Opening
At 12:01 a.m. Eastern on August 22, 2026, an additional 50% US duty took effect on a list of Canadian goods. It came the day after Prime Minister Carney suspended negotiations, saying the United States "asked too much and offered too little." On August 25, Finance Canada announced dollar-for-dollar counter-tariffs, effective September 8.
The rate drew the headlines, but for Canadian private-market investors the more consequential detail is structural. Under the Section 122 surcharge that expired on July 24, and under the Section 301 duty that replaced it, goods qualifying under CUSMA were exempt. These duties have no such exemption. This piece sets out what happened, why that distinction matters, and what it raises for anyone holding private credit, private equity or real assets with US exposure. It is not investment advice.
What Happened
On July 1, CUSMA's first six-year joint review ended without the US confirming a 16-year extension. The agreement stays in force to 2036, but annual joint reviews are now required, and the US said it would not renew it "in its current form" (Blakes; McMillan; Cassels).
On July 20, the US president signed three proclamations, numbered 11046 (alcohol), 11047 (dairy) and 11048 (motor vehicles), imposing an additional 50% duty on listed Canadian goods. It was the first time Section 338 had ever been used to levy a tariff. There is no CUSMA exemption and no fixed end date. Coverage extends to wood products, machinery, textiles, plastics, toys, cosmetics and foodstuffs. The stated grounds were Canada's retaliation on US autos and alcohol and its dairy measures. As originally written, the text excluded goods subject to Section 232 tariffs (Zonos; Polsinelli; Troutman Pepper Locke; UHY).
On July 24 the 10% Section 122 surcharge expired at its 150-day statutory cap and a Section 301 forced-labour duty took its place. Canada is in its 10% tier, and CUSMA-qualifying goods are exempt. That measure also excludes Section 232 goods, steel, aluminum, copper, certain energy products, potash and critical minerals (UHY; Crane Worldwide; Customs Genius). Two US regimes now apply to Canadian goods: one honours CUSMA qualification and one does not. The exclusions just listed belong to Section 301 and should not be assumed to apply to Section 338.
The Section 338 duties were due to start on August 19. A further proclamation suspended them for three days and moved the start to August 22 (Troutman Pepper Locke; Customs Genius). As of August 17, US Customs and Border Protection had not issued implementation guidance (Zonos). On August 20, Canada's LeBlanc described the two sides as "very close." On August 21, talks collapsed. US Trade Representative Greer: "They wanted more." Canadian content rules and Canada's freedom to deal with other countries were among the disputed points (CBC; NPR; CNN; PMO).
On August 25, Finance Canada announced counter-tariffs of 15%, 25% and 50% on C$27.6 billion of US imports, effective September 8, together with a C$7.5 billion support package.
The size of the US measure should be read with its source. US estimates put it at about US$20 billion of Canadian imports (Troutman Pepper Locke; Polsinelli). Finance Canada's release described a 50% tariff on $27.6 billion of Canadian goods, the same figure it gave for its own counter-measure. The currencies and bases differ, and we do not reconcile them here.
Why It Matters
CUSMA qualification is now necessary but not sufficient. Exporters that did the work to qualify their goods under CUSMA's rules of origin are still protected against the Section 301 duty. They are not protected against Section 338. A portfolio company whose risk disclosure says it is "CUSMA-compliant and therefore exempt" may be describing the regime before July 20. For a private-equity holding or a private-credit borrower that exports listed goods, the question has moved from whether its goods qualify to which statute applies to each product line.
This is a sector shock, not an economy-wide one, so far. The duties apply to listed categories, and the latest broad data predate them. July added 75,000 jobs, and the advance estimate for second-quarter GDP was +3.4% annualized (Statistics Canada, as reported by HR Reporter and The Canadian Press). The Bank of Canada's July deliberations had warned that "the pickup in growth could fade if businesses do not continue to adapt to US tariffs," and called new US tariffs "an ever-present downside risk" (Bank of Canada, July 29). The impact on any portfolio depends on its exposure product by product, not on the aggregate economy.
There is no end date. The Section 122 surcharge had a 150-day statutory cap that investors could underwrite to. These proclamations set no expiry. A case that assumed a temporary disruption is now a judgement call, not a schedule. From September 8, the exposure also runs the other way: Canadian businesses that import US inputs on Canada's counter-tariff list will face higher costs.
Private credit has a cross-border channel of its own. A Bank of Canada staff analysis reported this month estimated Canadian investors' private lending at about $500 billion, together with Canadian bank lending to private-credit funds. Most of it is in the United States. The analysis cited "potential channels of contagion" and said a sharp foreign downturn "could affect Canadian investors." Its title and authors were not identified in the coverage, which traces to a single Canadian Press report. The tariff break adds a second channel. Canadian capital lent into the US is exposed to the US cycle, and Canadian borrowers in private portfolios are exposed to US trade policy.
What to Do
None of what follows is investment advice. These are diligence questions for reading existing holdings, and any under consideration, in light of the August 22 change.
Ask for exposure by product line, not sector label. Which portfolio companies or borrowers export goods on the Section 338 list to the US? What share of revenue do those goods represent? Was that analysis updated after July 20? Does any holding depend on US inputs that will appear on Canada's counter-tariff list from September 8?
Ask which regime the manager's analysis assumes. Letters written before July 20 may describe CUSMA qualification as a mitigant. Ask whether the manager distinguishes Section 301, where CUSMA goods are exempt, from Section 338, where they are not, and whether Section 232 interactions have been checked against the current proclamation text.
Ask what tariff case the underwriting used. For private credit: what tariff rate and duration did the lender stress-test, and was a 50% duty with no end date among the scenarios? How much covenant headroom remains, and can the borrower pass costs through? For real assets: how dependent are tenants or operators on affected trade flows?
Ask when it will show up in reported values. Private valuations are updated periodically. Ask how often holdings are revalued, by whom, and whether the August 22 change will appear in the next reported value or a later one.
Read every dollar figure with its source and currency. US$20 billion and C$27.6 billion are not stated on the same basis.
Closing
The collapse of the talks was a political event. The loss of the CUSMA exemption for the goods Section 338 covers is a structural one. Until July 20, Canadian cross-border exposure could be partly underwritten on the assumption that CUSMA qualification kept most goods out of the line of fire. For a defined list of products, that assumption no longer holds, and nothing in the proclamations says when it might hold again. The useful question for a private portfolio is a precise one. Not "are we exposed to tariffs?" but "which goods, under which statute, at what rate, for how long, and when will we see it in the numbers?"