Modifications to the scope of Canadian products subject to 50% Section 338 tariffs: On 23 October, President Trump issued a Presidential Proclamation modifying the scope of Section 338 tariffs on certain imports from Canada, regardless of USMCA compliance, which will take effect on 30 October. Below is an overview of the food processing and packaging machinery which is no longer in scope, and which continue to be subject to 50% additional tariffs.
Machinery no longer in scope/tariffs removed:
Machinery still in scope/subject to tariffs:
Before this latest modification, Section 338 tariffs were implemented for 2 months (22 August to 29 October) and generated upwards of $71 M in additional tariff costs for $135 M in imports of in scope machinery. It is anticipated that the materialized tariff cost impact may have been less as 50% tariffs made imports cost-prohibitive, causing importers to forgo imports entirely.
Removal of certain machinery from the scope of these 50% tariffs makes importing a viable option and creates approximately $9 M in tariff cost avoidance for anticipated imports of machinery no longer impacted by these tariffs and imported from 30 October to 31 December.
Looking ahead, the Trump Administration has indicated that negotiations with Canada have “picked up” and there could be a deal before the end of the year. However, there is no certainty that a deal is truly imminent as discussions have previously collapsed in the last minute and it is not clear if a potential deal would include additional tariff relief for Canadian machinery. As such, the US-Canada trade relationship is likely to continue fluctuating and additional tariff relieve is not certain until officially published by the White House.
