Canada's Counter-Tariffs Are an Input Tax
Over 300 of the 874 tariff lines taking effect September 8 are steel and aluminum. This falls on Canadian manufacturers buying inputs, not on Canadian households buying finished goods. Currently, Canada's tariff-rate quotas limit how much steel can be imported from other countries without facing the 50% tariff. Non-FTA countries are capped at 20% of their 2024 import volumes, and FTA partners are capped at 75%. So Canadian tariffs are very high even on US substitutes. Components, fortunately, do remain duty-free from Europe and Japan.
1What happened
- Aug 22, 2026 — the US imposed 50% tariffs on $27.6B of Canadian goods under Section 338 of the Tariff Act of 1930. Applies even to CUSMA-compliant goods, with no expiry date.
- Aug 25, 2026 — Finance Canada published the retaliation list: 874 tariff items, $27.6B of US imports, at 15%, 25% or 50% — each rate mirrors the US rate on the corresponding good.
- Effective 12:01 a.m., September 8, 2026. Goods already in transit on that date are exempt.
- Applies only to goods marked US-origin under the CUSMA marking regulations.
- Covers roughly 7.3% of Canada's imports from the US at 2024 levels. Desjardins estimates ~$7B/yr in tariff revenue if buying patterns don't change.
- Paired with a $7.5B support package for workers and businesses, including a $2B Canada Strong Diversification Fund.
- Canada's pre-existing counter-tariffs on autos remain separately in force.
2This is an input tax
Of the 874 lines, more than 300 are steel and aluminum. Fastener code 7318 sits at 50%. Batteries (8507) and glass (Ch. 70) are notable absences from the list.
| HS Chapter | Category | Items | Rate |
|---|---|---|---|
| 72 | Raw & semi-finished steel — ingots, billets, flat-rolled sheet/coil, bar, rod, wire, rail | 134 | 50% |
| 73 | Fabricated steel — tube, pipe, structural shapes, fasteners (7318: screws, bolts, nuts, rivets, washers) | 140 | 50% |
| 76 | Aluminum — unwrought, alloys, bar, wire, plate/sheet, foil, tube, structures, door/window frames | 29 | 50% |
| 44 | Wood — softwood lumber (4407) | 18 total | 25% |
| 44 | Wood — plywood / LVL (4412) | 50% | |
| 83 | Base-metal fittings, hinges, mountings | 4 | 25% |
| 84 | Machinery — HVAC & parts (8415) | 50 total | 15–25% |
| 84 | Machinery — refrigerators/freezers (8418) | 25% | |
| 85 | Electrical — insulated wire & conductors (8544.49) | 16 total | 25% |
| 94 | Furniture and lighting — light fixtures (9405) | 22 total | 50% |
| 39 | Plastics — vinyl floor coverings (3918) | 6 | 50% |
3The price gap predates the tariff
US metals were already the most expensive in the world before September 8. The surtax widens an existing gap rather than creating a new one.
Hot-rolled coil, regional assessments, Q2 2026 (IMARC, June, USD/tonne):
| Origin | Price |
|---|---|
| USA | $1,220 |
| Germany | $792 |
| Malaysia | $583 |
| USA + 50% surtax (notional*) | ~$1,830 |
Cold-rolled coil, same source and period (USD/tonne):
| Origin | Price |
|---|---|
| USA | $1,377 |
| Germany | $935 |
| Brazil | $756 |
| India | $740 |
| China | $592 |
*Notional arithmetic, not a landed-Canada quote — see caveats.
Aluminum premium over LME cash (USD/tonne):
| Market | Premium |
|---|---|
| US Midwest, Sept contract (as of Aug 20, 2026) | ~$2,095 (95¢/lb, Platts) |
| US Midwest, record (Jan 2026) | ~$2,195 (99.55¢/lb — first time over $1/lb) |
| Japan, Q3 2026 settlement | $395 (highest Q3 in over a decade) |
| Rotterdam, duty-unpaid (Jan 16, 2026) | ~$293 |
- All-in US primary aluminum pushed above $5,000/tonne earlier in 2026.
- US aluminum import volumes fell ~35% over nine months after Section 232 went to 50%.
- On Aug 20, 2026 the Midwest premium fell 8.2% when the administration signalled it would lower tariffs on some Canadian aluminum; October and November contracts dropped more than 12%. Most of that premium is policy, not scarcity.
4Why you can't just re-source metal
Canada's steel tariff-rate quotas ration supply from every origin, so cheaper foreign coil is only cheaper up to a quarterly permit limit:
- Non-FTA countries: quota set at 20% of 2024 import volumes.
- FTA partners other than the US and Mexico: quota set at 75% of 2024 volumes.
- Over quota: 50% surtax. The CUSMA (US/Mexico) carve-out remains.
- Administered first-come, first-served via Shipment-Specific Import Permits from Global Affairs Canada. Quotas reset quarterly and unused quota generally expires.
- Since Dec 26, 2025, a separate 25% surtax applies to steel derivative products from all countries: doors, windows, wire, fasteners, bridges, wind towers.
- A separate 25% surtax applies to non-US steel melted and poured in China, or of unknown origin.
- These are non-stackable — only one steel surtax applies per scenario, by order of precedence. See Canada's tariffs: Steel and aluminum for the mechanics.
A quota binds on volume, rather than price, so it distorts an input market differently than a duty does. A duty raises the landed cost by a known percentage and has predictable market effects. A quota limits supply, so the price effect is secondary, and not directly calculable. Price mechanics break down once the quarterly allocation is consumed, leaving the marginal buyer with nothing left to buy until next quarter.
5Where substitution is actually clean
No quota, and CETA/CPTPP equivalents from Europe and Japan land duty-free:
- Sensors, safety devices, cordsets, terminal blocks
- Grippers / end-of-arm tooling, vision, motion control
- Insulated wire and cable
- General machinery and electrical equipment
The switching cost here is qualification and lead time, not price. The counterexample: PLCs, servo drives, and VFDs are not worth switching. Platform lock-in means the switching cost dwarfs the duty.
6Caveats
- The HRC/CRC figures are domestic market assessments, not landed-Canada prices. Freight ($20–120/tonne depending on route), the CAD/USD cross, and duty all move the real number. Read the $1,830 figure as arithmetic, not a quote.
- On steel and aluminum, the September 8 rate raises the existing 25% counter-tariff to 50% — it does not stack on top of it.
- The Rotterdam premium figure is from January 2026 and may be stale.
- Remission exists — the framework remains open for exceptional relief, and Canadian Manufacturers & Exporters has said it will be critical for small manufacturers with limited ability to change supply chains. But it's case-by-case and refunds can take months, so it isn't a plan.
Sources
- Finance Canada. List of products from the United States subject to counter-tariffs effective September 8, 2026. Aug 25, 2026.
- Finance Canada. Canada announces targeted countermeasures and substantive support for workers and businesses in response to U.S. tariffs. Aug 25, 2026.
- Government of Canada. Canada's tariffs: Steel and aluminum. TRQ mechanics.
- RV Industry Association. Canada Releases Retaliatory Tariff List. Line-by-line chapter analysis of the 874 items. Aug 25, 2026.
- Osler. Canada further shuts its market to steel imports. TRQ reductions effective Dec 26, 2025.
- IMARC Group. Hot-rolled coil pricing report and cold-rolled coil pricing report. Q2 2026 regional assessments.
- S&P Global Commodity Insights. Platts aluminum premium assessments — US Midwest, Rotterdam, and Japan.
- The Globe and Mail. Ottawa announces retaliatory tariffs on $27.6-billion of U.S. products. Aug 25, 2026.