• Canada has shown a willingness to impose secondary tariffs in response to new U.S. trade measures, pausing immediate implementation for negotiations.
  • Approximately 95% of Canadian non-energy exports have rapidly achieved USMCA compliance, mitigating the initial impact of the 25% U.S. tariffs.
  • The Canadian government has opened public consultations to determine which U.S. goods could face future retaliatory tariffs of up to 25%.

Canada has indicated a readiness to join a cycle of secondary tariffs following the Trump administration's imposition of new levies on Canadian goods, according to sources familiar with the negotiations. The initial U.S. measures, announced earlier this year, slapped a 25% tariff on a broad range of Canadian imports, with energy products receiving a comparatively lower 10% duty.

The retaliatory stance from Ottawa marks a significant escalation in trade tensions, though immediate implementation has been paused. Efforts to restructure the trade relationship have centered on compliance with the USMCA framework, which has become a critical negotiating tool. “The willingness to move to secondary tariffs is a clear signal that Canada will use every tool to protect its interests,” said one official, who asked not to be identified discussing private deliberations.

Despite the tariff threats, market reaction has been muted. Canada’s benchmark S&P/TSX composite index has remained stable, largely because an overwhelming majority of exports—roughly 95% of non-energy goods and all energy exports—achieved USMCA compliance by August 2025. This rapid adaptation has significantly blunted the potential economic impact, for now.

Public consultations are underway in Canada to identify which U.S. goods could be targeted in a future round of retaliatory measures. The government has emphasized its support for affected businesses and workers, recognizing widespread concern over the U.S. trade actions. A final decision on the next phase of tariffs is expected after the consultation period concludes.

This episode echoes previous tariff escalations, such as the steel and aluminum disputes of 2018-2019, but is characterized by a more explicit and phased reciprocal approach. The broader risk of supply chain disruption persists, particularly if future U.S. tariffs expand or negotiations stall, though trade experts currently predict limited market volatility amid the political uncertainty.