Amid escalating global trade turbulence, particularly aggressive U.S. sectoral tariffs on steel and aluminum, the Government of Canada, under Prime Minister Mark Carney, has issued a comprehensive and stringent new trade mandate to protect its domestic steel and lumber industries. The announcement on November 26 significantly expands Canada’s protective measures signaling a definitive shift toward prioritizing domestic production and managing market disruption.
The Two-Pronged Approach: Quotas and Derivative Tariffs
The government’s approach simultaneously restricts import volumes and expands the tariff base:
- Tightened Steel Import Quotas:
- Non-FTA Partners: The volume of steel imports permitted at a lower tariff rate for countries without a Free Trade Agreement (FTA) with Canada will be sharply reduced from 50% to 20% of their 2024 import levels.
- Non-CUSMA FTA Partners: Quotas for allied FTA countries (excluding the U.S. and Mexico) will also be reduced from 100% to 75% of 2024 levels.
- Over-Quota Surtax: Any imports exceeding these new thresholds will be subject to a steep 50% surtax, effectively penalizing trade diversion from the U.S. market and shielding Canadian producers from “artificially low-priced imports.”
- Global 25% Tariff on Steel Derivatives:
- Canada will implement a new, global 25% tariff on the full value of imported steel derivative products, mirroring but broadening a similar U.S. measure.
- This measure targets approximately $10 billion in imports across categories like fasteners, wire, doors, windows, and large structures (e.g., prefabricated buildings), regardless of the derivative product’s country of origin.
- Key Distinction from U.S. Policy: Canada’s application of the derivative tariff is significantly broader and more punitive than the U.S. approach. While the U.S. Section 232 tariffs on derivatives are often calculated only on the value of the steel or aluminum content within the imported product, the new Canadian tariff applies to the entire value of the imported item. For instance, if a $5,000 prefabricated building contains $1,000 worth of steel, the U.S. might tariff the $1,000 steel content, while Canada’s tariff will apply to the full $5,000 value of the finished building.
Impact and Enforcement
The new policy also signals a shift in government support and trade enforcement:
- Remission Relief Ends: The broad-based horizontal remission of retaliatory duties on U.S. steel used in Canadian manufacturing (excluding auto parts and aerospace) will expire on January 31, 2026. This move will force domestic manufacturers, who relied on imports for over 60% of their steel needs in 2024, to aggressively pivot toward Canadian-sourced steel.
- Enforcement Focus: The Canada Border Services Agency (CBSA) will receive new resources, including a dedicated steel trade compliance team and an expanded Market Watch Unit, to proactively combat steel dumping and ensure strict compliance with the Special Import Measures Act.
- Domestic Preference Policy: The government will implement a new ‘Buy Canadian Policy’ requiring federal contracts over $25 million to prioritize Canadian steel and lumber, further strengthening domestic demand for the protected sectors.
Prime Minister Carney stated the measures are designed to prevent the Canadian market from being “overwhelmed with cheap steel” and allow Canadian steel producers to compete fairly amidst global overcapacity and disrupted supply chains, Prime Minister Carney New Measures – Canada Steel Announcement .
Importers across various sectors must now reassess supply chains and potential cost liabilities ahead of the December 26, 2025, implementation date. The Prime Minister’s announcement sets the stage for the upcoming changes; the actual impact will be aligned once the pending regulations are finalized. We are monitoring these developments and will share updates as soon as the Agency confirms the regulatory details affecting the imports into Canada.
The Department of Finance is in the final stages of work on implementing Orders in Council(s) how the new measures will be applied, and will share additional details once approved by Cabinet.