President Donald Trump increased tariffs on certain Canadian imports from 25% to 35% Friday, following weeks of threatening to do just that. But experts say the new tariff landscape is not as clear-cut as it may sound.

Trump announced the increase in an executive order late Thursday, which followed weeks of uncertainty over whether the two nations would reach a bilateral agreement. Nearly 24 hours earlier, just after midnight Thursday, Trump said in a post on his Truth Social platform that Canada’s plan to recognize Palestinian statehood could undermine any chance at a deal.

Trump’s Thursday order also changed import taxes for over 60 other countries.

But the latest tariffs affecting Maine’s neighbor — by far its biggest trade partner — only apply to items that are not otherwise covered by the United States Mexico Canada Agreement, a major pact designed to alleviate trade barriers between the three countries. Maine brought in more than $4.7 billion worth of Canadian goods last year.

The agreement is sweeping, and it could exempt the vast majority of Canadian imports from the 35% tariff.

Patrick Woodcock, president of the Maine State Chamber of Commerce, said he was “discouraged” that the two countries did not settle on an agreement before Trump’s deadline. And he noted that the tariffs on Canadian goods went into effect at 12:01 a.m. Friday, unlike most of the others, which face a seven-day delay.

“Although the implications of this may be more limited than what we were preparing for at the beginning of the year, this will have significant consequences for individual companies and individual employers in the state,” Woodcock said.

WHAT IS THE UNITED STATES MEXICO CANADA AGREEMENT, OR USMCA?

The United States Mexico Canada Agreement, often abbreviated as USMCA, is a free-trade agreement that took effect in July 2020, during Trump’s first term.

It replaced the North American Free Trade Agreement, or NAFTA, which had offered similar tariff exemptions since 1994. At the time, the USMCA was touted as a way to modernize trade on the continent, and it provided new rules for sectors like the automotive, textile and agricultural industries, according to U.S. Customs and Border Protection.

Trump has gone back and forth about whether to exempt items covered in the landmark agreement from his latest batch of tariffs. In March, when the Canadian tariffs first took effect, they initially applied to all goods. But, facing criticism from companies and politicians on both sides of the border, Trump offered an exemption for products covered by the agreement.

“The items covered under the United States Mexico Canada Agreement, all those items remain untouched,” said Stefano Tijerina, a senior lecturer in management at the University of Maine.

WHAT ITEMS DOES IT PROTECT FROM THE NEW TARIFFS?

Roughly 86% of Canadian imports into the United States are potentially covered by the trade agreement, according to an April analysis by the Royal Bank of Canada.

“And I think for Maine, it’s probably even a little higher,” said Norm O’Reilly, dean of the University of New England College of Business. He noted that many of Maine’s biggest imports are not subject to the new tariffs.

Broadly speaking, the agreement exempts products made entirely in Mexico and Canada. Some items made with components from other countries — but that are substantially changed by the manufacturing process — are also exempt.

Others are still subject to tariffs under the agreement, including some maple syrup and dairy products, but rates for those items are still generally lower than the new 35% tax.

“Here in Maine, we rely heavily on oil and fuel, forest products, electricity, most of which are covered,” O’Reilly said.

The agreement shields electrical energy, natural gas, and oil-based fuels, as well as wooden logs and pellets intended for burning. It also protects some construction materials, including concrete and certain types of pipe, and agricultural products, like fertilizer and animal feed.

Seafood products, including live lobsters and chilled shrimp and scallops, can also be imported duty-free under the agreement.

To benefit from the protections, companies must complete a certification of origin stating the importer’s and exporter’s identities, a description of the goods and an explanation of how it meets the agreement’s criteria.

WHAT’S LEFT OUT THAT COULD GET COSTLIER?

While the agreement generally exempts imports produced wholly in Canada or Mexico, products built with materials from other countries may not be covered unless they are substantially changed during the manufacturing process.

Those origin determinations can vary widely from product to product, depending on what specific materials are used and how a given supply chain is structured. That makes it difficult to make sweeping predictions about how types of products will be treated under the new tariff order, said Woodcock, of the state chamber of commerce.

“We’ve gotten a lot of questions from members,” Woodcock said. “Every business is a little bit different. … Every business has a different supply chain.”

Tijerina noted that some sectors — including some in the agreement — are subject to other tariffs, including the auto, steel, aluminum and lumber industries. Trump tacked steep tariffs on aluminum imports from nearly all countries in June.

Canadian Prime Minister Mark Carney said American tariffs have “heavily impacted” some of the country’s largest exports. Still, he said in a statement on social media, the country remains committed to the agreement.

Additionally, some products may be technically covered by the agreement but never formally certified as such, Woodcock said, pointing to the seafood industry as an example. In those cases, companies may be on the hook for fees while they determine whether their imports qualify. Fully tracing a product’s origin can be a complex, paperwork-heavy process.

“There’s a sort of analysis businesses will do,” Woodcock said. “Is it worth it to get the certification or should we just pay the tariff?”

In 2024, only about 38% of Canadian imports were traded under the agreement, according to the Royal Bank of Canada, which blamed “the administrative burden” of meeting the origin requirements.

HOW WILL THIS SHAPE CANADA-MAINE TRADE?

Maine’s forest product sector could be among the first to feel the brunt of new tariffs, Woodcock suggested.

While the USMCA allows for duty-free imports of certain wood products — including wooden carpentry, notched studs and edge-glued pieces — much of Canadian lumber is subject to a different regime of tariffs.

A handful of other duties apply to softwood lumber, which can be ground into wood pulp to manufacture paper, a key industry in Maine. Late last month, the Commerce Department announced it would nearly triple an “antidumping” tax on Canadian softwood imports, bringing it from about 7.7% to about 20.7%. Including additional tariffs the department is expected to announce next week, softwood would be subject to a roughly 34% tariff, according to Canadian reports.

“Lumber will impact our construction, our housing for sure,” said Tijerina, the UMaine professor. “I really think that the biggest impact is the small business sector.”

He noted that smaller businesses, from retail to Maine-based manufacturing, may have a harder time pivoting if their suppliers’ prices go up, which could force them to pass additional costs to the end consumer.

WHAT’S NEXT FOR THE USMCA?

The agreement, which terminates 16 years after enactment, is slated for a full review in 2026.

During that review, the agreement could be renegotiated with minor tweaks or significant changes. Any of the three countries involved could also opt not to sign on again.

In the meantime, Woodcock still hopes for a new deal with Canada, and that the deals struck with other countries could serve as a framework for one between the United States and Canada.

“The trade deal is hugely consequential for Maine. Our bilateral relationship is massively important as well,” he said.