are now subject to a flat 10 percent tariff under Section 301, based on a USTR finding that Canada has failed to effectively enforce its forced-labour import prohibitions — though CUSMA-compliant goods remain exempt. 

Canada, the biggest foreign supplier of steel and aluminum to the U.S., was hit by Trump's separate 25 percent tariffs on steel and aluminum, which he imposed globally in the spring of 2025. Trump doubled that to 50 percent in June 2025, saying the measure would protect and bolster the U.S. metals sector; as of April 2026, those tariffs range from 15 to 50 percent depending on a good's actual steel, aluminum, or copper content. Trump also announced a separate 25 percent tariff on imported cars, trucks, and auto parts, though U.S. content in CUSMA-compliant vehicles is exempt. 

The trade relationship has escalated further: effective August 19, 2026, the U.S. is adding a 50 percent tariff on several lists of Canadian goods, including dairy products and a wide range of items such as electronics, furniture, building materials, plastics, clothing, and agricultural products, in response to a dispute over dairy, alcohol, and auto trade. Canada has said it will match those tariffs dollar-for-dollar.

Until the start of Trump's second term as U.S. president in January 2025, Canada had enjoyed years of free trade relations with the U.S. under the CUSMA agreement, which was negotiated and enacted during Trump's first term. CUSMA underwent its first formal six-year joint review starting July 1, 2026; the U.S. did not agree to renew it in its current form, though the agreement remains in force.

How will Canadians be affected by tariffs?

Everyday Canadians

• Higher prices for many goods at the store: Think groceries, electronics, car parts—many imports could cost an extra 10–35%. Even US‑made goods that use Canadian steel or parts might see price increases.
• More expensive car maintenance: Auto components not covered by the USMCA could cost significantly more due to a new 35% duty.
• Energy bills impacted: A 10% tariff on non‑USMCA energy could affect costs for oil, gas, and fertilizer.
• Employers may find themselves downsizing: With rising costs and less profit, some employers in hard-hit sectors may be laying off workers.

Canadian business owners

Small and medium-sized businesses that rely on U.S. imports or export goods to the U.S. face increased complexity:

• Increased costs: Supply chain disruptions, higher import duties, and unpredictable pricing may squeeze company profits and mean restructuring.
• Export uncertainty: Canada may impose “retaliatory tariffs”, and those can reduce U.S. demand for Canadian products and reduce cross-border sales. But it can also mean that businesses prefer to buy Canadian goods.
• Import cost chaos: Business owners should use tools like the Canada Tariff Finder and Harmonized System classification to track new duties and compliance.

Tax and financial implications of tariffs

For employees & consumers

Higher prices from tariffs may impact your disposable income. When filing your taxes:

• Use RRSPs and TFSA contributions wisely to offset living cost rises. Money withdrawn from RRSPs will have tax consequences, while withdrawing funds from a TFSA is tax-free. 
• Claim home office or vehicle expenses accurately, especially if remote work saves commuting costs. Ensure that your employer signs a T2200 - Declaration of Conditions of Employment.
• Watch for new provincial programs and benefits providing relief, rebates and job training.
• Given that interest rates are finally lowering, this may be the time to revisit any loans or mortgages to potentially save money on borrowing costs.

For small business owners

Some additional considerations for business owners when filing their taxes:

• Tariffs paid by a Canadian company on goods imported should be included in the costs of goods sold and taken as a deduction.
• Tariffs are added to goods before the GST/HST is calculated. Businesses can claim the GST/HST on those goods and the cost of tariffs through Input Tax Credits

Planning Ahead

Here are some things that may help you to navigate this volatile time:

• Seek professional advice: Tax experts and trade advisors can help optimize deductions and manage tariff-impact strategies.
• Manage your budget: Adjust your household and business finances for likely price increases.
• Think long-term: Understand that tariffs are moving targets right now—they may ease or escalate depending on trade negotiations.

TurboTax Canada knows taxes and is here to help. Whether it’s new benefits, navigating Input Tax Credits, or claiming every deduction, we simplify filing—so you can focus on staying agile amid an evolving trade and tax environment.

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