Canada Braces for New U.S. Tariffs as Trump’s “Tariff Wall” Gets a Fresh Coat of Paint

Canada could wake up to another round of American tariffs before the week is out. On paper, Washington’s justification centers on how well trading partners police forced labour in their supply chains. In practice, according to trade lawyers watching the file closely, the move is less about labour standards and more about patching a hole left by the courts.

The story traces back to June 2, when the Office of the U.S. Trade Representative floated tariffs of at least 10 per cent on goods from roughly five dozen trading partners. The proposal followed a months-long USTR probe into whether countries were adequately blocking imports tied to forced labour.

Canada found itself in that group, alongside Mexico, Taiwan, the United Kingdom and dozens of others all flagged for allegedly falling short on enforcing bans against forced-labour-made goods.

The legal mechanism behind the move is Section 301 of the Trade Act of 1974, a decades-old law that hands the president broad authority delegated by Congress to hit trading partners with tariffs and other trade penalties. Jesse Goldman, an international trade lawyer and partner at Osler LLP, describes it simply as a tool Congress gave the executive branch to respond to unfair trade practices abroad.

Under the USTR’s proposal, the penalties come in two tiers. Canada sits in the lighter tier, facing a proposed 10 per cent tariff alongside Ecuador, the European Union, Indonesia, Mexico and Pakistan countries the U.S. says have forced-labour import bans on the books but don’t enforce them properly. A tougher 12.5 per cent tariff would apply to most of the other nations under investigation, which Washington says have no such prohibition at all.

Goldman and other trade watchers argue the forced-labour rationale is largely a pretext. The underlying goal, they suggest, is to keep tariffs flowing after the U.S. Supreme Court gutted the legal foundation Trump had been relying on.

“I don’t think we should be under any illusion that even if we perfected that legislation and perfected enforcement, that it would change anything with respect to the U.S. approach,” Goldman said, calling the forced-labour probe a strategic vehicle to sustain the broader tariff regime rather than a genuine labour-standards initiative.

That broader regime has gone through several iterations. Back in February 2025, Trump used the International Emergency Economic Powers Act to slap tariffs on nearly every U.S. trading partner. The Supreme Court later struck that approach down. In response, the administration pivoted to Section 122 of the Trade Act a provision that allows temporary tariffs, but caps them at 150 days.

Those Section 122 tariffs are set to run out at the end of this week. Goldman expects the administration to finalize the Section 301 forced-labour tariffs just in time to fill that gap, effectively swapping one legal justification for another without any real interruption in the tariffs Canadian exporters face.

“I would expect that the 301 tariffs will be finalized, and the final measures will be announced this week, so that will be a continuous tariff wall,” he said.

If finalized, the Section 301 tariffs are expected to mirror the sweeping scope of the tariffs they’re replacing. According to the international law firm White & Case, the new duties would largely restore the baseline tariff levels that applied under the now-defunct IEEPA tariffs covering trading partners responsible for more than 99 per cent of goods entering the United States.

There is, however, a significant carve-out: goods that qualify under the Canada-U.S.-Mexico Agreement (CUSMA) are expected to be exempted, following a pattern the administration has used in both the IEEPA and Section 122 tariffs. That matters a great deal for Canada, since more than 98 per cent of goods traded between the two countries already qualify as CUSMA-compliant and have been shielded from Section 122 duties as a result.

White & Case notes that USTR’s past practice on exemptions will likely shape how the new Section 301 measures are structured, giving some reassurance though not certainty that the CUSMA shield will hold.

Even with that exemption, Canadian industries already absorbing separate sector-specific tariffs including steel, aluminum, lumber and autos would see those duties continue to stack on top of whatever comes out of the forced-labour proceeding.

With the clock running out on the current tariff authority, Ottawa now finds itself waiting to see whether Washington swaps legal justifications without missing a beat leaving Canadian exporters facing much the same tariff exposure they’ve had all year, just under a different name.