Canada Argues Against U.S. Forced Labour Tariffs Amid New Legislation

The Canadian government has formally told the Trump administration that recent legislative steps strengthening the prohibition of forced labour in supply chains should exempt Canada from new tariffs proposed under Section 301 of the U.S. Trade Act of 1974. In a written submission delivered to the United States Trade Representative’s (USTR) office, Ottawa stated it “remains committed to working closely with the United States to eradicate forced labour from global supply chains,” and that Canada’s new and existing measures present “no basis for the imposition of additional Section 301 duties on Canadian goods.”

This submission is one of more than 1,500 received by the USTR from countries and industry groups ahead of a three-day hearing in Washington that will review U.S. President Donald Trump’s use of Section 301 to expand tariffs on foreign goods. The U.S. administration is conducting trade investigations into 60 countries, including Canada, after USTR Jamieson Greer announced the initiative in March. Greer indicated that Canada, Mexico, the United Kingdom, and other countries should face 10 per cent tariffs for insufficient enforcement of forced labour bans, with a 12.5 per cent tariff recommended for countries with only partial or no such bans.

Canada has previously enacted legislation requiring annual supply chain reports to the federal government aimed at curbing forced labour. However, in June, the federal government tabled Bill C-35, which would strengthen enforcement. This legislation would create a public list of products linked to forced labour in specified regions, drawing on intelligence from embassies and authorities. Under the bill, importers would be required to provide evidence that goods from listed regions were not produced using forced labour.

Ottawa’s submission highlighted these new measures as evidence of its commitment to supply chain transparency and bilateral cooperation with the United States. The government stated that the combination of existing prohibitions, new legislative efforts, and ongoing Canada-U.S. collaboration addresses concerns raised by the USTR regarding forced labour.

Canadian business and industry groups also sent submissions to the U.S. trade office, arguing that tariffs are not the most effective mechanism for eliminating forced labour, particularly given the deeply integrated nature of North American supply chains. Matthew Holmes, Vice President of the Canadian Chamber of Commerce, urged the USTR to assess Canada separately under Section 301, and to suspend consideration of the proposed 10 per cent tariff while the impact of Canada’s enforcement reforms is evaluated. Holmes advocated for “targeted bilateral enforcement co-operation over broad country-level measures.”

The Section 301 investigations follow the U.S. Supreme Court’s decision earlier in the year to strike down President Trump’s preferred tariff tool, previously deployed for “Liberation Day” tariffs and duties related to fentanyl on Canada, Mexico, and China. In response, Trump imposed a 10 per cent worldwide tariff under Section 122 of the Trade Act of 1974, a measure that expires after 150 days—at the end of July—unless Congress intervenes to extend it.

The Canada-U.S.-Mexico Agreement (CUSMA) has protected Canada from many of Trump’s previous tariffs. However, Canadian industries such as steel, aluminum, automobiles, and cabinetry remain subject to separate U.S. duties. Many Canadian stakeholders submitting to the U.S. trade office have called for CUSMA exemptions to be maintained regardless of the outcome of the current investigation.

Keith Currie, president of the Canadian Federation of Agriculture, expressed concern that the proposed tariffs could be applied to goods that are compliant with CUSMA, warning of “serious and unintended consequences.” Currie noted that “Canada-U.S. agricultural trade is highly integrated and depends on predictable, timely cross‑border movement,” and even modest tariffs could disrupt supply chains, increase input costs, and reduce competitiveness. He also highlighted that many agricultural products cross the border multiple times during processing, amplifying the potential impact. According to Currie, these effects would increase pressure on farmers and agri‑food businesses in both countries.

The National Foreign Trade Council, a U.S.-based association of business enterprises, also advocated for CUSMA exemptions and argued that “broad-based tariffs are a blunt, punitive measure that is unlikely to be an effective tool for eliminating forced labour.” The group emphasized that comprehensive tariffs penalize all goods from a country, including products from companies that have invested significantly to remove forced labour from their supply chains.

Canadian and U.S. business groups have generally supported targeted enforcement and bilateral cooperation over broad punitive tariffs. They argue that such measures would be more effective in addressing forced labour concerns without harming the tightly linked North American market. The integrated nature of supply chains means that disruptions caused by tariffs could have far-reaching consequences beyond the intended policy objectives.

The outcome of the USTR’s Section 301 investigations and the associated hearings will determine whether the proposed tariffs are implemented and whether exemptions for Canada under CUSMA are maintained. The hearings occur as the temporary Section 122 tariffs approach their expiry at the end of July, adding urgency to the ongoing trade policy discussions between the two governments.

For Canadian exporters and industries, the stakes include potential increased costs, supply chain disruptions, and reduced competitiveness in the U.S. market. For the U.S., the policy questions centre on how best to enforce forced labour bans without negatively impacting domestic industries and trade relationships. The Canadian government and its industry partners continue to press their case for exemption, citing legislative action and the importance of cross-border cooperation in addressing forced labour in global supply chains.