Tariff Update: Latest Changes to US, Canada and Mexico Import Duties
October 20, 2026 | ATN Trade & Finance
A volatile year for North American trade policy has left importers and exporters navigating a patchwork of new duties, retaliatory measures, and an agreement framework in annual review mode. Here is where things stand as of mid-October.
US Effective Rates Hit Highest Level in Decades
The average US effective tariff rate reached 7.1% in August 2026 — up from 6.7% in July and more than triple the 2.3% rate in January 2025 — according to the Penn Wharton Budget Model's October 14 update. The headline figure masks wide variation by category: steel and aluminum duties stand at 39.8%, automotive vehicles at 13.8%, and China-origin goods at 24.3%.
The tariff architecture has shifted twice this year. The IEEPA tariffs were struck down by the Supreme Court on February 20, 2026, and replaced with a 10% global Section 122 surcharge in March. That surcharge expired July 24, 2026. New Section 301 tariffs of 10% or 12.5% now apply to imports from 60 economies, with product exclusions. Separately, default duties of 100% on patented pharmaceuticals took effect under Proclamation 11020 — from July 31 for Annex III companies and from September 29 for all others.
An important deadline is approaching: 178 China Section 301 product exclusions (HTS 9903.88.69/70) and the suspension of China-linked port fees expire November 9, 2026. No extension has been published as of October 5. Importers relying on those exclusions should prepare for full rates as of November 10.
Canada: 50% US Duties, $20 Billion in Counter-Tariffs
The US-Canada trade relationship deteriorated sharply over the summer. The White House imposed 50% Section 338 duties on approximately $20 billion of Canadian goods effective August 22, with five implementing proclamations signed September 8. An import ban — covering Canadian alcoholic beverages, certain dairy products, and motorcycles above 800cc — took effect September 29. USMCA origin does not shield Canadian goods from Section 338 duties; they apply regardless of rules-of-origin status.
Canada responded in kind. Counter-tariffs on more than 700 US products worth approximately $20 billion went into effect September 8, at rates of 15% to 50%. Targeted categories include US steel and aluminum, dairy, plywood, appliances, electronics, and perfume and cosmetics — products selected, according to KPMG Law analysis, to target politically sensitive swing and Republican-leaning states. Prime Minister Mark Carney said Canada is prepared for "serious talks" when the rhetoric from Washington ends; no new bilateral talks are currently scheduled. A recent poll found more than 80% of Canadians support the retaliatory measures.
USMCA: Annual Review Mode After US Declines to Extend
At the July 1, 2026 joint review meeting, USTR Ambassador Jamieson Greer announced the US "did not agree to renew the USMCA in its current form." Mexico and Canada both confirmed support for a 16-year extension; the US did not. Under Article 34.7.4, this triggers annual review mode — the commission must now meet each year until the parties agree to extend or the agreement expires on July 1, 2036. The agreement itself remains fully in force: tariff preferences, rules of origin, investment protections, and dispute settlement are all operative.
Three rounds of negotiations have taken place — Mexico City (May 28–30), Washington (June 16–17), and Mexico City again (week of July 20) — focused on auto rules of origin, steel and aluminum, and economic security. Canada has not been a participant in the formal text-based talks. USTR published a notice on October 5 requesting public comments ahead of the 2027 annual review, with a comment deadline of January 12, 2027.
Mexico: USMCA Shield Intact, But Steel Is Not Exempt
For manufacturers sourcing in Mexico, the critical number is USMCA utilization: 81.4% of combined Canada-Mexico imports claimed USMCA exemptions in the most recent data, up from roughly 45% utilization in early 2025. USMCA-qualifying Mexican goods are exempt from Section 301 duties, but Section 232 steel and aluminum duties of 50% apply to all countries including Mexico and are not waived under USMCA. US-Mexico tariff talks remain stalled; Commerce Secretary Lutnick has opposed reducing auto, steel, and aluminum duties as part of the USMCA process.
What this means: The November 9 deadline for China exclusions is the most immediate operational risk. For companies sourcing from Canada, the 50% Section 338 framework now functions as the baseline — USMCA provides no shield, and the counter-tariff regime adds cost on the US-export side as well. The USMCA annual review calendar makes 2027 the next formal decision point, but the trade architecture governing day-to-day North American shipments is already under stress on both the Canada and Mexico tracks.
Sources:
- Effective Tariff Rates and Revenues, Updated October 14, 2026 — Penn Wharton Budget Model
- Trade Policy and Customs Update, October 2026 — CargoLinked
- Canada's Retaliatory Tariffs Go into Effect on $20 Billion Worth of US Products — WSHU/NPR
- USMCA 2026 Joint Review: United States Declines to Extend Agreement, Triggering Annual Reviews — White & Case
- Mexico Tariffs 2026: What Manufacturers Actually Need to Know — Tetakawi
- Canada to Hit US with Retaliatory Tariffs as Trade War Escalates — Al Jazeera
- Ambassador Greer Issues Statement on the USMCA Joint Review — USTR