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Toronto Sun
7 days ago
- Business
- Toronto Sun
Here's what Canada's effective U.S. tariff rate might look like after carve-outs
Published Aug 12, 2025 • 3 minute read The Canadian flag flies near the Ambassador Bridge at the Canada-U.S. border crossing in Windsor, Ont., on Saturday, March 21, 2020. Photo by Rob Gurdebeke / THE CANADIAN PRESS OTTAWA — When you peel back the many layers of tariffs and exemptions imposed by the United States, the effective tariff rate on Canada looks much lower than the headline figures suggest, some economists say. This advertisement has not loaded yet, but your article continues below. THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY Subscribe now to read the latest news in your city and across Canada. Unlimited online access to articles from across Canada with one account. Get exclusive access to the Toronto Sun ePaper, an electronic replica of the print edition that you can share, download and comment on. Enjoy insights and behind-the-scenes analysis from our award-winning journalists. Support local journalists and the next generation of journalists. 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Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors Don't have an account? Create Account RBC senior economist Claire Fan said in an interview that the effective tariff rate is an average of the import duties paid on goods heading to the United States that accounts for exemptions tied to the Canada-U.S.-Mexico Agreement (CUSMA) on trade. While U.S. President Donald Trump ramped up blanket tariffs on Canada to 35% at the start of the month, that move maintained an exemption for goods compliant with the CUSMA. RBC estimates the effective tariff rate on Canadian goods is closer to 6% today. BMO's calculations from the start of the month place that figure a little higher, at around 7%. Read More Your noon-hour look at what's happening in Toronto and beyond. By signing up you consent to receive the above newsletter from Postmedia Network Inc. Please try again This advertisement has not loaded yet, but your article continues below. The Bank of Canada said in late July — before Trump's latest escalation — that it estimated the effective U.S. tariff rate was around 5%, up from almost nothing at the start of the year. RBC's calculation is based on export volume data from 2024. Other sets of data offer slightly different measures of the tariff strain facing Canadian businesses. Fan said that, according to data published by the U.S. Census Bureau, Canada's effective tariff rate was roughly 2.4% in June, before the latest wave of higher tariffs came into effect. That figure captures the actual duties paid at the Canada-U.S. border, she said, and may fall short because of delays in reporting and general confusion over tariff levels among businesses. This advertisement has not loaded yet, but your article continues below. 'It's not surprising that there's a certain amount of disarray at customs,' she said. The effective tariff rate could also be lower in practice as U.S. businesses shift away from importing Canadian goods that carry the highest levels of tariffs, Fan said. RECOMMENDED VIDEO While the effective tariff rate offers a simple explanation for the total level of U.S. tariffs facing Canada, Fan warned that it can underestimate the on-the-ground impact. 'It's not the best gauge of the severity of tariffs, but it's one of the only ones that we have, unfortunately,' she said. CUSMA compliance does not broadly exempt Canadian goods from sector-specific tariffs like those levied under Section 232 of U.S. trade legislation. This advertisement has not loaded yet, but your article continues below. Ongoing U.S. tariffs of 50% on steel and aluminum, for example, will have an outsized impact on those sectors going forward, Fan said. At roughly 6%, Canada's effective tariff rate is well below the cumulative rate facing the United States' other trading partners right now, which RBC pegs at around 15% to 17%. 'That's the key point right there, which is why we're still one of the countries that's facing the least amount of U.S. tariffs right now,' Fan said. It's not fully clear to economists how much of the Canadian goods entering the United States are tariff-free under CUSMA. The Bank of Canada said in its monetary policy report in late July that it assumes Canadian businesses will collectively achieve CUSMA compliance on 95% of non-energy goods under a scenario that sees the tariff situation hold steady over the coming three years. This advertisement has not loaded yet, but your article continues below. The central bank doesn't assume perfect compliance, since some businesses might not want to go through the administrative burden of securing a carve-out. But Fan said the CUSMA exemption is the critical element giving Canadian exporters a 'competitive advantage' over other highly tariffed economies. Oxford Economics' lead economist Adam Slater said in a report issued Monday that, despite tremendous uncertainty tied to disruption of trade with the United States, Canada and Mexico may extract some benefit as long as CUSMA remains active. That trade agreement is up for renegotiation in 2026. Based on U.S. Census Bureau data from June, Oxford calculates the effect tariff rate for China at 35%, Japan at 15% and the United Kingdom at 8%. The firm suggests that — at 2.5% — Canada's effective tariff rate is a bit higher than RBC's estimate based on the U.S. Census Bureau data, while Mexico's effective tariff rate is estimated at 4%. 'If the relatively low tariffs apparently being paid on imports from Mexico and Canada persist, these two economies could pick up some benefits from shifts in supply chains, although uncertainties over the endgame for tariffs and the future of the (CUSMA) deal will be near-term drags,' Slater wrote. Opinion Toronto Blue Jays Toronto & GTA Canada Toronto Blue Jays
Toronto Star
7 days ago
- Business
- Toronto Star
Here's what Canada's effective U.S. tariff rate might look like after the carve-outs
OTTAWA - When you peel back the many layers of tariffs and exemptions imposed by the United States, the effective tariff rate on Canada looks much lower than the headline figures suggest, some economists say. RBC senior economist Claire Fan said in an interview that the effective tariff rate is an average of the import duties paid on goods heading to the United States that accounts for exemptions tied to the Canada-U.S.-Mexico Agreement on trade, or CUSMA.
Toronto Star
7 days ago
- Business
- Toronto Star
Here's where Canada's effective U.S. tariff rate might stand after the carve-outs
OTTAWA - When you peel back the many layers of tariffs and exemptions imposed by United States, the effective tariff rate on Canada looks much lower than the headline figures suggest, some economists say. RBC senior economist Claire Fan said in an interview that the effective tariff rate is an average of the import duties paid on goods heading to the United States that accounts for exemptions tied to the Canada-U.S.-Mexico Agreement on trade, or CUSMA.
Winnipeg Free Press
7 days ago
- Business
- Winnipeg Free Press
Here's where Canada's effective U.S. tariff rate might stand amid carve outs
OTTAWA – Amid the many layers of tariffs and exemptions from the United States, some economists say the effective tariff rate on Canada is much lower than the headline figures suggest. RBC senior economist Claire Fan says the effective tariff rate is an average of the import duties paid on goods heading to the United States that accounts for exemptions tied to the Canada-U.S.-Mexico Agreement. While U.S. President Donald Trump ramped up blanket tariffs on Canada to 35 per cent at the start of the month, that move maintained an exemption for goods compliant with that trade pact. RBC estimates the effective tariff rate on Canadian goods is closer to six per cent today. Fan warns that the effective tariff rate offers a simple explanation for the total level of U.S. tariffs facing Canada, but it can underestimate the severity of the trade disruption. Monday Mornings The latest local business news and a lookahead to the coming week. She says ongoing tariffs of 50 per cent on steel and aluminum, for example, will have an outsized impact on those sectors going forward. This report by The Canadian Press was first published Aug. 12, 2025.
Toronto Star
7 days ago
- Business
- Toronto Star
Here's where Canada's effective U.S. tariff rate might stand amid carve outs
OTTAWA - Amid the many layers of tariffs and exemptions from the United States, some economists say the effective tariff rate on Canada is much lower than the headline figures suggest. RBC senior economist Claire Fan says the effective tariff rate is an average of the import duties paid on goods heading to the United States that accounts for exemptions tied to the Canada-U.S.-Mexico Agreement.
