Trade War Briefing – September 21

The Huron Chamber of Commerce publishes this briefing to keep members informed of substantive developments in Canada’s trade dispute with the United States, including changes to tariffs, government programs, official announcements and economic data that may affect local businesses.

U.S. Targets Canadian Goods in Procurement as Canada Expands Investment and European Ties

The Canada-U.S. trade dispute expanded into another area this week, with the U.S. government directing officials to begin removing Canadian-origin goods from federal civilian procurement. Canada, meanwhile, announced a major expansion of immediate tax deductions for business investment and moved toward a potentially much deeper economic relationship with the European Union.

Those developments come as Canadian exporters prepare for the next major trade deadline on September 29, when U.S. import prohibitions are scheduled to replace tariffs on selected Canadian alcohol, dairy and motor vehicle products.

U.S. moves to restrict Canadian goods in federal procurement

On September 16, the U.S. administration issued a presidential memorandum directing federal officials to identify Canadian-origin goods in the federal civilian procurement system and take available steps to remove them or otherwise make them unavailable for purchase.

The directive applies to the federal civilian procurement system and instructs the U.S. Office of Management and Budget, U.S. Trade Representative and Federal Acquisition Regulatory Council to begin implementing the restrictions. It also directs U.S. officials to monitor Canadian procurement practices and consider further measures.

Importantly, the memorandum does not immediately create a blanket prohibition on every Canadian product purchased by every U.S. government agency. The extent of the impact will depend on how the directive is implemented through U.S. procurement rules and on existing legal and trade-agreement obligations. https://hcoc.ca/news-21914 

The U.S. administration says the action is a response to Canada’s Buy Canadian policies and provincial procurement practices, which it argues provide insufficient reciprocal access for U.S. suppliers. Canada’s procurement policies have increasingly emphasized domestic sourcing as part of the federal response to U.S. tariffs and broader trade uncertainty.

For Canadian businesses that sell directly to the U.S. government, or that supply American companies serving government contracts, the new directive adds another area of potential exposure beyond tariffs. Businesses with U.S. public-sector customers should watch for implementation details from individual agencies and changes to federal purchasing rules.

Canada proposes major expansion of immediate business deductions

Canada announced its own significant economic-policy change on September 15 with the proposed Productivity Mega Deduction.

The measure would allow businesses to immediately expense a much broader range of capital investments, meaning the eligible cost could generally be deducted in the year the asset becomes available for use rather than depreciated over a longer period.

The Department of Finance says roughly two-thirds of capital investment would qualify, up from about 15 per cent under the Productivity Super-Deduction introduced in Budget 2025. Eligible property would include most depreciable capital assets acquired on or after September 15, 2026, subject to specified exclusions. https://hcoc.ca/news-21927

Examples include machinery and equipment, software, computer equipment, fibre-optic infrastructure, patents, aircraft, certain vehicles, rail infrastructure and Canadian development expenses. Some buildings, goodwill and other specified assets would remain outside the new immediate-expensing rules.

The federal government estimates that the measure would reduce Canada’s overall marginal effective tax rate on new business investment from approximately 13 per cent to 6.4 per cent. That figure is a government estimate intended to compare the tax burden on an incremental investment across jurisdictions.

For businesses considering equipment purchases, automation, technology upgrades or other significant capital investments, the proposed acquisition date and detailed eligibility rules may become important to investment planning.

The measure is proposed federal tax policy and will require the necessary legislative and regulatory implementation.

Canada and EU discuss substantially deeper economic integration

Canada’s trade-diversification strategy also took a significant step forward during Prime Minister Mark Carney’s visit to Strasbourg.

In her September 16 State of the Union address, European Commission President Ursula von der Leyen proposed opening the door for Canada to become the European Union’s first “associate member.” The European Commission described the proposal as part of an “Alliance for the Future” that could extend well beyond the existing Canada-EU Comprehensive Economic and Trade Agreement. https://hcoc.ca/news-21939

The proposed relationship is not a conventional EU membership process, and the precise meaning of “associate member” has not yet been defined. Canada and the EU are instead beginning discussions about what a new relationship could include.

Areas identified for deeper cooperation include advanced manufacturing, technology, artificial intelligence, critical minerals, energy, defence industries, financial services, digital trade and economic security. Canada and the EU have also discussed greater mobility for people to work, study and travel between the two jurisdictions.

Canada already has extensive tariff-free access to the European market through CETA. The importance of the new discussions is therefore less about another conventional tariff agreement and more about whether Canada and the EU can create deeper integration in strategic industries and services.

Further work is expected ahead of the Canada-EU Summit scheduled for October 29 and 30.

September 29 import prohibitions are the next major U.S. deadline

The next significant implementation date in the bilateral trade dispute remains September 29.

Beginning at 12:01 a.m. Eastern time that day, selected Canadian alcoholic beverages, dairy products and motor vehicle products that currently face 50 per cent Section 338 tariffs are scheduled to be prohibited from entering the United States altogether.

The U.S. Trade Representative confirmed the measures earlier this month as part of a package combining targeted import bans with changes to the underlying Section 338 tariffs. https://hcoc.ca/news-21952

For affected exporters, this is materially different from a tariff. A tariff increases the cost of entering the U.S. market, while an import prohibition prevents covered products from entering the market at all.

The restrictions apply only to products identified in the relevant U.S. tariff schedules rather than automatically covering every Canadian alcohol, dairy or motor vehicle product. Businesses in those sectors should therefore confirm their HTS classification and the applicable U.S. rules before the September 29 implementation date.

Chamber tariff resources remain current

The Huron Chamber’s Consolidated Canada-U.S. Trade War and Tariff Guide has been updated to reflect the current bilateral tariff landscape.

The guide replaces the Chamber’s earlier separate tariff guides and brings U.S. Section 232 and Section 338 measures, Canadian counter-tariffs, detailed HTS and HS product tables, current exclusions and upcoming import restrictions together in one resource.

The Chamber’s U.S. Trade War page also includes information on federal tariff-relief programs, financing and liquidity supports, export diversification and other resources for businesses affected by the dispute. https://hcoc.ca/us-trade-war

The Chamber will continue updating the guide and Trade War page as tariff programs, restrictions, relief measures and negotiations change.

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