What new proposed U.S. forced labour tariffs mean for Canadian employers

On June 3, 2026, the Office of the United States Trade Representative (USTR) proposed additional tariffs of up to 12.5% on imports from 60 countries, including Canada, based on its determination that those jurisdictions have failed to adequately curb the trade of goods produced with forced labour. The proposal issued under Section 301 of the Trade Act of 1974 (United States) is part of the Trump administration’s effort to reconstruct the global tariff regime that was struck down by the U.S. Supreme Court in February 2026, as further explained in a previous Insight.

While the headline issue is trade, the underlying premise that forced labour remains embedded in global supply chains has significant implications for Canadian employers, particularly those engaged in cross-border manufacturing, distribution and procurement.

Overview of the USTR proposal

The USTR proposal establishes a two-tier tariff structure based on each country’s progress in addressing forced labour, while carving out significant exemptions for goods already subject to other U.S. trade measures. At a high level, the USTR proposal can be broken down into the following three key components:

• 10% additional tariffs are proposed on imports from 15 economies, including Canada, the European Union, the United Kingdom, Mexico, Indonesia and Pakistan, which the USTR determined have plans (or partial plans) to address forced labour
• 12.5% additional tariffs are proposed on imports from the remaining 45 countries investigated, including China, India, Japan, South Korea, Vietnam, Australia and New Zealand
• Exemptions apply to goods already subject to Section 232 national security tariffs under the Trade Expansion Act of 1962 (United States) (auto, steel, aluminum and copper), to Canadian and Mexican products entering the U.S. that comply with the Canada-U.S.-Mexico Agreement (CUSMA) rules of origin and to an extensive list of specified product categories (including crude oil, rare earths, pharmaceuticals and aircraft parts)

Prime Minister Mark Carney noted that Canada shares the U.S. objective of eliminating forced labour and that most Canadian exporters will remain protected by the CUSMA-based exemptions.

Why this matters for Canadian employers

Although the tariffs are a U.S. trade measure, the practical effect is to elevate forced labour due diligence from an ethical aspiration to a commercial necessity. Canadian employers, particularly those importing inputs from offshore suppliers or exporting finished goods into the U.S., should expect heightened scrutiny of their supply chains, including the labour practices of their suppliers, subcontractors and staffing agencies.

Canadian businesses are already subject to a parallel domestic regime under the Fighting Against Forced Labour and Child Labour in Supply Chains Act (Canada), which came into force on January 1, 2024. Most reporting entities must file an annual report by May 31 each year describing the steps taken to prevent and reduce risk of forced labour and child labour in their supply chains. The USTR proposal reinforces that U.S. trading partners will increasingly expect documented, verifiable supply chain controls.

Key considerations for employers

Canadian employers with cross-border operations or offshore supply chains should consider taking the following steps to manage their exposure:

• Regularly audit your supply chain – Map your suppliers (including sub-tier suppliers) and identify exposure to jurisdictions flagged by the USTR. Pay particular attention to high-risk sectors such as textiles, apparel, electronics, agriculture and mineral inputs.
• Review supplier contracts – Ensure supplier and subcontractor agreements include robust representations, warranties, audit rights and termination triggers tied to forced labour and child labour compliance. Where appropriate, build in mechanisms for tariff exposure and shipment seizures.
• Strengthen internal labour and HR controls – Forced labour and child labour risks are not limited to offshore suppliers. Employers should seek advice and review their use of foreign workers, third-party staffing agencies and recruitment intermediaries to ensure compliance with the Immigration and Refugee Protection Act (Canada), Provincial and Federal employment standards and anti-trafficking obligations.
• Update Supply Chains Act reporting – Use the USTR proposal as a prompt to enhance your annual report, including governance structures, due diligence processes, training and remediation measures, well in advance of the next deadline.

The MLT Aikins Labour and Employment and International Trade groups regularly advise employers on supply chain due diligence, the Supply Chains Act reporting, cross-border workforce compliance and contract structuring to manage trade and labour risk.

If your organizations sources or sells products from/to the United States, our team can assist you with assessing your exposure to the proposed tariffs and strengthen your forced labour and child labour compliance program.

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