When U.S. President Donald Trump published an open letter to Prime Minister Mark Carney in late July, declaring his intention to impose a 35 per cent tariff on Canadian goods in the absence of a trade deal by Aug. 1, there was a brief moment of panic. But it quickly became clear that the 35 per cent tariff, later formalized in an executive order, wasn’t a new blanket levy on all goods — it was an increase to the 25 per cent that already applied to items that were not compliant with the existing North American trade pact, the Canada-U.S.-Mexico Agreement (

CUSMA ). That CUSMA exemption meant the increase was more a glancing than crushing blow and the muted reaction when the Aug. 1 deadline passed without a deal seemed to confirm it.

While the trade war has roiled the auto, steel and aluminum sectors and others targeted by specific sectoral tariffs, the impact of the broader tariffs has been harder to pinpoint. Few companies have stepped forward to acknowledge their products fall outside of CUSMA and are being hit by the now 35 per cent tariff, leaving exactly who is affected and how big an impact the tariffs are having something of a mystery.

Even Canada’s big banks and the Bank of Canada have struggled to put a precise number on it. In the scenario planning that it updated after its most recent interest rate announcement, the central bank estimated that 100 per cent of energy and 95 per cent of all other goods should be covered by CUSMA, while bank estimates of actual CUSMA compliance have climbed to anywhere from 50 per cent to 90 per cent.

Customs brokers and other trade specialists say those who are falling outside the shield of CUSMA fall into several buckets, including smaller firms that are unwilling or unable to pay the costs associated with compliance and firms of all sizes with complex manufacturing and production supply chains that may put their goods offside with CUSMA’s “rules of origin,” which require qualifying exports to contain a fixed amount of North American components and production.

And unlike sectoral tariffs, which delivered a direct blow to many companies, in many cases the broader tariffs only hit selected products and a small percentage of a company’s sales.

Steve Bozicevic, chief executive of A&A Customers Brokers, gave the example of a client who stopped shipping its skincare products to the United States altogether over concerns that shea butter sourced from Ghana could raise flags at the U.S. border.

“They have paused Canada to U.S. shipping until they figure it out because they do not want to be on the hook for retroactive (duty and taxes) at 25 per cent or 35 per cent if they cannot transform their supply chain,” Bozicevic said, noting the company was scrambling to find ways to add more Canadian content to their brands.

This type of situation is not unique, said Clifford Sosnow, a partner in the trade group at law firm Fasken Martineau DuMoulin LLP, especially for companies with complex manufacturing and production supply chains that use inputs from countries outside the Canada-U.S.-Mexico trade pact whose place of origin is not clear or difficult to document.

“At 35 per cent (tariffs), some of our clients are likely to cut losses if their contracts permit them, and try to find alternative markets, if they can,” he said. “Some clients we are advising are struggling with managing the 25 (per cent), particularly if they can’t cost share with their buyers.”

In the past, these goods could be exported to the U.S. without attracting tariffs because the sellers could count on Canada’s “most favoured nation” status under other international cooperative agreements or other exemptions, such as small value shipments.

Even when things are in order these days, the new and fast-changing rules can make exporting to the U.S. difficult and potentially costly.

Another of Bozicevic’s clients recently faced an audit of exports to the U.S. even though it uses only North American-sourced materials. He said this was a worrying event for the Quebec-based home goods company that designs and manufactures pillows and throw blankets. It was flagged, he said, simply because raw hemp textiles often come from China.

“U.S. Customs wanted proof that their hemp was North American origin,” he said, pointing out the kind of scrutiny that puts companies in a vulnerable position if they don’t have the proper documentation to prove the country of origin of all their components.

“Thanks to clean documentation and verified supply chains, (the client) passed the audit, but it underscores how even compliant businesses need to keep supply chain transparency and paperwork in top shape,” he said.

Aggregate trade figures for June show tariffs paid on goods that tend to use a lot of foreign components — such as aerospace parts, electrical equipment and machinery — saw increases that were in the small single digits, said Erik Johnson, a senior economist at Bank of Montreal.

That was up from zero or extremely low payments in January, before the trade war began.

“The (new tariff) that applies to non-USMCA (CUSMA) compliant goods isn’t having a noticeable impact on the aggregate trade data,” he said.

Johnson said the most obvious reason for the lower than expected tariff numbers would be that more companies had done the work necessary to receive preference under CUSMA. Other contributors could include exporters holding off on shipping in hopes the tariffs would be short-lived and border officials not being ready to impose the new levies.

Exports were down around 14 per cent, he said, but that’s the same level of decline seen since April.

“Without a surge in (trade pact) compliance, the calculated tariff rate would be much higher right now,” he said.

Carl Gomez, chief economist at Costar Group, estimates that Trump’s latest levy on raised the overall effective tariff rate on Canadian goods and services from 5.5 per cent to slightly above six per cent.

The overall blended U.S. tariff rate on Canadian goods thus remains below the low double-digit base tariff rates negotiated by some outside the Canada-U.S.-Mexico trade pact, such as the European Union, United Kingdom and Japan.

More concerning for Canadian exporters is the chance that CUSMA protections may be altered or even disappear altogether. The trade pact comes up for review and possible renegotiation by the three countries next year, but some have expressed concerns it won’t last even that long.

After meeting with Carney on Thursday, Ontario Premier Doug Ford warned that Trump may try to reopen negotiations early, possibly as soon as this fall.

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“Losing (the trade pact’s) preferential treatment for Canadian-origin goods would have severe and devastating consequences for broad segments of the Canadian economy,” said William Pellerin, a partner in the international trade practice at law firm McMillan LLP. “That is a worst-case scenario.”