A recent executive order from the White House once again shifts the global trade spotlight to the northern border. Targeting specific goods imported from Canada, the United States has decided to raise additional tariffs from 25% to 35%, while also introducing severe penalties for transshipment. This move is not just a tariff increase, but a clear signal of deeply intertwining trade policy with national security and public health crises.

Tariff Hike: A Firm Stance from 25% to 35%

According to this executive order issued on July 31, 2025, the additional ad valorem duty rate imposed by the United States on certain Canadian products will increase from 25% to 35%.

• Effective Date: The new tariff rates will take effect on August 1, 2025, at 12:01 a.m. eastern daylight time.

• Reason: The White House attributes this move to Canada's "lack of cooperation" in stemming the flood of fentanyl and other illicit drugs across the northern border, as well as Canada's retaliatory actions against previous U.S. tariff measures. This action is deemed necessary to address the "emergency" declared in Executive Order 14193.

Strict Crackdown on Transshipment: 40% Punitive Tariff

The executive order specifically emphasizes the crackdown on transshipment, marking another firm stance in U.S. trade enforcement:

• 40% Punitive Tariff: For Canadian goods that do not qualify as originating under the United States-Mexico-Canada Agreement (USMCA) and are determined by U.S. Customs and Border Protection (CBP) to have been transshipped to evade applicable duties, an additional 40% ad valorem duty will be imposed.

• Additional Penalties: In addition to the 40% tariff, these goods will face other applicable fines and penalties, and CBP shall not allow for mitigation or remission of these penalties.

• Public Information: To enhance transparency and deterrence, the Secretary of Commerce and the Secretary of Homeland Security will publish a list of countries and specific facilities used in circumvention schemes every six months.

Exemptions and Exceptions: The Complexity of Policy

The executive order also clarifies some special circumstances:

• USMCA Goods Exemption: Goods that qualify as originating under USMCA rules will continue to enjoy tariff exemptions.

• "De Minimis Exemption": Canadian goods that would otherwise qualify for the de minimis exemption will no longer be eligible if determined to have been transshipped. However, if the goods comply with regulations and are not deemed transshipped, they may still qualify for the exemption. Nevertheless, this exemption will cease to be available for such articles once adequate systems are in place to fully and expediently process and collect applicable tariff revenue.

Conclusion and Outlook

This executive order clearly indicates that the United States is deeply linking public health crises and national security issues with trade policy. Through tariff increases and a strict crackdown on transshipment, the U.S. seeks to exert greater pressure on Canada to take more action in border control and enforcement.

For businesses engaged in trade with Canada, this means:

1. Higher compliance costs and risks, especially for those with supply chains involving transshipment.

2. Increased urgency for supply chain review and adjustment.

3. The era of "zero tariffs" is over, and even low-value goods may face tariff risks.

This undoubtedly serves as another example of the increasingly complex and fragmented global trade landscape. In such an environment, businesses must be more forward-looking to navigate evolving policy challenges.

What are your thoughts on the U.S. linking trade policy with national security? Feel free to share your views in the comments section!