Implications of Trump’s Proposed Tariffs on Canadian Goods/Services
The trade relationship between Canada and the United States (U.S.) has once again been disrupted by new tariff measures. U.S. President Donald Trump has proposed a 25% tariff on nearly all Canadian imports, with the exception of energy products, which will be subject to a 10% tariff. In response, Prime Minister Justin Trudeau has proposed a 25% retaliatory tariffs on $30 billion worth of U.S. goods entering Canada.
These developments and its implications raise significant concerns for Canadian businesses that engage in cross-border trade. Here’s what you need to know about the tariffs, their economic impact, and potential relief measures for businesses.
While both sets of tariffs were paused once again on March 6th, President Trump has confirmed that they will go forward following the expiration of the one month period.
What is a Tariff?
A tariff is a tax or duty imposed by a government on imported or exported goods. It is typically used to regulate trade between countries, protect domestic industries, and generate revenue. There are two main types of tariffs:
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Import Tariffs: These are taxes on goods brought into a country from abroad. They make imported goods more expensive, encouraging consumers to buy domestic products.
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Export Tariffs: These are taxes on goods being sent out of a country. Although less common, some countries impose export tariffs to control the supply of certain resources or products.
Tariffs can vary depending on the product and the country imposing them. They are often used as a tool in trade policy, influencing international relationships and negotiations. The tariff is usually paid by the importing business; however the costs are typically passed down the consumer through higher prices.
Canada’s Retaliation: Tariffs on U.S. Imports
On February 2, 2025, the Government of Canada provided a detailed list of U.S. products that were proposed to be subject to the 25% tariffs. The affected goods include:
- Food and beverages,
- Appliances,
- Apparel and footwear,
- Motorcycles,
- Cosmetics, and
- Pulp and paper.
A full list of products that are subject to the 25% tariff is available here.
Additionally, the government intends to impose tariffs on an additional $125 billion worth of U.S. imports, including:
- Passenger vehicles and trucks, including electric vehicles, trucks and buses, recreational vehicles, and recreational boats,
- Steel, aluminum, and aerospace products, and
- Certain fruits and vegetables, beef, pork, and dairy.
However, these tariffs will only be implemented after a 21-day public comment period.
Economic Impact to Canadian Businesses
The tariffs will significantly affect Canadian businesses, whether they import U.S. goods or export products to the U.S. Canadian businesses acting as importers will faces higher operational costs due to the imposition of tariffs, leading to lower profit margins.
If a Canadian business operates as an exporter, they are faced with lower demand as US consumers have to pay higher prices for the Canadian good.
According to the Bank of Canada, the tariffs will affect spending, trade, government revenue, exchange rates, employment, and inflation. Overall, Canada’s gross domestic product (GDP) is expected to weaken as a result of weaker net exports and weaker domestic demand.
Relief for Canadian Businesses
As the tariffs on U.S. imports are a retaliative measure, the government is launching relief for affected businesses. The Department of Finance has announced a remission program to consider requests for exceptional relief from the tariffs imposed to mitigate the effects of the new tariffs. Relief will only be granted in “exceptional and compelling circumstances” which entails a high threshold for relief.
How a Tax Lawyer Can Assist
If your business is affected by these tariffs, either as an importer or exporter, seeking professional guidance can help navigate tariff compliance and explore relief opportunities.
***Disclaimer: This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions, you should consult a lawyer.
Michelle Kosarnia