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With the signing of an executive order, U.S. President Donald Trump upped Canada's tariff rate to 35 per cent, effective at 12:01 a.m. today.

That's a 10 per cent increase on the 25 per cent rate that has been in effect on Canadian goods headed south of the border since March, and is a blanket tariff that will apply to Canadian products across the board.

However, that doesn't paint the whole picture. A very small number of Canadian products will be subjected to the 35 per cent tariff.

That's because the tariffs don't apply to all goods that are subject to the Canada-U.S.-Mexico Agreement (CUSMA), the existing free trade deal governing trade between the three countries. Those products can keep going across the border free of tariffs.

Most of the goods Canada exports to the U.S. are covered by CUSMA. The Bank of Canada said in its monetary policy report released Wednesday that an estimated 95 per cent of stuff sent south of the border qualifies under that agreement.

That means the new, higher 35 per cent rate will be felt by a small fraction of exports that are not CUSMA-compliant, which likely includes a broad array of products across all sectors, according to experts.

"[CUSMA] is the one thing that is ensuring normalcy in trade flows in much of the economy," said Eric Miller, president and CEO of Rideau Potomac Strategy Group."And so the maintenance of that exemption was absolutely crucial."

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There's no simple list of items that are CUSMA-compliant, because products are certified on a case-by-case basis, based on a number of complicated factors.

In order to get the exemption, a certain amount of the product needs to be made in Canada, with Canadian inputs.

Take the example of a steak versus that of a screwdriver.

If a cow is born, raised, slaughtered and prepared in Alberta, then the steak — the end product — is clearly Canadian and would be shielded under CUSMA, says Miller.

But a typical screwdriver is made of metal, along with plastic or rubber for the handle. The manufacturer would have to make sure that enough of the materials come from Canada, Mexico or the U.S. That amount is usually about 60 per cent, according to lawyer Daniel Kiselbach, a managing partner at Miller Thompson LLP.

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Then, you have to make sure you're adding value to those parts and converting them to a finished product before shipping it out. In the case of the screwdriver, you're taking the raw materials and making them into a new, finished item, so that would meet the bar.

Overall, anything harvested or mined is usually CUSMA-compliant, Kiselbach said.

Anything manufactured or produced in Canada gets more complicated. Electronics and machinery, in particular, are product types that tend to have a harder time getting CUSMA certification.

On top of that, the certification process can be challenging, requiring records showing where all a product's components come from, and it is costly.

"[Businesses] don't necessarily understand what the rules are telling them," Miller said."It's almost like cryptography or something." For that reason, Miller says some businesses have simply not acquired CUSMA certification in the past — something that's changing now that the rates are so much higher.

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While the fraction of companies that don't qualify for the free trade exemption might be small, Miller says the impact of the new rate should not be overlooked.

Many of those who will be hit by the Saturday tariff increase will be small- to medium-sized businesses that rely on components that are made in countries outside of Canada — and can't easily replace them with materials sourced elsewhere.

"If you are used to sourcing a particular input from China for the last 10 years, it's not so easy to go and say, 'Now I'm going to buy that good somewhere else,'" Miller said."They can't easily change and they can't meet the rules, so they have to pay 35 per cent. And for them, going from 25 per cent to 35 per cent is pretty devastating," Miller.

Kiselbach says 35 per cent tariffs might be higher than some companies' profit margins, meaning they'd be losing money on each item they sell at the current rate.

Sectoral tariffs still in play

The 35 per cent rate also has no bearing on the rates Trump has set for specific sectors.

Those include a 50 per cent tariff on steel and aluminum, as well as 25 per cent on cars and auto parts, both of which had already been in effect.

A new, 50 per cent tariff on some copper products, including copper pipes and wiring, also went into effect today. The Trump administration made carveouts for copper input materials such as ores, concentrates and cathodes, which is providing the industry some relief.

And while the sector-specific rates are largely not new, the impact of these steep rates on important sectors cannot be ignored, said Alan Arcand, chief economist with the trade association Canadian Manufacturers and Exporters.

"These are very important industries for Canada," Arcand said."These are tariff rates that are just not … sustainable for these industries. So that's really the rub of the issue right now."