Relief on Retaliatory Surtaxes, New Tariffs on Trading Partners, and More: What Canada’s Recent Measures to Protect Domestic Industry Mean for Your Business

In response to escalating global trade pressures and rising concerns about market access, Canada has introduced a suite of new trade and procurement measures with significant implications for Canadian businesses. These include expanded eligibility for retaliatory surtax remission, new tariff rate quotas on steel product imports from allied countries, and restricted access to federal government procurement opportunities for non-reciprocal trading partners.

Key Takeaways for your Business

• Expanded Relief from Retaliatory Tariffs: Canadian businesses affected by U.S. steel, aluminium, and auto tariffs may now qualify for broader retaliatory surtax remission.
• New Steel Import Tariffs: Effective August 1, 2025, imports of steel products from non-U.S. sources will be subject to a 50% surtax if they exceed quota limits. A separate 25% surtax will apply to imports of products containing steel melted and poured in China, regardless of the exporting country (excluding the United States). This is accompanied by new support programs for the domestic steel industry.
• Procurement Restrictions: Foreign suppliers from countries that do not offer reciprocal access to their own procurement markets are excluded from most new federal contracts in Canada effective July 14, 2025.

Businesses impacted by these changes should review their exposure across all of their supply chains, procurement strategies, and eligibility for relief measures under the new frameworks. McCarthy Tétrault’s International Trade and Investment Law Group has extensive experience helping clients across numerous sectors navigate trade measures, secure duty relief, and manage compliance with shifting import and procurement rules. Whether you're seeking tariff relief, facing new surtaxes, or assessing your eligibility under the reciprocal procurement policy, our team can guide you through the process with practical and industry-specific advice.

Expanded Relief from Retaliatory Tariffs

In early 2025, the United States imposed a series of tariffs targeting Canadian exports, including a 25% tariff on steel and aluminium products (increased to 50% effective June 4^th, 2025) and broad auto tariffs affecting non-CUSMA compliant vehicles. In response, Canada introduced countermeasures, applying 25% surtaxes on nearly $60 billion worth of U.S. imports including many steel, aluminium, and vehicle products. See more details in our previous client alerts: What Businesses Need to Know About the New U.S. Steel and Aluminum Tariffs and Canada’s Response and Trade War Update: Canada Retaliates Against US Tariffs on Automobiles and Parts

Although these surtaxes are intended to encourage the United States to withdraw its tariffs on imports of Canadian products, they have also affected Canadian businesses that rely on U.S. imports. Limited surtax remission was previously made available by the Canadian government in specific circumstances.

Canada has now broadened eligibility for relief to a wider range of products being sourced from the United States. Specifically, remissions have been available for:

• certain goods found to be in short supply;
• certain identified companies whose imports are subject to the surtax as they are bound by contractual obligations that make substitution impossible; or
• certain companies identified as facing particularly exceptional circumstances that could have significant adverse impacts on the Canadian economy

At the same time, Canada has also taken steps to narrow the available relief under its China Surtax Remission Order (2024). Product-specific remissions for three steel and aluminium products have been changed  to company-specific remissions following the identification of a domestic source of supply. This will narrow eligibility for Canadian businesses importing from China.

Remission can significantly reduce costs by providing relief from tariffs already paid or exempting future imports. The application process requires proper documentation and classification, but for many businesses, the financial benefit can be substantial.

For more details, please see the official regulatory amendment Order Amending the China Surtax Remission Order (2024) and the United States Surtax Remission Order (2025), SOR/2025-147

New Tariffs Imposed on Steel Products from Free Trade Agreement Partners

Effective August 1, 2025, Canada will begin imposing significant steel tariffs on many of its closest trading partners. New tariff rate quotas (TRQs) will apply both to countries with a free trade agreement (FTA) in force with Canada and those without. TRQs allow a set volume of steel imports to enter Canada duty-free or at a reduced rate. Once that limit is reached, a surtax applies to the volume of steel product imports that exceed the quota limit.

For countries with FTA in force with Canada, excluding the United States and Mexico, the quota limit will be set at 2024 import volumes, and a surtax of 50% will apply to any steel imports exceeding that quota. For non-FTA countries, the quota will be half of 2024 import volumes, with the same surtax of 50% applied beyond that point.

In addition, before the end of July 2025, Canada will implement a new 25% surtax on imports from all countries other than the United States that contain steel melted and poured in China. This is intended to improve transparency in supply chains and prevent circumvention of existing trade measures with respect to China.  

These measures follow Canada’s imposition of a 50% surtax, effective June 27, 2025, on certain steel products (specifically flat, long, pipe and tube, semi-finished, and stainless steel products) that originate from non-FTA countries, as listed in Schedule 1 of the Order Imposing a Surtax on the Importation of Certain Steel Goods. Importantly, this surtax “stacks” onto the 25% surtaxes imposed on aluminum and steel products originating in China effective October 1, 2024 by the China Surtax Order (2024). However, for now this 50% surtax on certain steel products is time-limited, being set to expire after one year (i.e. June 27, 2026).

These measures are a response to the surge in diversionary steel shipments triggered by the U.S. tariffs, which have increased the threat of excess global supply being redirected into the Canadian market. While the goal is to protect Canada’s steel industry from being flooded by low-cost imports, the result is that even our close and friendly economic partners will now face new trade barriers.

To help the domestic industry adjust, the government has announced numerous support programs. These include:

• $1 billion in funding through the Strategic Innovation Fund to modernize production and strengthen supply chains;
• $70 million over three years for steelworkers retraining through labour market development agreements;
• up to $150 million in targeted support for small and medium enterprises through the Regional Tariff Response Initiative; and
• improved access to financing for steel producers through the Large Enterprise Tariff Loan Facility.

For more details, see the news release from the Canadian government: Support for the Canadian Steel Sector

Canada Adopts New Reciprocal Procurement Policy

On July 14, 2025, Canada’s new Interim Policy on Reciprocal Procurement takes effect, which changes the current approach to federal procurement. Under the new policy, foreign suppliers from jurisdictions that do not offer Canadian companies equivalent access to their government procurement markets will no longer be eligible to compete for most federal contracts in Canada.

The policy applies to all new competitive procurements above $10,000, with certain exceptions including national security, defence, sensitive operations, and contracts delivered entirely outside Canada. Existing contracts and solicitations are unaffected, but the policy will apply to renewals of supply arrangements and standing offers as of July 2026.

In practical terms, only Canadian suppliers and suppliers from countries with applicable trade agreements (and who continue to allow Canadian companies access to the procurement markets) will remain eligible to bid on covered federal procurements. Suppliers from non-reciprocal jurisdictions will be excluded unless a narrow exception, such as lack of domestic capacity or public interest, has been approved at a senior level.

The move is designed to protect Canadian businesses from asymmetric market access, strengthen domestic supply chains, and incentivize reciprocal treatment from international partners. It also signals Canada’s willingness to condition access to its federal procurement market on fair and equal terms.

For more details, see the official policy guidelines: Interim Policy on Reciprocal Procurement

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McCarthy Tétrault’s International Trade and Investment Law Group has advised, and continues to advise, a large number of clients in a variety of industries on how to navigate the uncertainty caused by the U.S. tariffs and the Canadian countermeasures. For assistance with addressing these changes or for further analysis on the legal and economic implications of the recent trade measures ― and assistance navigating them ― please contact our team.