- with Senior Company Executives, HR and Finance and Tax Executives
- with readers working within the Accounting & Consultancy, Healthcare and Law Firm industries
As 2025 draws to a close, the waters of international trade remain rough, with the United States leading the way with its broad-based sectoral tariffs on steel, aluminum, copper, automobiles, trucks, lumber and wood cabinetry. In particular, the duties on steel and aluminum derivative products were vastly expanded to cover a very broad range of items that were not traditionally contemplated as "steel goods". Canada will now be implementing a new set of measures, including new tariffs and lower quotas on imported steel products, to address ongoing challenges with US trade policy and its impact on global market conditions.
We have previously discussed Canada's retaliatory duties on the US in our legal alert, Tariffs Up, Tariffs Down: What Businesses Need to Know, including how those duties are both lower in quantum and scope than the original US measures. We have also covered the Canadian government's steps in setting up global safeguards and tariff rate quotas limiting the quantity of steel that can be imported based upon historic levels, which is intended to prevent the diversion of steel from the US market to Canada, in Relief on Retaliatory Surtaxes, New Tariffs on Trading Partners, and More: What Canada's Recent Measures to Protect Domestic Industry Mean for Your Business.
On November 26, Prime Minister Mark Carney announced new measures (the Announcement) related to these programs, significantly expanding the scope and quantum of the measures.
Tightened Steel Quotas
Expanding on existing measures, Canada's new tariffs and quotas on steel and steel products are intended to address global steel market "pressure from excess capacity driven by non-market practices abroad, resulting in artificially low-priced imports that undermine Canadian producers [and] recent U.S. trade actions [that] have further disrupted market dynamics, closing off Canada's primary export destination and intensifying competition at home."
Previously, Canada set up a system where steel from any country that did not have a free trade agreement with Canada was restricted to a quota of 50% of its 2024 levels, with any imports above that threshold being subject to a surtax of 50%. The Announcement notes that, effective December 26, 2025, this will be reduced to 20% of 2024 levels.
Similarly, the quota for our non-CUSMA free trade agreement partners will be reduced from 100% to 75% on December 26, 2025, with over quota amounts also being subject to the 50% surtax. This change will impact a number of key Canadian allies, including South Korea and European Union countries. However, it will not affect our CUSMA partners, the United States and Mexico.
The Announcement indicates that these changes to the tariff rate quotas are being driven by concerns regarding global overcapacity and recent U.S. measures, noting that:
This measure will prevent the Canadian market from being overwhelmed with cheap steel owing to global overcapacity and the closure of the U.S. market. It will also allow Canadian steel producers to compete fairly in the domestic marketplace.
These more restrictive quotas are expected to have a significant impact on Canadian manufacturers. As the Announcement notes, over 60% of the steel used by Canadian manufacturers in 2024 was imported, and many importers could now be looking at significant cost increases, particularly if they cannot find a domestic source to fulfill their needs.
Derivative Tariffs – Not Just the United States Anymore
The second measure introduced in the Announcement is the December 26, 2025 implementation of a global 25% tariff on steel derivative products. As we discussed in our legal alert, U.S. Steel and Aluminum tariffs and new Canadian retaliatory measures now in force: what businesses need to know, a similar measure on derivative products of steel and aluminum was imposed by the United States in March of this year. However, unlike the US derivative product tariffs, the Canadian tariff applies to the whole value of the imported item. There is no attempt to parse out the value of steel in the good from the total value of the good.
Though a comprehensive list of goods that are considered "derivatives" of steel and subject to this new surtax has not yet been released, the Announcement indicates that the list will target goods for which steel content is a large portion of the full value of the product, and describes these derivatives as falling into the following categories of products:
- Certain shapes of iron/non-alloy steel
- Doors and Windows
- Wire, ropes, cables, and chains
- Fasteners (e.g., nails, screws)
- Structures (e.g., prefabricated buildings, bridges and wind towers)
- Steel and iron cloth, grille, and netting
- Seating with metal frame and certain metal furniture
The Announcement states that the initial list will cover approximately $10 billion in steel derivative imports, but may be adjusted in the future to reflect changes in market conditions.
There is no indication in the Announcement that exemptions will be provided for goods that are not produced domestically. For example, we note that many of these categories are currently subject to anti-dumping and/or countervailing duties and, in some instances, specific goods have been excluded from those duties where it was determined that Canadian industry did not produce that product or a substitutable product. The new tariff appears to include no exemption or exclusion for such products, although the Announcement notes that individual remissions can still be applied for imported steel "in a narrow set of circumstances".
Remission Removal for US Steel Imports
In addition to the new duties and quotas, Canada will be removing its broad-based horizontal remission on steel products for use in manufacturing and food packaging in Canada. As we had discussed in our legal alert when this remission was first announced, Trade War Update: Relief for some as Canada orders six-month reprieve on retaliatory tariffs on a wide range of imported goods, this remission provided significant relief for Canadian manufacturers reliant on US imports. The remission was initially set to expire on October 16, 2025, then extended to December 16, 2025 and now is set to expire effective January 31, 2026, except for imported goods used for the manufacturing of automobiles, auto parts, and aerospace products. The remission will also remain in place for aluminum imports from the United States.
At the moment, it is unclear if the removal of horizontal remission will also include removal of access to pre-existing programs administered by Canada Border Services Agency (CBSA) for remissions and drawback of duties paid for imported products that are subsequently exported, including when those imported products are used in manufacturing of a good that is exported. These programs remain valuable for Canadian manufacturers and their loss in addition to the loss of remission could have a significant effect.
Increasing Focus on Trade Remedy (Dumping and Countervail) Enforcement
Canada will also be implementing new measures with the CBSA to improve and increase enforcement of anti-dumping and countervailing duties applied against steel products. This includes new resources for receiving "tips" regarding non-compliance or circumvention, a new market watch unit within the CBSA, and a dedicated steel trade compliance team that will work with the Canadian Steel Producers Association.
Importers should be attentive that their imports remain in full compliance with the Special Import Measures Act, and that cooperating exporters have been properly keeping the CBSA advised of any increase in costs or local market prices that may impact normal values. Failure to provide prompt notice and keep prices in line with market prices may result in retroactive duties, particularly in light of the CBSA's increased emphasis on strict enforcement.
Buy Canadian Policy – Domestic Preferences
The Announcement also indicates that the Canadian government will implement a new Buy Canadian Policy that "prioritizes" Canadian materials in contracts valued more $25 million. This policy would also apply to federal infrastructure funding programs through the Government of Canada's Grants and Contributions programs.
The Announcement notes that that this program is more focused on supply chains as opposed to whether or not the contracted supplier is Canadian, and will require Canadian steel, aluminum and softwood lumber be used where the value exceeds $250,000.
Lumber Sector
The Announcement also includes additional support for Canadian lumber producers. This includes an additional $500 million in liquidity support through the Large Enterprise Tariff Loan Facility. These supports are particularly helpful to producers who export product to the United States and are subject to US duties on softwood lumber which can tie up funds in bonds, security and deposits for years after the importation is made.
The Announcement also indicates that the Canadian government will be asking Natural Resources Canada to set up a "single window" for the forestry sector that would help businesses navigate the different federal programs that are available to this sector.
***
The ongoing volatility in global trade and the Canadian government`s response to this changing dynamic can make it extremely difficult for Canadian business to stay up-to-date on the latest developments and how these changes may impact their business. McCarthy Tétrault's International Trade and Investment Law Group has and, through our Cross-border Trade & Tariffs Roundup, will monitor and share updates on these developments. We continue to advise a large number of clients in a variety of industries on how to navigate the uncertainty caused by this volatility.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
