Canadian exporters from various sectors have found a loophole to avoid the broad tariffs imposed by U.S. President Donald Trump. By complying with the Canada-U.S.-Mexico Agreement (CUSMA) signed in 2018, goods can escape the blanket tariffs set to take effect on Aug. 1. Trade policy experts suggest that most Canadian exports are eligible for this exemption, prompting a rush among companies to ensure their products meet the necessary criteria.
The CUSMA exemption has significant implications for Canada’s cross-border trade with the U.S. Trump initially imposed 25% tariffs on Canadian exports, excluding energy and potash, but later exempted products complying with CUSMA from these tariffs. Approximately 86% of Canada’s exports to the U.S. could benefit from this exemption, allowing them to enter the U.S. market without facing tariffs, as analyzed by RBC Economics.
Wolfgang Alschner, a trade law expert at the University of Ottawa, highlights the advantage Canada gains through this exemption compared to other countries facing widespread tariffs on exports to the U.S. The majority of Canadian exports, rooted in Canadian resources or labor, are eligible for tariff-free entry under CUSMA.
Products that qualify as CUSMA-compliant are those predominantly made in Canada, meeting specific rules of origin. While the process of proving compliance can be meticulous, it has become essential for Canadian exporters engaging in trade with the U.S. Obtaining a certificate of origin is crucial to ensure a smooth tariff-free journey for products crossing the border.
As trade negotiations continue, the CUSMA exemption remains a vital tool for Canada to shield its exports from potential tariffs. However, the uncertainty lies in Trump’s discretion to revoke this exemption at any time, posing a significant risk to Canadian trade if it were to be eliminated.