New US and Canadian tariffs show how quickly geopolitical decisions can affect supply chains, landed costs and sourcing decisions. For European businesses, the impact goes beyond tariffs: origin, CETA preferences and the economic substance behind supply chains are becoming increasingly important.

On 22 August 2026, new US duties of 50% on a range of Canadian-origin goods took effect after a short suspension expired without a deal. On 25 August, Canada announced counter-tariffs on US-origin goods, matched dollar for dollar and rate for rate, effective 8 September. Within days, the landed cost of Canadian dairy, plywood, furniture and apparel entering the United States had changed, and the cost of US steel, appliances, pulp and electronics entering Canada was fixed for a date two weeks out, long before any sourcing contract, inventory policy or production plan could respond. That speed, not the tariff rate, is the real lesson of this dispute. Geopolitical decisions now reach a company’s cost base faster than the company can adjust to them.

None of this arrived unannounced, and the information was available; what most companies lacked was a disciplined way of reading it and a reason to act on it before the duty was due. Applied to this dispute, we expect three things: a wave of goods offered to Europe as “Canadian” that will need to prove it, a sharp rise in origin and substance scrutiny on both sides of the Atlantic, and a widening gap between companies that already know where their inputs come from and those that will find out from a customs audit. Anticipating the next move is worth more than documenting the last one.

The rest of this article shows how the US Canada dispute fits the wider shift, where a Canadian pivot to Europe is commercially credible, and what European importers must be able to substantiate before treating goods as Canadian or claiming Comprehensive Economic and Trade Agreement (CETA) preferences.

This article was written by Mario van den Broek and Marius Ungureanu. Mario and Marius are consultants with RSM Netherlands with a focus on international trade and supply chain management.

What is happening? A bilateral dispute becomes a global supply chain event

At the end of August 2026, Canada announced that it would match the new US tariffs dollar for dollar and rate for rate. The countermeasures cover the same value of trade as the US duties and concentrate on the sectors most affected by US tariffs: steel and aluminium, dairy, appliances, agricultural equipment, pulp and paper, and electronics, alongside plywood, furniture, clothing and other consumer goods. The list was already amended the day after it was published, a reminder that even a retaliation list is a moving target. The tariffs apply only to goods that qualify as US-origin under Canada’s marking rules, not to everything shipped from the United States, and goods in transit on the effective date are exempt. Ottawa paired the tariffs with a support package for affected workers and businesses.

The measures answer US duties imposed under Section 338 of the Tariff Act of 1930, a provision never before used to impose duties. Presidential proclamations issued in July 2026 imposed an additional 50% duty on specified Canadian-origin products, citing Canadian treatment of US dairy, alcohol and motor vehicles, although the product lists reach well beyond those three sectors. A short suspension expired without agreement and the duties took effect on 22 August. Canada’s response draws its product list from goods targeted under both Section 338 and the earlier Section 232 measures, and raises its existing steel and aluminium counter-tariffs to match the US rate. Whatever legal and diplomatic arguments follow, businesses pay the duty while the dispute continues. That changes landed cost immediately, often before contracts, inventory policies or production footprints can catch up.

Canada enters this conflict from an unusually exposed position. Roughly seven in every ten dollars of its merchandise exports still went to the United States in 2025. That share fell to its lowest level since the early 1980s as shipments to Europe and other markets rose, but the direction of travel does not change the arithmetic. The retaliation is therefore broadly symmetrical in targeted trade value but economically asymmetrical: Canada can diversify at the margin, but it cannot reproduce the scale, proximity and industrial integration of the US market in the short term.

That is why this is a boardroom issue rather than a customs-only issue. Management teams must decide whether to absorb the cost, pass it through, switch suppliers, add capacity in another market or redesign the product. Each choice affects customer commitments, working capital, transfer pricing, customs valuation and the evidence the company must be able to produce.

What do US Canada tariffs mean for European supply chains?

Why Europe is a natural alternative for Canadian trade

Europe is Canada’s most credible strategic alternative because the institutional platform is already in place. CETA has applied provisionally since 2017, bilateral trade has grown strongly since then, and the EU is Canada’s second-largest trading partner after the United States. In 2025, Canadian exports to Europe rose sharply while exports to the United States fell, although a large part of that increase was gold shipped to the United Kingdom rather than a broad industrial shift.

The relationship is also moving beyond tariff reduction. At the CETA Joint Committee meeting in Toronto in March 2026, the two sides tied deeper trade and investment to diversification, economic security and supply chain resilience. They launched negotiations on a Digital Trade Agreement, agreed to extend mutual recognition of manufacturing inspections to pharmaceutical active ingredients and named critical raw materials, energy, forestry, defence procurement and clean technology as priorities. Canada’s participation in the EU’s SAFE defence procurement programme adds a defence-industrial dimension to the partnership.

The political direction is therefore clear: Canada wants more non-US trade, and Europe wants more resilient sources of strategically important goods. The strongest near-term opportunities are likely to be in products that can travel economically and are not locked into tightly integrated North American production: aluminium and critical minerals, forestry and pulp, seafood and selected agri-food products, pharmaceutical inputs, defence-related products and clean technology. This sector view is supported by RSM’s underlying research assessment.

Automotive is the clearest counterexample. Canadian and US plants share components, suppliers and production schedules across the border. Redirecting finished vehicles to Europe also raises questions of technical standards, model specifications, dealer networks and freight. A tariff can change the economics overnight; building a different automotive ecosystem cannot.

CETA benefits depend on rules of origin

CETA itself is also underused. On both sides of the Atlantic a substantial share of eligible trade still enters without claiming the preference. That gap points to practical upside: better classification, supplier evidence and origin processes may unlock savings before any factory is moved. It also warns against assuming that a free-trade agreement delivers benefits automatically.

That opportunity depends on qualifying production and on the paperwork that proves it, not on the country from which goods are invoiced or shipped. Under CETA a product originates in one of three ways: it is wholly obtained in Canada or the EU, it is produced exclusively from originating materials, or it undergoes sufficient production under the product-specific rule for its tariff heading. EU Canada cumulation can support genuine co-production, but simple packing, labelling, sorting or certain simple assembly are insufficient.

Even a product that qualifies only obtains the preference if the exporter issues the prescribed origin declaration and can back it with records when customs ask. A Canadian invoice identifies the seller; it does not establish Canadian origin or entitlement to the CETA preference.

Why Canadian origin requires more than a Canadian label

A Canada Europe pivot does not make China irrelevant. China remains the EU’s largest source of imported goods, dominated by machinery and vehicles, and Canadian manufacturers and distributors are themselves connected to Asian supply networks. A single product may therefore contain Chinese materials, US subassemblies, Canadian processing and European engineering or intellectual property.

Where a product combines Chinese inputs, Canadian processing and European content, importers must also determine its non-preferential origin. Under Article 60 of the Union Customs Code, origin rests with the last substantial, economically justified processing or working, carried out in a suitably equipped undertaking and resulting in a new product or important stage of manufacture. Repacking or relabelling a finished Chinese product in Canada will not normally change its origin; substantive Canadian manufacturing may, but the assessment remains product-specific.

The useful management objective is not a fictional “China-free” label. It is visibility: which inputs come from China, which operations take place in Canada or Europe, which supplier can prove those facts and which legal rule determines origin. Once that map exists, companies can make deliberate choices about resilience, concentration and cost.

Geopolitics is changing supply chain decisions

There is a great deal moving at once. Tariff disputes, export controls, industrial subsidies, sanctions, economic-security measures and repeated disruption of transport routes are arriving in quick succession. Treated as stand-alone crises, they lead companies to change suppliers, routes and investment assumptions repeatedly without a stable view of the forces connecting them.

Read together, they point in one direction: governments are using trade, investment and technology policy to pursue security and industrial objectives; access to strategic inputs matters alongside price; and companies are expected to demonstrate the origin and economic substance behind their supply chain choices. A new tariff therefore matters less for the rate applied today than for what it says about the direction and durability of that shift.

EU anti-circumvention enforcement shows how far the focus on substance already reaches. Where an existing trade-defence measure is in place, duties may be extended when routing, slight modification or assembly changes trade patterns without sufficient justification beyond avoiding that measure. In 2024 the Commission extended anti-dumping duties on Russian birch plywood to consignments from Türkiye and Kazakhstan, whether declared as originating there or not, and collected the duties retroactively. Anti-circumvention is only available where such a measure exists, but the standard it applies, substance over paperwork, is the same one customs authorities apply through origin verification and post-clearance audit to goods that acquire a Canadian label on their way to Europe.

For Dutch and European businesses, Canada is therefore one component of a broader diversification strategy, not a substitute for the United States or China. The opportunity is strongest in critical minerals, metals, forestry products, selected food products, pharmaceutical inputs and defence-related supply, where Canada offers genuine production capability and a commercially viable second source. It is weakest where Canada is only an additional stop in an otherwise unchanged supply chain. The Netherlands can provide an efficient entry point through Rotterdam, customs warehousing and regional distribution, but none of these arrangements determines origin.

That is why procurement, logistics, customs, tax and finance cannot decide separately. A sourcing change has to be tested at the same time against customs value, transfer pricing, freight, inventory, contractual responsibilities and tariff exposure; an optimisation in one area easily creates cost or risk in another. Reading the wider picture also helps management tell a negotiating move from a structural change, and resist redesigning the network around every headline.

How can businesses prepare for geopolitical supply chain risks?

The wider picture is not a reason to wait. Sourcing contracts, supplier selections and investment decisions are being made now, often for several years. The right balance is disciplined urgency: build options before the next announcement by mapping concentrations and origin dependencies, testing landed cost assumptions, qualifying credible alternatives and agreeing the thresholds that would trigger a change in sourcing, production or routing.

Origin capability is the no-regret part of that programme: map processing steps, preserve supplier evidence and test product-specific rules before changing the supply chain, and where the conclusion is uncertain and commercially material, secure Binding Origin Information for advance legal certainty. Irreversible footprint decisions can wait for developments that confirm the underlying trend; the evidence behind the origin claimed cannot.

This is a publication that is part of RSM’s the Voice of SCM. On a monthly basis, RSM issues the Voice of Supply Chain Management (SCM). Our SCM consultants constantly follow global SCM developments in an everchanging society and translate their impact into practical considerations for internationally active companies. 

RSM is a thought leader in the field of international tax and tax governance, and we provide frequent insights through training and thought leadership, based on detailed knowledge of industry developments and practical application gained from working with our clients. We help organisations establish where fiscal decisions are actually taken, set the levels and parameters at which they should be taken, and build the record that supervisors and stakeholders increasingly expect.

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