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Globe and Mail
30-05-2025
- Business
- Globe and Mail
Canada's pause on U.S. countertariffs causes confusion among businesses it was supposed to help
A recent measure that temporarily exempts certain U.S. imports from Canadian retaliatory tariffs was meant to provide businesses here with some financial relief. But for many firms, it's added yet another layer of confusion to the rapidly changing conditions of the trade war. Prime Minister Mark Carney's Liberal government issued a six-month reprieve on April 16 that exempts a number of U.S. imports used in Canadian manufacturing, processing, and food and beverage packaging from Canada's countertariffs on about $60-billion worth of U.S. goods. The temporary measure was also intended to 'minimize the negative effects' of surtaxes by carving out exemptions for importers in public health, health care, public safety and national security, according to an April customs notice. But trade lawyers say the order's broad room for interpretation, along with a lack of clarity in how the order will be administered at the border, has resulted in a flurry of questions from businesses, which still need to pro-actively apply for the exemption. 'I have clients who are having a really difficult time understanding their own imports – which ones are going to benefit from remission and which ones aren't,' said Jonathan O'Hara, an international trade lawyer at McMillan LLP. 'And these are sophisticated companies who are looking really hard at the issue, and it's tricky.' Martha Harrison, an international trade lawyer at McCarthy Tétrault, said the order's significant room for interpretation wasn't necessarily a downside, but the subsequent guidance from the government on how to apply it created confusion. 'On a broad reading, there could be any number of products that are used in the manufacturing and processing, and food and beverage packaging, that could be eligible,' she said. Canadian car shoppers should brace for tariff price hikes in June For example, in the food sector, the remission makes it clear that inputs coming from the United States for manufacturing in Canada – think of chocolate chips imported to make cookies - would likely be eligible for an exemption. Those chips get off the hook because they're being imported into Canada for further production, she said. Finished packaged goods – chocolate bars, a can of orange juice or even canned peanuts – would likely not be eligible for the exemptions unless they're repurposed for further manufacturing. Where things get murky is when it comes to the eligibility of indirect inputs: 'Lubricants or fuel, or replacement tires for use of workers in the manufacturer facility … handles for food handlers or gloves or some kind of protective equipment," said Ms. Harrison, listing examples. On a broad reading of the original remission order, any number of those products, which are used in manufacturing and processing, could be eligible, she said. But a Canada Border Services Agency notice updated in May, which administers the remission order at the border, added confusion. 'After the CBSA notice was issued, it became less clear that some of the opportunity was still available,' she said, adding that the language in the memo seemed to reduce the scope of eligible imports. Businesses are now reassessing their eligibility for the exemption and determining when it's worthwhile to disentangle it all. Sometimes, hundreds of thousands of dollars are at stake – and often it's millions, said Ms. Harrison. Confusion among businesses and trade experts reached a fever pitch in early May after the release of a report from advisory firm Oxford Economics. The findings, shared and referenced across a handful of publications as well as a post on X from Conservative Leader Pierre Poilievre, stated that the Canadian government had 'essentially paused nearly all its countertariffs on the U.S. for at least six months.' The report claimed that the six-month exemption would cover about 97 per cent of the other $59.8-billion worth of goods that previously faced countertariffs. 'This brings the Canadian effective tariff rate increase on the US to nearly zero in Q2 and Q3,' Oxford Economics said. More businesses weigh tariff surcharges as trade wars drag on William Pellerin, an international trade partner at McMillan LLP, says his LinkedIn feed and e-mail suddenly blew up with inquiries when a media outlet ran a story that quoted the Oxford report was published. His clients were dumbfounded and eager to know whether the news was true. 'We actually thought that they must be referring to a new exemption that we hadn't even seen yet,' he said. 'When we understood that they were referring to the April 16 exemption, we were quite incredulous.' He said the report's findings were 'completely inconsistent' with what his firm was seeing from clients, some of whom were still paying tens of millions of dollars in tariffs. Responding to Mr. Poilievre's post on X, which accused Mr. Carney of 'quietly' dropping retaliatory tariffs to nearly zero, Finance Minister François-Philippe Champagne said that 70 per cent of those tariffs are still in place. Tony Stillo, director of Canada Economics at Oxford Economics, said that the report's conclusion was based on a 'broad interpretation' while the Canadian Finance Minister's comments appeared to 'assume a much narrower' definition regarding tariff exemptions. Marc Froese, a political science professor and founding director of the international studies program at Burman University in Alberta, said the initial order from the Canadian government may have been trying to walk the line between pleasing tariff-weary businesses and consumers while maintaining a strong position in trade talks. 'They recognize that countertariffs have been popular with Canadians as an initial show of collective disapproval,' he said. 'But they are also acutely aware that this particular response hurts Canadians.' Mr. Pellerin added that Canada's countertariffs likely won't be lifted any time soon, despite a ruling by the U.S. Court of International Trade on Wednesday that blocked almost all the Trump administration's tariffs. On Thursday, a U.S. federal appeals court allowed Mr. Trump's tariffs to be reinstated. A May food inflation report from Loblaw Companies Ltd. stated that the new Canadian rules would provide some relief, as indirect tariffs were of 'significant concern' for food prices. But tariffs remain on thousands of products imported from the U.S. Consumers can expect to continue seeing tariff-related increases on approximately 6,000 items, Loblaw said.
Globe and Mail
15-05-2025
- Business
- Globe and Mail
Canada should reduce Syria sanctions to align with U.S. and Britain, experts say
Canada should scale back its sanctions on Syria now that the United States is promising to scrap them entirely and other major allies are reducing them, international trade experts say. John Boscariol, head of McCarthy Tétrault's international trade and investment law group, said Canada could end up among the countries with the toughest sanctions still in place on Syria if the United States eliminates its sanctions, as President Donald Trump said earlier this week he would do. 'When our close allies like the U.K. and the U.S. are relaxing sanctions against a target country, it absolutely makes sense for Canada to be going down that same path,' he said. International trade lawyer Lawrence Herman agreed. 'Canada should co-ordinate with its closest allies on Syrian sanctions, so that we are in step with the international consensus to help rebuild Syria and the Syrian economy.' Foreign Affairs Minister Anita Anand declined comment Wednesday on Syria, noting as she exited a cabinet meeting that it was her first full day in a new portfolio. Syria is trying to rebuild after former dictator Bashar al-Assad fled the war-torn country last November and was granted asylum in Russia. Mr. Trump announced this week that he would order the lifting of sanctions on Syria at the behest of Saudi Arabia's crown prince, a major U.S. policy shift ahead of his Wednesday meeting with Syria's new President, Ahmed al-Sharaa, a former militant who severed ties with al-Qaeda in 2016. The decision is expected to have an almost immediate effect on the ability of humanitarian groups to bring money and supplies into the country, although a full removal of sanctions will require action by the U.S. Congress and the revival of dormant financial links with Syria. Mr. Trump's pledge was announced despite deep Israeli suspicion of Mr. Sharaa's administration. Israeli officials have continued to describe Mr. Sharaa as a jihadist. Britain said in April that it would support efforts to rebuild Syria's financial system by removing sanctions to encourage investments in financial services, energy production and other sectors. A notice posted online by the British finance ministry said the Syrian Interior Ministry, Defence Ministry and General Intelligence Directorate were among 12 entities no longer subject to asset freezes. Michael Nesbitt, a University of Calgary law professor who previously worked in the federal government's sanctions division, said the change in government in Syria should give rise to a re-evaluation of sanctions. 'We had sanctions against Syria, including because there was a grave threat to international peace and security with the ongoing conflict there,' he said. 'If Canada determines that there's been a change in that status, then it should be sitting down to think about whether to change the sanctions regime.' Ottawa in March announced that it would temporarily ease existing sanctions on Syria for a period of six months 'to support democratization, stabilization, and the delivery of aid to and within Syria during this period of transition.' Mr. Boscariol said the general permit issued by Canada allows certain transactions, 'if they were humanitarian or related to the stabilization of Syria, to proceed.' But otherwise, he said, Canada maintains a 'fairly aggressive financial services ban in place, which essentially prohibits providing financial services to, or for the benefit of, any person in Syria,' he said. Mr. Boscariol said one challenge that the United States and Canada will face is that the organization Mr. Sharaa led, Hayat Tahrir al-Sham, is listed as a terrorist entity by both Washington and Ottawa. Aid groups said the mere sign that the White House intends to alter course will be enough to produce some change for the country, pointing to the rapid rise in value for the Syrian pound. As one example, those working in Syria have often encountered issues related to 'over-compliance,' in which fear of consequences has kept institutions from engaging even in work that is technically legal. Companies and banks have balked at measures such as financing humanitarian shipments, 'because the sanctions are so complicated and the costs of getting it wrong are so high,' said Joel Veldkamp, director for public advocacy at Christian Solidarity International, a religious human-rights organization. 'Since the Treasury Department will presumably no longer be pursuing these cases, that problem should get much better relatively quickly.' Mr. Trump, too, can act unilaterally to cancel a national emergency declared by George W. Bush in 2004, which was used to back a series of sanctions. Congress, however, will need to act to overturn the 2019 Caesar Act, which imposed broad sanctions on the Assad regime and those doing business with key sectors of the country. As change happens, humanitarian groups and people sending home remittance money are likely to be the first to test new pathways into the country, said Joude Badra, a financial technology executive who has written on Syrian economic reconstruction. 'Syrians abroad, some friendly governments, development finance institutions and risk-taking business people will lead the way,' he said. But the broader sweep of foreign investment needed in the country is likely to take time, given the need for companies to assess the feasibility of any new projects and gauge comfort with the investment environment in a country, much of whose leadership has been drawn from the ranks of Islamic militant groups. Bankers will need to make their own decisions. 'Syrian banks and their correspondent banks across the world need to re-engage and activate old dormant or frozen accounts,' Mr. Badra said. 'This part may be faster for some Middle Eastern banks that are shareholders in Syrian banks or are servicing humanitarian transfers already.' What it means is 'it will likely take a bit of time before we see actual money flowing in,' he said. Still, the shift has raised hopes among groups who have worked in Syria, and witnessed the toll taken by sanctions. 'This announcement marks a potentially transformative moment for millions of Syrians who have endured more than 13 years of economic hardship, conflict and displacement,' Mathieu Rouquette, Mercy Corps country director for Syria, said in a statement. 'With fewer restrictions on financial transactions and imports, we can more effectively support Syrians to restore livelihoods, revive small businesses and strengthen local markets,' he said. 'This moment offers a real opportunity to shift from a heavy reliance on aid toward long-term resilience.' Removing obstacles to the movement of money and goods is, of course, only one element of what is needed in a country that has been deeply impoverished. 'It's a cash issue. There's really no cash to be able to rebuild the infrastructure in Syria,' said Mufaddal Hamadeh, a Chicago hematologist and oncologist who is president of the Syrian American Medical Society. But, he said, change in U.S. policy should open the way for other countries to help. 'Countries like Qatar and the Gulf countries will be able to provide free assistance to Syria without fear of conflicting with the U.S. sanctions,' he said. It is also likely to bolster Syria's nascent government, by giving it new legitimacy at home. 'I have no reason but to feel elated, with an optimism that is sky-high,' he said. 'And that is how Syrian people are feeling today.' With a report from Reuters
