The Department of Finance Canada announced on August 25 that Canada will impose counter-tariffs of 15, 25, and 50 percent on products drawn from those targeted by US Section 338 and Section 232 tariffs, with the rate on each product matching the corresponding US rate. The measures take effect at 12:01 a.m. on September 8, 2026, cover CAD$27.6 billion in imports from the US, and do not apply to US goods already in transit to Canada on that day.
In contrast to Mexico, who was negotiating the elements of the US-Mexico-Canada (USMCA) trade agreement before the renewal date of July 1, 2026, Canada was a late-comer to the conversation. With the three countries failing to renew the USMCA and the agreement now continuing on a year by year review, President Trump invoked Section 338 of the Tariff Act of 1930 to impose an additional 50 percent tariff on certain Canadian goods, including USMCA-compliant goods. The three categories of goods that were cited alleging Canadian discrimination were motor vehicles, dairy, and alcoholic beverages.
Though President Trump would state on August 18 that a deal was reached with Canada for a mutual trade agreement subject to the finalization of documents, talks collapsed a few days later and the additional Section 338 duties took effect. Section 338 did not touch or change existing Section 232 duties on steel. Though it could be stacked, Section 338 duties cover products not covered by the tariffs on steel. The sum total was the breaking point for Canada that then pledged to match the new tariffs dollar for dollar and did so on virtually all items the US imposed tariffs on. Critically for steel, this increased the Canadian tariff on US steel to 50% up from 25%.
The potential impact on the US steel industry can be seen by the effects of past actions. Canada is the second-largest destination for US steel exports after Mexico. US mills shipped 2.55 million mt of steel to Canada in 2025, down 28.1 percent from 3.55 million mt in 2024, a loss of nearly 1 million mt. The decline was more than double Mexico's 12 percent drop over the same period and well ahead of the 19.3 percent fall in total US steel exports worldwide. Canada's share of US steel exports slipped to 37.3 percent from 41.8 percent. Monthly volumes fell sharply after Canada's 25 percent counter-tariff took effect on March 13, 2025, dropping from 260,155 mt in March to 165,308 mt in April and never returning to the March level.
It can only be expected that the September 8 increase to 50 percent will push volumes down further.
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