Tariffs in Canada: Essential Facts

Jul 16

A purple background with text saying "Are you overwhelmed by tariffs?" — Tariffs can be overwhelming for business owners, volatility can be so difficult to navigate as a business owner. This article explores how these tariffs work.

Quick Definition

Tariff: A tax or duty placed on imported goods at the border, making foreign products more expensive than domestic alternatives.
The Two-Way Tariff Reality
What This Means
Canada and the U.S. are both imposing tariffs on each other's goods. This creates a complex situation where:

Canadian exporters face barriers entering the U.S. market
Canadian importers pay more for U.S. goods
Consumers in both countries may see higher prices
Businesses must adapt supply chains and pricing strategies

Key Principle

The U.S. announced 25% tariffs on all Canadian imports (except oil/energy at 10%), and Canada responded with its own 25% tariffs on $155 billion worth of U.S. goods. This is reciprocal trade action - each country responding to the other's measures.How Tariffs Work

Basic Process

Import arrives at Canadian border
Customs assesses if tariffs apply
Tariff added to product value
Regular taxes (GST/HST) calculated on new total
Costs passed to consumers/businesses

Key Point
Tariffs are separate from and in addition to regular sales taxes.Current Tariff Status (2025)
Major Canadian Tariffs (Canada imposing on U.S.)

25% on $155 billion of U.S. goods (phased implementation)
25% on non-CUSMA vehicles from the U.S.
50% surtax on certain steel products from non-FTA countries
10% on energy products and potash not meeting CUSMA rules

Major U.S. Tariffs (U.S. imposing on Canada)

25% on all Canadian goods (with exceptions for oil/energy at 10%)
25% on Canadian steel and aluminum (effective March 12, 2025)
50% on steel and aluminum (threatened/implemented at times)
35% general tariff on all Canadian goods (announced for August 1, 2025)

Implementation Timeline

March 4, 2025: Canada imposes 25% on $30 billion in U.S. goods
March 12, 2025: U.S. implements 25% on Canadian steel/aluminum
March 13, 2025: Canada responds with 25% on additional $29.8 billion in U.S. goods
April 9, 2025: Canada adds vehicle tariffs
June 27, 2025: Canada implements steel surtax
August 1, 2025: U.S. announces 35% general tariff on Canada

Why Canada Uses Tariffs
Primary Reasons
✓ Protect domestic industries from unfair competition
✓ Respond to trade disputes and unfair practices
✓ Level the playing field for Canadian businesses
✓ Generate government revenue (historically)
✓ Provide negotiating leverage in trade talksBenefits for Canada
For Industries

Job protection in vulnerable sectors
Market share growth for domestic producers
Investment incentives for Canadian manufacturing
Supply chain resilience through domestic alternatives

For Exports

New market opportunities when competitors face tariffs elsewhere
Competitive advantages in third-country markets
Scaling opportunities for efficient Canadian producers

Impact on Canadians

From U.S. Tariffs on Canadian Goods

Export Challenges: Canadian exporters face higher costs to enter U.S. market
Industry Pressure: Steel, aluminum, and auto sectors particularly affected
Job Concerns: Export-dependent industries may face layoffs
Price Impacts: Some Canadian products become less competitive in U.S.
From Canadian Tariffs on U.S. Goods
Higher Prices: Some imported goods cost more
More Choices: Increased availability of Canadian alternatives
Job Impacts: Potential employment in protected industries
Supply Chain: Businesses may need to find alternative suppliers
Business Effects
Import Costs: Higher expenses for U.S. inputs
Export Barriers: Increased difficulty accessing U.S. markets
Market Opportunities: Increased domestic demand for Canadian products
Investment Decisions: Companies reassessing North American operationsCommon Misconceptions
MYTH: Tariffs always hurt consumers
REALITY: While some prices may rise, tariffs can create jobs and strengthen domestic industries, potentially offsetting costs.
MYTH: Tariffs are permanent
REALITY: Most tariffs are temporary policy tools used to address specific trade issues.
MYTH: All imports face tariffs
REALITY: Many goods are exempt, especially those covered by free trade agreements like CUSMA.Key Exemptions
Products Often Exempt

Goods used in automobile manufacturing
Inputs for aircraft production
Products covered by free trade agreements
Certain raw materials for domestic production

Special Considerations

Personal exemptions for travelers
Commercial use exemptions for specific industries
Chapter 98/99 exemptions in Customs Tariff

Scale and Export Importance

Why Scale Matters

Domestic production must meet increased demand
Efficient operations needed to compete globally
Investment in capacity required for long-term success

Export Opportunities

Market displacement: When competitors face tariffs elsewhere
Cost advantages: Canadian products become more competitive
Trade diversification: Reduced dependence on single markets

Economic Strategy

Short-Term Goals

Protect Canadian jobs and industries
Respond to unfair trade practices
Maintain economic leverage in negotiations

Long-Term Vision

Build competitive Canadian industries
Strengthen domestic supply chains
Create sustainable export advantages

What You Can Do

Stay Informed

Monitor trade policy developments
Understand impacts on your industry
Follow government announcements

Business Planning

Assess supply chain vulnerabilities
Explore domestic sourcing options
Consider export opportunities

Consumer Awareness

Compare domestic vs. imported options
Understand price changes in context
Support Canadian businesses when viable

Key Takeaways

This is a two-way trade dispute - both countries are imposing tariffs
Canada's tariffs are largely retaliatory - responses to U.S. actions
Tariffs are tools, not permanent barriers
Protection enables growth of domestic industries while creating export challenges
Scale matters for effectiveness in both directions
Both countries face economic adjustments as supply chains adapt
Temporary measures aim for long-term negotiated solutions