Plywood Is Off the 50% Canada Tariff List — But Carpets and Air Conditioners Just Got Added

If you buy anything from Canada, the rules for which products face a 50% tariff changed on Friday. A presidential proclamation signed October 23 removes some goods from the list and adds others, and the changes take effect October 30. That gives importers, distributors and retailers about six days to check whether the products they buy moved from one side of the list to the other.

The swap helps some owners and hurts others. Plywood, certain machinery and some packaging are coming off. Carpets, air conditioners and cocoa powder are going on, along with items that the public summaries do not fully name. Here is what the sources confirm, where they disagree, and how to protect your margins.

What came off the list

According to the White House fact sheet and trade press coverage, the following are being removed from the scope of the tariffs:

• Plywood (the fact sheet says plywood sheets; sources differ on whether all plywood is covered)
• Some paper products
• Certain industrial machinery and refrigeration equipment
• Certain packing crates and boxes, along with select packaging materials

Coverage of the announcement also pointed to seaweed among the removals, tied to exemptions that Sen. Susan Collins said she secured for products "crucial to Maine's agricultural industries," including blueberries, potatoes, apples and seaweed.

What went on the list

Newly covered goods, depending on the source, include:

• Carpets
• Air conditioners
• Cocoa powder
• Certain valves
• Waste products

One trade site also listed vinyl flooring, chest freezers up to 800 liters, shampoos, electric hand tools, canoes and archery gear, and counted about 22 tariff lines removed against roughly 100 added. The White House fact sheet itself says only "others" without naming them, and it does not publish the full product lists, HTS codes or tariff rates in the summary. That is why you should not rely on any news article, including this one, for a final answer on your products. The proclamation annex is the authority.

The rate and the legal basis

The additional duty is 50%, imposed under Section 338 of the Tariff Act of 1930. The July 20 proclamation first imposed it, with duties taking effect August 22. A September 8 proclamation rewrote the list again. This new action further modifies the scope. The fact sheet says the duties apply regardless of USMCA origin and are in addition to Section 232 tariffs, though how the two interact on overlapping products is disputed, so ask a customs broker about any product that could fall under both.

The administration's stated reason is to offset what it calls Canada's discriminatory treatment of U.S. commerce. White House spokesman Matthew Middleton said the administration "continues to address Canada's discriminatory treatment of U.S. commerce." The Wall Street Journal reported that the move was partly aimed at helping candidates in Maine and other states where tariffs are a major issue.

Who actually pays

The importer of record pays the duty at the border. For many small businesses, that is not you but your supplier or distributor, who then passes the cost down through higher wholesale prices, new price lists or backorders. If you drop-ship or buy from a U.S. distributor, you may feel this as a quiet price increase rather than a customs bill.

A KPMG Law attorney, Robert Glasgow, expects a relatively small immediate impact overall because more lines were added than removed. That is a macro view. For an individual shop that sells carpets or air conditioners, the effect can be large, and for a lumber or packaging buyer it can be a relief.

What 50% does to your margin

Here is an illustration from one trade analysis, not a forecast. Take a freezer that sells for $900, with a supplier cost of $540 and a customs value of $400. A 50% duty adds $200. If you absorb it fully, your gross margin falls from 40% to about 17.8%. Pass the whole cost on and your price rises by $200 or more, which may cost you sales.

The same source offers a rule of thumb that you should treat as a heuristic, not a formula:

• If the added cost is under 10% of the retail price, consider raising prices.
• If it is 10% to 20%, re-quote your suppliers.
• If it is above 20%, consider pausing ads and finding another country of origin.

Research from the New York Fed, as cited in that analysis, suggests that pass-through to consumer prices can take up to a year, which means your costs may rise well before your customers see the change.

A lawsuit that could change things, but don't count on it

The same week, the Liberty Justice Center filed suit at the Court of International Trade on behalf of food importer Gellert Global Group. The suit argues that the President did not meet Section 338's requirements and questions the use of the statute given more recent legislation. The plaintiffs want the tariffs removed, an order blocking collection and refunds for importers.

There is no ruling, and the proposed class has not been certified. Do not budget for refunds. If you do import directly, keep clean records of every entry and duty payment, in case a refund process ever opens.

Your six-day checklist

1. List your Canadian-origin products. Include anything your suppliers source from Canada, and ask them directly.
2. Match each product to its HTS code. Then compare against the annex of the proclamation, not a news summary.
3. Re-run your margins. Update your profit and loss statement with a 50% duty on newly covered items and any savings on removed ones.
4. Talk to your suppliers. Ask whether price lists will change on October 30 and whether they will hold current quotes.
5. Review your cash. If higher inventory costs squeeze working capital, look at options such as a line of credit or an SBA loan before you need the money.
6. Talk to a customs broker. This matters most for products that may also face Section 232 tariffs.

The bottom line

This is a reshuffle, not a repeal. The rate stays at 50%, the legal basis stays the same, and the lists move around. Buyers of plywood, packaging and some machinery may get relief on October 30, while sellers of carpets, air conditioners and cocoa products face new costs. Check the actual annex for your product codes this week, because the difference between being on the list and off it can be the difference between a healthy margin and a thin one.

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