Former Bank of Canada Governor Mark Carney said Canada has strong measures against forced labour and most trade will avoid proposed U.S. tariffs.
The situation is critical because the U.S. is threatening to impose levies on dozens of trading partners [2], which could disrupt North American supply chains if not mitigated by existing trade agreements.
The proposed tariffs stem from a report released late Tuesday by the office of U.S. Trade Representative Jamieson Greer [1]. The USTR accused Canada, Mexico, the United Kingdom, and several other countries of failing to "effectively enforce" import bans on forced-labour goods [1].
In response to these allegations, the Trump administration plans to impose new tariffs on these partners over claims that they are not policing forced-labour in their supply chains [2]. Specifically, a 10% tariff on Canadian goods is being considered [1].
Carney said the impact on the Canadian economy would be limited. He said the latest proposed tariffs will not impact the majority of trade with the U.S. because CUSMA-compliant goods would be exempted [1].
The Canada-U.S-Mexico Agreement (CUSMA) provides the framework for trade between the three nations. Because most Canadian exports adhere to these standards, Carney said the exemption serves as a shield against the broader tariff initiative [1].
While the U.S. continues to allege enforcement gaps in how Canada monitors its imports, the Canadian government maintains that its current safeguards are robust enough to meet international standards.
“The latest proposed tariffs won't impact the majority of trade with the U.S. because CUSMA‑compliant goods would be exempted.”
This dispute highlights a tension between the U.S. administration's use of tariffs as a tool for human rights enforcement and the legal protections provided by CUSMA. If the U.S. follows through with the 10% levy, the economic fallout will depend entirely on how strictly the U.S. defines 'CUSMA-compliant' goods. If the exemption is broad, the tariffs serve as a political warning; if narrow, they could trigger a significant trade conflict over supply chain auditing.
