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That exemption, however, does not apply to Section 232 tariffs with the sole exception of auto parts where CUSMA exemptions temporarily apply until administrative challenges are resolved. To-date, these Section 232 tariffs have accounted for the bulk of U.S. duties charged on Canadian exports.  

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For details on the implications of the announced and looming U.S. Section 232 tariffs:

Softwood lumber

• Softwood lumber products targeted with new 10% tariffs accounted for 1.3% of Canadian exports to the U.S. in 2024.

• The latest tariffs apply globally, but disproportionately impact Canada as they stack on top of anti-dumping duties already imposed on lumber producers in August.

• With 75% of softwood lumber imports coming from Canada in 2024, the U.S. is highly reliant on Canada for these products. Sourcing from alternative markets won’t be easy due to geographical and logistical barriers. American buyers will face higher prices as they absorb the additional costs.

Kitchen cabinets

• Tariffs of 25% on kitchen cabinets are significant for Canadian manufacturers. About a fifth of Canadian kitchen cabinets were exported in the past.

• U.S. importers may pivot to other sources. Canada’s share of U.S. imports for these products is smaller (about 7% in 2024). Canada faces a higher tariff rate compared to Europe, which accounted for 8% of U.S. imports in 2024 and will see a new 15% tariff.

• The broader economic impact is limited since the sector as a whole comprises only 0.3% of Canadian exports to the U.S. in 2024.

Pharmaceutical products and heavy vehicles

• Tariffs on pharmaceutical products and heavy trucks remain unclear, but threats loom.

• Pharmaceutical exports to the U.S. made up about 1.3% of Canadian exports in 2024, but the final impact would hinge on whether generic drugs are exempted since they take up a substantial 79% of Canadian drug exports to the U.S. Exemptions could sharply limit damage to this sector.

• Heavy trucks (5 short tons and above) accounted for 0.6% of Canadian goods exports to the U.S. in 2024, and 8% of total motor vehicle exports to the U.S.

• U.S. tariffs so far have been applied to the non-U.S. content of finished vehicles. Statistics Canada estimates that over 40% of Canadian heavy truck exports to the U.S. in 2024 were U.S. content (intermediate parts imported earlier in the production process), 30% were Canadian content with the rest from other countries.

Suspension of the de minimis treatment

The recent U.S. global suspension of the de minimis treatment (duty free access for low-value imports) following terminations for China and Hong Kong in May is concerning for Canadian retail exporters.

De minimis entries, which include U.S. goods imports valued under US$800 per person per day have ballooned in the last decade as e-commerce expanded. Total entries surged from 123 million in 2014¹ to 1.4 billion in 2024, according to U.S. Customs and Border Protection (CBP) data.

CBP data suggests the average value of de minimis entries was US$47.50 in 2024 (well below the US$800 value threshold), indicating they are weighted toward lower-value household goods.

How the end of de minimis impact trade statistics and consumer prices:

• Since de minimis imports were not subject to duties, they are largely absent from U.S. Census Bureau trade data. That means the elimination won’t have a significant impact on the trade balance.

• Still, they have grown to represent a sizable share of consumer spending. In 2024, de minimis imports accounted for more than 1% of total U.S. household goods consumption, 5.6% of e-commerce sales, and 8.3% of consumer goods imports (excluding food and auto).

• The end of de minimis will push up U.S. consumer costs as they turn to pricier domestic alternatives instead of absorbing tariffs costs on very low-value imports. Lower-income U.S. households will likely see a bigger impact, having relied more on affordable goods from e-commerce platforms.

• For Canadian exporters, low-value exports to the U.S. may still qualify for duty-free status if they comply with CUSMA requirements. However, the added administration and brokerage costs will erode already-thin profit margins on low-value items, or worse, force some exporters to exit the U.S. market altogether.

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About the Author

Claire Fan is a Senior Economist at RBC. She focuses on macroeconomic analysis and is responsible for projecting key indicators including GDP, employment and inflation for Canada and the US.

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