What Does the 35 Percent US Tariff Apply to Exactly?

The United States raised its baseline tariff rate on Canada from 25 to 35 percent on Aug. 1, but amid a variety of tariffs imposed in recent months, it can be difficult to track which goods are actually hit with an import tax when crossing the border.

The 10-percentage-point increase appears significant, but there is an important nuance to what products these tariffs apply to, given that many Canadian exports are compliant with the United States-Mexico-Canada Agreement (USMCA) and are thus not subject to tariffs. 

Items that don’t meet the USMCA criteria are subject to the tariffs, including electronics assembled in Canada that use parts like circuit boards or screens imported from countries outside North America. Many medical devices that are manufactured in Canada but have parts imported from other countries are tariffed. Some machinery parts, including farm equipment, are also being tariffed by the United States.

The exact products subject to 35 percent tariffs are difficult to determine because the tariffs apply to specific products as opposed to entire categories.

Overall, the new 35 percent tariff applies to Canadian goods that do not comply with the USMCA because they don’t use enough materials or labour from North America. However, many products within key industries that do comply with USMCA rules are still subject to universal tariffs, like steel, aluminum, copper, energy, and some vehicles and auto parts. 

But in general, products that meet “rules of origin” categorization—meaning an adequate percentage of the product is made or assembled in North America—are covered under the USMCA and not subject to tariffs, as long as the importer makes a claim for preferential tariff treatment by filing a certification of origin.

Goods obtained or produced entirely within Canada, such as vegetables harvested in Canada or minerals mined in Canada, are considered USMCA-compliant and thus not subject to tariffs. Manufactured goods will also not be subject to tariffs if the final product is in a different category from that of the imported parts (such as wood from a tree outside of North America that is manufactured into a table in Canada), or if a certain percentage of the product’s value comes from work or materials in North America.

What Do the Numbers Say?

The Fitch Ratings credit agency has developed a tool to monitor tariffs and has calculated what Canadian companies have paid in tariffs across different categories, shedding light on which categories are subject to the highest tariffs.

For example, US$30 million was paid in tariffs for the export of electronics and parts in 2024. Based on annualized data from May 2025, that category will have jumped to US$420 million in tariffs paid to the United States in 2025, Fitch reports.

Similarly, for the category of scientific instruments, zero or negligible tariffs were paid in 2024, compared to US$220 million in 2025, using annualized May data.

Another sector that has been heavily impacted is machinery and parts. In 2024, the sector paid US$50 million in tariffs, while this year it could be US$890 million based on annualized May data.

Sectors like pharmaceuticals and chemicals have been mostly spared so far, with zero or negligible tariffs paid in 2024 compared to a projection of US$50 million this year. The Chemistry Industry Association of Canada estimates that Canadian chemical and plastics products are mostly compliant with the USMCA due to the “near-universal use” of North American materials.

Things could get rougher for pharmaceuticals, however, which have been identified by the Trump administration as a strategic sector. Many of those sectors deemed strategic have fallen under Section 232 tariffs, referring to Section 232 of the U.S. Trade Expansion Act of 1962, which the president can implement in order to adjust certain types of imports to address a national security concern. 

Those have so far included steel and aluminum, automobiles and parts, and copper. Autos have a USMCA exemption, whereas metals do not.

According to Fitch, Canada paid out a total of US$420 million in tariffs to the United States in 2024, compared to an annualized projection of US$6.8 billion in 2025 based on May 2025 trade data. Tariff revenue on Canadian steel and aluminum is projected to rise from US$10 million to US$3.3 billion, and tariff revenue from automotives and parts from US$80 million to US$900 million.

Overall Effective Tariff Rate

While Prime Minister Mark Carney on Aug. 1 said he was “disappointed” that the United States would be raising tariffs on Canada from 25 to 35 percent, he noted that the U.S. average tariff rate on Canadian goods was still one of the lowest globally due to many products being exempt under the USMCA.

At a press conference on Aug. 5, Carney also said over 85 percent of all Canada-U.S. trade continues to be “tariff-free, in both directions.”

According to Fitch, the U.S. effective tariff rate (ETR) for Canada, which refers to total duties as a percentage of total imports, was at 10 percent as of Aug. 1. The rating agency said Canada had an ETR of 7.5 percent before Trump raised the general tariff from 25 to 35 percent. Among America’s 21 largest trading partners listed by Fitch, of which Canada is the third-largest, Canada’s effective tariff rate is ranked the seventh-lowest as of Aug. 1.

Other organizations conducting economic analysis have calculated a different ETR for Canada. The Budget Lab, a policy research centre at Yale University, calculated that Canada has an effective tariff rate of 13.1 percent as of Aug. 1, compared to the world average of 18.3 percent. The Center for Global Development, meanwhile, calculated Canada’s effective tariff rate at 18.79 percent..