What Changed
Effective February 24, 2026Non-USMCA qualifying goods from Canada face a 35% combined tariff rate effective February 24, 2026 — the Section 122 rate (15%) plus an additional Canada-specific policy surcharge of 20% applied to goods that do not qualify under USMCA rules of origin. USMCA-qualifying goods from Canada remain at 0%.
Rate Changes
| Item | Before | After |
|---|---|---|
| Canada non-USMCA goods | 0% + MFN | 35% bilateral rate |
| Canada USMCA-qualifying goods | 0% | 0% (no change) |
Who's Affected
US importers sourcing goods from Canada that don't meet USMCA rules of origin requirements. This includes goods with insufficient North American content and transshipped goods from third countries through Canada. Canadian manufacturers whose products don't meet USMCA thresholds face a significant competitive disadvantage versus USMCA-qualifying Canadian goods.
Analysis
Canada Non-USMCA Goods Face 35% Combined Rate Under Section 122 (effective 2026-02-24). Non-USMCA qualifying goods from Canada face a 35% combined tariff rate effective February 24, 2026 — the Section 122 rate (15%) plus an additional Canada-specific policy surcharge of 20% applied to goods that do not qualify under USMCA rules of origin. Bilateral trade deals negotiated under IEEPA authority served as the primary mechanism for country-specific tariff rates during the pre-February 2026 period. When the Supreme Court struck down IEEPA tariff authority on February 20, 2026, the legal basis for these bilateral deals became uncertain. The administration has maintained the effective rates from these deals without formal reimplementation under new statutory authority, meaning the rates apply in practice but their legal durability is uncertain. The Section 122 proclamation uses bilateral deals as a "replace" mechanism: countries with negotiated deals at or above the Section 122 base rate have their bilateral rate applied instead of the standard Section 122 rate. Countries like India (18%) and Vietnam (18%) face higher bilateral rates than the standard Section 122 rate of 15%, creating differentiation in the tariff treatment of US trading partners. USMCA partners Canada and Mexico are the most significant exception: USMCA-qualifying goods enter the US at 0%, completely bypassing both Section 122 and most bilateral deal frameworks. The trade policy trend clearly favors USMCA-qualifying supply chains and penalizes imports from countries without formal preferential agreements with the United States.
Impact & Next Steps
Importers from countries with bilateral deal rates should verify current effective rates with their customs broker, as the legal framework for these deals remains uncertain following the IEEPA ruling. The most reliable tariff reduction strategy remains USMCA qualification for Canadian and Mexican-origin goods, which provides statutory 0% rates. For countries without bilateral deals — such as Australia, New Zealand, and most of Africa — the standard Section 122 rate of 15% applies unless a Section 232 exemption is available.