Navigating the US-Canada Tariffs: A Guide for Canadian Small Businesses

For small businesses that import or export goods across the border, understanding these tariffs and how to manage them can be the key to maintaining profitability and sustaining growth.

In this blog post, we’ll explore the new US-Canada tariffs, how they affect small businesses, and provide actionable strategies for managing them effectively.

Current Status of the US-Canada Tariff Dispute

U.S. Tariffs on Canada

As outlined in the February 6, 2025, update from FTR Now, U.S. President Donald Trump directed the implementation of new tariffs on imports from Canada, Mexico, and China. These tariffs were initially set to be enforced on February 4, 2025, but were delayed for 30 days to allow for negotiations between Canada and the U.S. to find a possible resolution.

After the 30-day pause, the U.S. confirmed that it would proceed with imposing a 25% tariff on Canadian exports and a 10% tariff on Canadian energy. These tariffs officially came into effect on March 4, 2025.

Canada's Counter-Tariffs

In retaliation, Canada introduced its own countermeasures, known as surtaxes, targeting U.S. goods. These surtaxes included 25% tariffs on a range of products valued at $30 billion, effective March 5, 2025. This initial wave of retaliatory tariffs is expected to grow to $155 billion worth of U.S. imports in 21 days. The surtaxes will remain in effect until the U.S. removes its tariffs. Additionally, Canada is considering other potential non-tariff measures in the event that the U.S. does not withdraw its tariffs.

Tariff Break Until April 2: What’s Affected?

On March 5, 2025, the U.S. announced a 30-day suspension of tariffs on automobiles and auto parts, allowing for a brief reprieve. The following day, the U.S. extended this break to include goods that comply with the Canada-U.S.-Mexico Agreement (CUSMA), effective until April 2, 2025. Here’s how the new rules break down for Canadian goods entering the U.S.:

• Goods that do not meet the CUSMA rules of origin will still face a 25% tariff.

• Energy products and potash outside of the CUSMA agreement will continue to incur a 10% tariff.

• Goods that comply with CUSMA’s rules of origin will be exempt from tariffs.

Despite these partial relief measures, Canada’s 25% surtax on $30 billion worth of U.S. products remains in place. However, Canada has postponed the implementation of its second round of retaliatory tariffs on $125 billion CAD worth of U.S. imports until April 2, 2025.

How US-Canada Tariffs Affect Canadian Small Businesses

For Canadian small businesses, these tariffs will have a direct impact on their bottom line. Here are a few key ways in which tariffs can affect small businesses:

1. Increased Costs of Goods: If your business imports goods from the US, you may face higher costs if those goods are subject to tariffs. This can lead to higher prices for your customers or decreased profit margins.

2. Supply Chain Disruptions: Tariffs can disrupt the flow of goods between Canada and the US, potentially delaying shipments or causing shortages of critical materials.

3. Export Challenges: If your business exports goods to the US, you may face tariffs imposed by the US government, making it more expensive to sell your products in the American market. This can reduce competitiveness and limit opportunities for growth.

4. Fluctuating Exchange Rates: Tariffs can also influence exchange rates, which can further impact the cost of doing business across the border. Even small fluctuations in currency exchange can significantly affect the price competitiveness of goods.

Strategies for Managing Tariffs as a Canadian Small Business

Though tariffs can seem daunting, there are strategies Canadian small businesses can use to mitigate the impact and keep operations running smoothly.

1. Stay Informed About Tariff Changes

Tariffs can change quickly due to political shifts, trade disputes, or adjustments in international trade agreements. It’s crucial for Canadian small business owners to stay informed about current tariff rates, especially if your business relies heavily on imports or exports with the US.

Subscribing to trade newsletters or working with a customs broker can help you stay ahead of any tariff changes that could impact your business.

2. Work with a Customs Broker

A customs broker is a professional who specializes in managing the import/export process and ensuring that you comply with all regulations. They can help you determine the appropriate tariff classifications for your goods, assist with paperwork, and ensure that you don’t miss any opportunities for tariff exemptions or reductions.

3. Consider Diversifying Suppliers

If your business relies on importing goods from the US, consider diversifying your supplier base to include sources from other countries. While this may not always be practical for every type of product, having suppliers in different regions can help reduce your dependency on one market and mitigate the risk of tariff-related disruptions.

Additionally, you may want to look into suppliers located within Canada or other countries that have favourable trade agreements with Canada.

4. Optimize Your Pricing Strategy

Tariffs lead to higher costs for importing goods, but you can adjust your pricing strategy to protect your profit margins. Consider revising your pricing structure to reflect the added costs without losing customers. This could involve offering tiered pricing, bundling products, or providing discounts for bulk purchases.

Alternatively, you can explore cost-saving measures in other parts of your business, such as streamlining operations or renegotiating supplier contracts, to offset the increase in import costs.

5. Engage in Advocacy

While small businesses may not always have the resources to influence trade policy directly, it’s important to remain active in trade advocacy. Many industry associations and chambers of commerce lobby on behalf of small businesses to reduce tariff barriers and advocate for fair trade practices.

By engaging with these groups, you can contribute to the ongoing conversation about trade policies and potentially influence future changes that benefit Canadian small businesses.

7. Leverage Technology to Streamline Operations

Technology can help reduce the burden of managing tariffs. From advanced inventory management systems to software that helps calculate tariffs on imported goods, utilizing tech solutions can improve efficiency and help you avoid costly mistakes when navigating the complexities of tariffs and customs procedures.

Tariffs between Canada and the US can present challenges for Canadian small businesses, but with the right strategies in place, these challenges can be navigated effectively. Staying informed, working with experts, optimizing your supply chain, and leveraging trade agreements are all ways to manage the impact of tariffs on your business. By being proactive and adaptable, you can continue to grow and thrive despite the complexities of cross-border trade.