Canada maintained low tariffs on U.S. goods pre-trade war

Canada's trade relations with the United States have been tense since President Donald Trump announced plans for high tariffs on Canadian goods. In the midst of this trade conflict, China has also imposed new tariffs on Canadian products, bringing more challenges to Canada's trade landscape. Tariffs in Canada are generally governed by the Customs Tariff Act, which establishes a baseline rate of 35 percent. However, this rate is rarely applied because Canada belongs to the World Trade Organization (WTO). Under the WTO, most countries, including Canada's main trading partners, benefit from lower tariffs due to "Most-Favored-Nation" (MFN) status and bilateral trade agreements. Most goods from the U.S. entered Canada tariff-free under the Canada-United States-Mexico Agreement (CUSMA), which complemented existing trade relations. Aside from these items, certain products, like clothing, face higher tariffs to protect domestic industries and care about labor conditions. The dairy sector is an exception due to Canada's "supply management" policies. These policies limit the import of dairy products to protect local producers from international competition. U.S. President Trump has criticized these policies, particularly the high tariffs applied to U.S. dairy imports that exceed a specific quota. However, the U.S. has never surpassed this quota, which was negotiated during the CUSMA discussions. In another development, Canada imposed a 25 percent surtax on steel and aluminum from China and 100 percent on Chinese electric vehicles to address unfair competition. In retaliation, China has targeted Canadian agricultural products with tariffs of its own. This ongoing trade dispute reflects the complicated relationships between the three countries. Overall, Canada's trading strategies are being tested, and the outcomes could have significant implications for small businesses and broader economic policies.