Trade glossary

How tariffs and trade measures work.

A practical guide to the agreements, legal tools, and business impacts behind Canada–U.S. trade news.

Why tariffs exist

Tariffs began as a practical way to fund governments. They later became a tool for protecting industries, enforcing trade rules, and applying political pressure.

The original job: Customs duties were once a central source of government revenue because goods crossing a border were relatively easy to identify and tax. For almost 50 years after Confederation, Canada’s federal government relied on customs duties and excise taxes rather than a general income tax.
The postwar shift: After the disruption of the 1930s and the Second World War, countries tried to make trade more predictable. Twenty-three countries signed the GATT in 1947 and began negotiating lower tariffs and limits on how high agreed rates could be raised. That system later became part of the WTO.
North American free trade: Canada and the United States moved further toward tariff-free regional trade through the 1989 Canada–U.S. Free Trade Agreement. NAFTA replaced it in 1994, and CUSMA replaced NAFTA in 2020. Preferential access still depends on product-specific rules and proof of origin.
Why use them now?: A tariff can make imported goods more expensive relative to domestic goods, raise revenue, respond to dumping or subsidies, support a national-security policy, or create leverage in a negotiation. Different legal authorities exist because those goals are not the same.
Who actually pays?: The importer pays the duty to customs. The economic cost can then be shared in less obvious ways: the importer may accept a smaller margin, demand a lower supplier price, charge customers more, or change where the product is made or purchased.

NAFTA and what replaced it

NAFTA rewired North American trade for a generation. The agreement is no longer in force, but its rules, supply chains, and political legacy still shape today’s debate.

What NAFTA was: The North American Free Trade Agreement joined Canada, the United States, and Mexico in one regional trade framework on January 1, 1994. It replaced the 1989 Canada–U.S. agreement and progressively removed most tariffs and quantitative restrictions among the three countries.
What it changed: NAFTA made it easier to organize production across three countries, especially in industries such as automotive manufacturing. It also established shared rules for origin, customs, services, investment, intellectual property, and dispute settlement—not just tariff rates.
What it did not mean: NAFTA did not make every shipment automatically tariff-free. Goods had to meet rules of origin and carry the required proof, some agricultural restrictions remained, and countries retained trade-remedy tools such as anti-dumping and countervailing duties.
Why it was replaced: The three governments renegotiated and modernized the agreement. CUSMA—called USMCA in the United States—took effect on July 1, 2020, with updated provisions including tighter automotive rules of origin, stronger labour enforcement, digital-trade rules, and revised dispute procedures.
Why people still say NAFTA: NAFTA was the familiar name for more than 25 years, so it remains common shorthand for North American free trade. Legally, current Canada–U.S.–Mexico trade is governed by CUSMA/USMCA; NAFTA is now the predecessor agreement.

Reading a measure

The basic language used to describe what a government has announced and what is actually being charged at the border.

Tariff: A tax rate applied to imported goods. The importer normally pays it at the border, then may absorb the cost, negotiate with suppliers, or pass some of it on to customers.
Duty: The amount customs collects on a shipment. A tariff is the rule or rate; the duty is the resulting bill after the product, value, origin, and applicable treatment are determined.
Baseline rate: The regular tariff rate that applied before a new trade action. It is the starting point for understanding whether a new tariff replaces that rate or gets added on top of it.
Effective rate: The rate a shipment is actually subject to after trade-agreement treatment, special tariffs, exemptions, and any stacked duties are taken into account.
In force: The measure has taken legal effect and applies to covered goods now. The exact product code, origin, shipment date, and any exemption still determine whether a particular shipment is caught.
Upcoming: A measure has been formally announced or scheduled but its effective date has not arrived. Businesses have a real deadline to plan around, although the terms can still change before launch.
Unconfirmed: A threat, proposal, negotiation position, or report that has not yet become an enforceable measure. It matters for planning, but it should not be treated as a current border cost.
Exemption or remission: Relief from a tariff that would otherwise apply. An exemption removes specified goods or importers from the measure; remission can repay or waive duties when stated conditions are met.

Agreements and legal tools

The agreements and U.S. authorities that often sit behind a Canada–U.S. trade headline.

Free trade agreement (FTA): An agreement between countries that reduces trade barriers for covered goods or services under a shared set of rules. It does not mean every product automatically crosses the border duty-free.
CUSMA / USMCA: The Canada–United States–Mexico Agreement. Canada calls it CUSMA; the United States calls it USMCA. It sets regional trade rules and can provide preferential tariff treatment for qualifying goods.
Rules of origin: The product-specific tests used to decide where a good legally originates. A Canadian shipment is not automatically CUSMA-qualifying simply because it leaves from Canada; its inputs and production must meet the relevant rule.
CUSMA-compliant: A practical shorthand for goods that meet the agreement’s origin requirements and have the supporting certification needed to claim preferential treatment.
Section 232: A U.S. trade authority tied to national security. It can lead to tariffs or other restrictions when imports are found to threaten the country’s ability to meet national-security needs.
Section 301: A U.S. process for investigating foreign practices that violate trade rights or are considered unjustifiable, unreasonable, or discriminatory. The response can include tariffs or other trade action.
Section 338: A rarely used U.S. authority aimed at discriminatory treatment of American commerce by another country. It allows additional duties or import restrictions after a formal finding.
IEEPA: The International Emergency Economic Powers Act. It gives a U.S. president broad economic powers after declaring a national emergency, so actions under it follow an emergency-powers route rather than the usual trade-investigation process.
Anti-dumping / countervailing duty: Trade-remedy duties imposed after investigations. Anti-dumping duties address goods sold below a calculated fair value; countervailing duties offset certain foreign government subsidies.
Tariff-rate quota: A two-tier system: a set quantity can enter at a lower tariff rate, while imports above that threshold face a higher rate. It changes the cost of additional volume without necessarily stopping imports.
World Trade Organization (WTO): The international organization that administers shared trade rules and a government-to-government dispute process. A WTO challenge can test whether a measure follows those rules, but it does not provide immediate relief at the border.

Cost and business exposure

Terms that connect a government action to margins, prices, sourcing, and operations.

Counter-tariff: A tariff imposed in response to another country’s trade action. It is also called a retaliatory tariff and is often designed to create negotiating pressure on selected products or regions.
Tariff stacking: When more than one duty applies to the same shipment. The headline rate may therefore understate the total border cost unless the legal order says one measure replaces or excludes another.
Importer of record: The party legally responsible for the customs entry, classification, declared value, documentation, and duties. A customs broker can file the paperwork, but responsibility remains with the importer of record.
Landed cost: The full cost of getting a product to its destination: purchase price, freight, insurance, duties, brokerage, handling, and other border charges. This is the useful number for pricing and sourcing decisions.
Direct vs. indirect exposure: Direct exposure means your own goods are covered. Indirect exposure means a supplier, customer, competitor, transport route, or input is affected, which can still change your costs or demand.
Trade diversion: A shift in where goods are bought or sold because a tariff changes relative prices. It can create new demand in one market while producing shortages, congestion, or price pressure in another.

Reading Trade Radar

How the site turns several kinds of pressure into a concise industry condition.

Impact: How strongly current measures are affecting an industry now, based on the breadth of goods covered and the importance of cross-border trade to that sector.
Escalation risk: The chance that pressure will increase through new measures, higher rates, broader product coverage, or retaliation. It looks forward rather than describing only today’s cost.
Adaptability: How much room an industry has to change suppliers, markets, product mix, or production. More adaptable sectors can often reduce exposure faster, even when the initial shock is significant.
Price stress: The pressure a trade measure puts on input costs and selling prices. It can be high even when a company is not the importer, because costs travel through the supply chain.
Clear → Watch → Elevated → Storm → Crisis: Trade Radar’s severity scale. It summarizes the combined condition, from limited disruption to broad and immediate business pressure. It is a decision aid, not a forecast of the wider economy.

Reference desk

These definitions are written for business readers and checked against primary government material. For a specific shipment, confirm the current customs notice or get professional advice.

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