Exemption Lets Canadian, Mexican Goods Enter U.S. Tariff-Free

U.S. President Donald Trump raised tariffs on Canadian goods to 35% last week, but a key exemption for Canada and Mexico shields the vast majority of goods from the punishing duties, Rob Gillies reported for the Associated Press (AP).

The Royal Bank estimated that almost 90% of Canadian exports accessed the U.S. market duty-free in April. (Photo: Francisco Diez)

Goods that comply with the 2020 United States–Mexico–Canada Agreement (USMCA), which Trump negotiated during his first term, are excluded from the tariffs. Canada’s central bank says 100% of energy exports and 95% of other exports comply with the trade pact.

The Royal Bank estimated that almost 90% of Canadian exports accessed the U.S. market duty-free in April.

Canadian Prime Minister Mark Carney said the U.S. commitment to the core of USMCA, reaffirmed again last week, means the average U.S. tariff rate on Canadian goods remains among the lowest, with over 85% of Canada–U.S. trade continuing to be tariff-free.

“Canada is better off than any of the trading partners right now because the Americans appear to be relying as a default on USMCA,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.

“That gives them the tough tariff headline but also allows them access to the stuff they need from us. Because of that, we’re in a relatively better position.” Canadian and Mexican companies can claim preferential treatment under USMCA based on where the products are made.

“The headline news is 35% tariffs, but it’s somewhat targeted,” said John Manley, Canada’s former industry minister, finance minister, foreign affairs minister, and deputy prime minister.

“There is a lot of resilience, I’d say. The Canadian economy has done relatively well—better than most of us expected—and remember, there are no tariffs on any of our energy exports,” he said.