What to Know About the New US Tariffs on Canada Over Forced Labour Concerns

A gantry crane operator removes a container from a cargo ship while docked at port, in Vancouver, on July 16, 2024. The Canadian Press/Darryl Dyck

News Analysis

A few days after threatening a wave of counter-retaliatory tariffs on Canada, the U.S. administration imposed a separate new tariff of 10 percent on the country.

The new tariff, which took effect on July 24, is part of a broader U.S. trade action targeting 60 trading partners that Washington says do not effectively prohibit or enforce bans on goods made with forced labour.

The United States Trade Representative (USTR) launched an investigation into U.S. trading partners in March under Section 301 of the Trade Act of 1974. The section is designed to address foreign trade practices deemed unfair.

The move came after the U.S. Supreme Court in February struck down global tariffs imposed under emergency powers, saying U.S. President Donald Trump had overstepped his authority.

To maintain his tariff regime, Trump shortly after used another Trade Act tool, Section 122, to impose a universal tariff of 10 percent for 150 days. The use of this trade measure is also being challenged in court.

The Section 301 tariffs, which took effect July 24, were implemented at the same time as the Section 122 tariffs expired.

“President Trump recognizes that decades of moral suasion have not eradicated forced labor from global supply chains,” Trade Representative Jamieson Greer said in a statement announcing the new tariff on July 23. Greer said the measure addresses both human rights abuses and “distortive” trade practices.

The 10 percent tariff was imposed on U.S. trading partners deemed not to be effectively enforcing prohibitions on goods made with forced labour. This includes Canada, the European Union, Ecuador, Indonesia, Mexico, and Pakistan.

Canada and Mexico will benefit from an exemption for goods covered by the Canada-United States-Mexico Agreement (CUSMA) on free trade. Over 85 percent of goods have been able to cross the border tariff-free amid the current trade conflict.

Fifty-four other economies face a higher tariff, of 12.5 percent, for allegedly not imposing or effectively enforcing a prohibition. Those include Western economies such as Australia and the United Kingdom, as well as countries that have faced longstanding allegations of widespread forced labour, including China.

The U.S. trade action in total covers 99.4 percent of goods imported by the United States, according to the USTR.

Canada-U.S. Trade Minister Dominic LeBlanc reacted to the new tariff by saying it was “not unexpected” given that the U.S. administration had signalled the Section 122 global tariffs would be replaced.

LeBlanc added that Canada shares the U.S. objective to ensure supply chains are free from forced labour.

“That is why Canada has one of the world’s most robust frameworks to prevent and address forced labour, backed by strong legislative and enforcement measures,” he said, adding that new legislation aims to reinforce the framework.

The new U.S. trade action adds another piece to the puzzle for the Canadian government, which is trying to avoid Trump’s sectoral tariffs on key industries like metals and autos as it deals with a new threat of a 50 percent tariff on a variety of Canadian goods.

The Trump administration announced the 50 percent tariff, set to come into force Aug. 19, in response to Canadian retaliatory actions on U.S. alcohol and autos, and to target Canada’s supply management system on dairy products.

Prime Minister Mark Carney said he spoke with Trump this week on the issue and they agreed to “intensify” negotiations. Along with addressing the different tariffs and counter-measures, the two sides need to work on the CUSMA renewal, which the United States rejected earlier this month, citing a need for improvements.

Canada Rejects Tariff Rationale

After the Section 301 investigation was launched in March, Canada argued it has a “robust” regime to prevent the importation of goods made from forced labour.

“Canada respectfully submits that there is no basis for the imposition of additional Section 301 duties on Canadian goods,” the Canadian government told the USTR on July 6 as part of a consultation process.

Ottawa made its case in writing but did not send a representative to defend its position during the Section 301 hearings in Washington earlier this month. A minority of targeted countries sent delegates. Meanwhile Mexico, a continental free trade partner, sent its economy minister.

In the weeks preceding the hearings, the Liberal government introduced new legislation to reinforce provisions against forced labour. Bill C-35, the Ban on Importing Goods Made with Forced Labour Act, was tabled in the House of Commons on June 12.

The bill would allow the foreign affairs minister to establish a list of goods suspected of being produced with forced labour. The onus on proving that goods are made without forced labour would shift to the importers. Currently, the Canada Border Services Agency (CBSA) has to prove that a shipment breaks the rules.

Canada is obliged under CUSMA to prevent the importation of goods made with forced labour. Legislative changes were brought as the deal came into force in July 2020 to ensure compliance.

The impact on stopping goods made with forced labour from entering Canada has been minimal, however.

CBSA says that, as of July 9 of this year, it intercepted 51 shipments suspected of containing goods made with forced labour. These included red dates, solar panels, auto parts, textile goods, agricultural products, and frozen seafood. Out of those, only two shipments—of textile products and seafood—were blocked.

“The remaining shipments were either permitted entry upon receipt and review of additional supply chain information, abandoned by the importer, or re-exported out of Canada prior to the CBSA making a formal determination,” CBSA spokesperson Rebecca Purdy told The Epoch Times.

From 2022 to 2026, U.S. Customs and Border Protection denied over 24,000 shipments from entering the United States in accordance with the Uyghur Forced Labour Prevention Act, a law to prevent the importation of goods made with Uyghur forced labour. Uyghurs are an ethnic and religious minority from Western China persecuted by the communist regime.

Global Affairs Canada has been concerned in the past about the widespread persecution of Uyghurs and other minorities in China, but it remains to be seen whether Bill C-35 will be used to target China amid Ottawa’s push to deepen relations with Beijing.

Foreign Affairs Minister Anita Anand has declined to comment on what items could make it to the list of prohibited goods.

Opposition MPs have asked Anand whether Chinese electric vehicles could be added to the list of prohibited goods, as Ottawa plans to allow nearly 300,000 Chinese-made EVs into Canada at a preferential tariff rate over the next several years.

Human Rights Watch says Uyghur forced labour is present in the Chinese EV supply chain.