Last week proved to be quite eventful as the Trump administration renewed its trade war with Canada and the world. Here is an update for members, including the implications for the cosmetics and personal care products sector.
Summary
- Trump has imposed a 50% tariff on various Canadian imports – including certain cosmetics and manufacturing inputs – in “retaliation” for Canada imposing its counter-tariffs on U.S. autos, the provincial liquor boycott of U.S. alcohol, and the different treatment of U.S. cheese under the Canada-E.U. trade agreement (CETA). Essentially, this is U.S. retaliation to Canada’s retaliation to the original Trump tariffs.
- The current implementation date is August 19, 2026.
- CUSMA compliant products are NOT exempt, thereby violating CUSMA and reaffirming that agreements with the United States are not to be relied on.
- Canada has responded by indicating that negotiations will “intensify” but that countermeasures (including counter-tariffs) will be considered if necessary. (Cosmetics were included in the last round of Canadian counter-tariffs.)
- On July 23, the U.S. announced a further round of tariffs of up to 12.5% on some 80 countries – including Canada – based on the use of forced labour. CUSMA compliant products are exempt in this case. These tariffs came into effect July 24, 2026.
- Recent Trump policies, actions, and statements are negatively affecting the mood of Canadians (and our consumers) towards the United States (and U.S. manufactured products).
The U.S. Announces New Round of Tariffs on Canadian Exports
As has been widely reported, the Trump administration announced last week the United States will be imposing a 50% tariff on a wide range of products – including certain cosmetics and inputs into cosmetic manufacturing – and would do so even if these products are compliant with the Canada-United States-Mexico trade agreement (CUSMA). The tariffs are currently scheduled to take effect on August 19, 2026.
This action is a clear violation of CUSMA and reinforces that the United States does not keep its commitments nor obligations under trade agreements, an ominous warning to American trading partners and for any future negotiations including on CUSMA.
Cosmetics Products & Inputs Included in the Tariffs
The finished products and manufacturing inputs targeted for the 50% tariff include:
- Cosmetics & Personal Care: Perfumes, toilet waters, lip makeup, eye makeup, nail products, hair care preparations, essential oils, resinoids, fragrance concentrates, odoriferous mixtures used in cosmetics and fragrances
- Cosmetic Ingredients: Essential oils (orange, lemon, grapefruit, peppermint, eucalyptus, mint, citrus, other botanicals), plant extracts, vegetable saps, gums, resins, oleoresins, gum arabic, pectin, agar, guar gum, thickeners, sorbitol, glycerin, mannitol, fatty acids (stearic, oleic), fatty alcohols, protein isolates, gelatin, casein, albumins, starches, dextrins, chemical preparations
- Natural & Botanical Materials: Mint, herbs, medicinal plants, algae, seaweed, bamboo, reeds, cotton linters, vegetable fibers, natural gums, resins, honey
- Packaging Materials: Plastic bottles, jars, caps, closures, tubes, boxes, sacks, bags, cartons, paper packaging, labels, glass containers, paperboard packaging
U.S. Rationale for These “Retaliatory Tariffs” on Canada
The rationale used by the Trump administration to impose these specific tariffs on Canada is that Canada is treating the U.S. “very badly” with its counter tariffs on autos and the refusal of 11 of 13 provincial/territorial liquor authorities to stock U.S. alcohol products. These were implemented as retaliatory measures following the U.S. imposing significant tariffs on Canadian aluminum, steel, autos and wood products in 2025.
The Trump administration has also offered as a justification the differing requirements for dairy imports (cheese) under CUSMA and Canada’s trade agreement with the European Union as discriminatory against the U.S.
Essentially, the Trump administration is imposing retaliatory tariffs on Canada in retaliation to Canada retaliating against the original U.S. tariff action. As Trump has noted, Canada and China were the only two countries to have retaliated against the U.S. when they launched their original tariff war on the world.
All these retaliatory tariffs would likely be removed if the Trump administration removed their original tariffs and returned to the original CUSMA trade agreement which Trump negotiated in his first term.
Trump Administration Using 1930’s Tariff Legislation
This latest tariff attack on Canada is premised on Section 338 of the U.S. Tariff Act of 1930 which provides for a 50 percent tariffs on countries which “discriminate” against U.S. exports.
The Tariff Act of 1930 – more commonly known as the Smoot-Hawley Tariff Act – was introduced in 1930 to impose tariffs to protect American agriculture and industry following the 1929 stock market crash and beginning of the depression. It has been largely credited with unnecessarily shrinking world trade as other countries responded to the U.S. with their own tariffs and ultimately lengthened and deepened the economic situation and suffering. The result was the Great Depression of the 1930’s which effectively ended with the outbreak of World War II.
We understand that Section 338 of the Act, on which Trump has based these tariffs, has never been used or tested in court. Since both this Act, as well as CUSMA in which these tariffs are in violation, have both been approved by the U.S. Congress, these tariffs may be subject to a legal challenge.
Canada’s Response
The U.S. Tariff announcement came when Canada’s provincial and territorial premiers were holding their annual meeting in Charlottetown including an in-person meeting with Prime Minister Carney.
Premiers were quick to demonstrate a united front in opposing this latest attack in the U.S. trade war and all the 11 provinces and territories with U.S. liquor boycotts were quick to reinforce that these alcohol boycotts would remain in place until there is a comprehensive resolution of all trade matters. Given the growing U.S. focus on the alcohol boycott – Canada being the largest purchaser of U.S. spirits and wines – it is clear that the boycott is meeting its intended result of causing pain in the U.S. economy and providing Canada with a significant bargaining chip in negotiations.
As to the federal response, Prime Minister Mark Carney indicated that this would now “intensify” negotiations although Canada would NOT accept a bad agreement for the sake of getting an agreement. He also made clear that Canada was not afraid to impose its own retaliatory measures should no acceptable resolution be found.
The Prime Minister’s initial statement can be found HERE. This has been followed by various remarks through the media including reference to the use of counter-tariffs should they be necessary.
Cosmetics were included in Canada’s previous round of retaliatory tariffs and could be reasonably expected to be included again should Canada be forced to take such action. CA and our colleagues at the U.S. PCPC will continue to monitor and assess this situation.
U.S. Further Expands Trade War on Some 80 Countries – Including Canada – with Forced Labour Tariffs
On July 23, the Trump administration announced a further round of up to 12.5% tariffs on some 80 countries based on their supposed lack of effort to prevent the use of forced labour in manufacturing. Not unexpected, these tariffs intended to replace Trump’s previous “Liberation Day” tariffs which were struck down by the U.S. Supreme Court and which the U.S. Treasury now has to refund.
Canada has also been included in this latest round which took effect July 24, 2026. However, products that are CUSMA compliant are exempt.
Affected countries are responding negatively to this announcement as the U.S. continues to position itself as an untrustworthy trading partner. The obvious question for U.S. policy makers, and U.S. based manufacturing is at what point will the world have had enough and impose countermeasures including tariffs on U.S. manufactured products? This is a question that all international companies, including in our sector, should be considering in their planning.
The Public (and Consumer) Mood in Canada
As what Prime Minister Carney is calling “intensified” negotiations are about to begin, it is important to note the public (and consumer) mood in Canada in which negotiations are being undertaken. The “public mood” can influence the ability to negotiate as well as influence the day-to day purchasing decisions of consumers (brand damage).
As pollster Angus Reid has reported earlier this year, and covered by U.S. news outlet CNN, how Canadians view the United States is at a historical low in the long-standing relationship. Some 74% of Canadians in 2026 view the United States as either a “threat” or to be dealt with “cautiously”. Only 22% view the United States as an “ally or friend”.
This is almost a complete reversal from 2024 when 73% viewed the U.S. as a friend and ally while only 26% viewed the U.S. as a threat or to be dealt with cautiously.
Since this poll was conducted, Canadians have come to see further U.S. policies and actions that undermine the relationship and make negotiations even more difficult. Some of the lead items in Canadian media that are influencing public opinion (and how governments can negotiate) include:
- The U.S. initiated war in the middle east driving up fuel prices around the world, including for Canadian consumers, and adding to inflationary pressures.
- What Canadians are viewing as a “shakedown” of Canada on the opening of the new Gordie Howe Bridge connecting Windsor and Detroit. Funded entirely by Canadian taxpayers under an agreement in which Canada would receive the net tolls until the $6.4B investment was recouped, the Trump administration would not allow the bridge to open until they forced Canada to agree to provide half the net revenues to them for the next 15 years. This, along with Trump’s new round of tariffs, have led to the cancellation by Canada of a joint opening ceremony with Canada holding its own event on July 24 with no representation from the U.S. federal government being invited. A definite low in Canada-U.S relations.
- Trump’s recent threats to impose tariffs on Canada for wild-fire smoke drifting across the border into the U.S.
Although our industry would desire a return to the stability, predictability, and significant benefits of what was a highly integrated North American trading relationship, this is becoming more difficult in the current trade war and political environment.
Additionally, give the strong feelings of Canadians with respect to our relationship with the United States, it is not a surprise if and when these feeling are expressed by consumers through their purchasing decisions. This is one thing that individuals have in their control in which they can directly express their feelings. The food and travel industries have been feeling this intently.
A 20% decline in U.S. manufactured vehicle sales in Canada is not just because of the Canadian counter-tariff, or higher costs due to U.S. tariffs on aluminum, but also because of the decisions of Canadian consumers to avoid U.S. made vehicles as many dealers have reported.
Although this may not yet have been widely felt in our sector, it is a factor which we must be aware and continue to monitor.
As a business person, it would appear that Trump has never learned the lesson that offending your customer and treating them poorly is not the best way to protect sales. A customer may buy from you once, but they will be soon looking to take their business elsewhere, and Canadian consumers – including for cosmetics and personal care products – are an important market for U.S. manufacturers.
This reality may explain the Carney government’s long-term strategy of reducing Canada’s economic ties with the U.S. and expanding them with other trading partners around the globe including our European and Trans-Pacific partners.
CA will continue to work closely with our U.S. and Mexican counter-parts and will keep you informed of developments.
