Why It Matters

President Donald Trump’s escalating tariff campaign against Canada has transformed one of the largest U.S. trading relationships as the administration shifts among several trade laws to impose new duties and Canada responds with retaliatory tariffs. Canada was the second-largest U.S. goods and services trade partner in 2025, with the U.S. importing $454 billion and exporting $426 billion that year alone.

A Congressional Research Service (CRS) report published August 28 examines escalating trade tensions between the two countries as the Trump administration uses several statutory authorities to impose tariffs on Canadian goods and Canada retaliates with tariffs of its own. For Congress, the report documents how executive tariff authority has expanded beyond traditional trade remedies, raising questions about the scope of presidential power to reshape commerce without legislative approval.

The Big Picture

The tariff campaign began in March 2025, when President Donald Trump imposed 25 percent tariffs on most Canadian imports and 10 percent on energy and potash under the International Emergency Economic Powers Act (IEEPA), citing a national emergency related to illicit fentanyl trafficking at the border. That authority collapsed in February when the U.S. Supreme Court ruled that IEEPA does not give the president authority to impose tariffs.

The administration quickly pivoted to Section 122 of the Trade Act of 1974, imposing a 10 percent, 150-day temporary import surcharge on most U.S. imports, including those from Canada. When that surcharge expired in July, the administration imposed a 10 percent tariff on most Canadian goods under Section 301 following a U.S. Trade Representative investigation into countries' failure to impose and effectively enforce prohibitions on imports produced with forced labor.

In August, after the U.S. and Canada failed to finalize an agreement during bilateral talks, Trump imposed 50 percent tariffs on certain Canadian goods, including alcoholic beverages, dairy, paper and wood products, and other goods, under Section 338 of the Tariff Act of 1930. The tariffs marked the first time the U.S. expressly cited Section 338 to impose tariffs.

Canada initially responded to the IEEPA tariffs with 25 percent tariffs on approximately US$22 billion worth of U.S. imports. It imposed additional 25 percent tariffs on approximately US$22 billion worth of U.S. imports in response to sectoral tariffs. Most recently, Canada announced retaliatory tariffs on US$20 billion worth of U.S. goods starting Sept. 8 in response to the Section 338 tariffs.

In 2025, the U.S. imposed duties on about 15 percent of U.S. imports from Canada by value, totaling about $56 billion. The calculated duties on those imports reached $10 billion, compared with $0.4 billion in 2024. Canada is also the largest supplier of U.S. energy imports and a top U.S. source of critical minerals.

Political Stakes

Congress has a constitutional role in U.S. trade policy and may consider whether to bolster or curb presidential tariff authorities. Lawmakers could also direct the administration or agencies such as the U.S. International Trade Commission to assess the economic effects of U.S. tariffs and Canadian retaliatory measures.

The U.S.-Mexico-Canada Agreement (USMCA) joint review adds another layer to the dispute. Canada and Mexico announced in July that they want to renew the agreement, while the U.S. declined to renew it. The countries remain engaged in the review process, which could result in significant changes to the agreement. If USMCA is not renewed, it is set to expire in 2036.

Canada's dairy policies remain another point of contention. Canada enacted legislation in June 2025 preventing its government from increasing dairy tariff-rate quotas or reducing over-quota tariffs in future trade negotiations, potentially limiting its ability to make concessions sought by the U.S.

The Bottom Line

The escalating tariff dispute comes as the U.S., Canada, and Mexico determine the future of USMCA. Congress could seek to bolster or curb presidential tariff authority, conduct additional oversight of the economic effects of the tariffs, pursue changes through the USMCA review or codify specific tariff rates on Canadian imports.

The unresolved question is how Congress will exercise its constitutional role in trade policy as the executive branch increasingly relies on multiple statutory authorities to impose tariffs.

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