Latest update: February 4, 2025
Proposed tariffs between Canada and the US have been delayed for at least 30 days, according to a social media post from Prime Minister Justin Trudeau. This news comes after ongoing conversations between Trudeau and Donald Trump on February 2, a day before tariffs were set to be implemented. In his post, Trudeau reiterated the $1.3 billion border plan, including other measures to combat the flow of fentanyl. In addition, the United States has also agreed to delay the imposition of tariffs on Mexico for 30 days.
Following this announcement, some of Canada’s provinces have stated they will also put proposed retaliatory measures on hold, such as removing or limiting the sale of American alcohol and cancelling provincial contracts with American companies.
US President Donald Trump has confirmed a 25% tariff on almost all Canadian goods entering the United States, except for energy products which will face a lower 10% tariff. In response, outgoing Prime Minister Justin Trudeau said Canada will retaliate with a 25% tariff on $30 billion worth of American goods coming into Canada. The tariffs will then be applied to an additional $125 billion worth of US goods in the next 21 days to allow Canadian companies additional time to plan and find alternative suppliers. These tariffs were originally expected to take effect on February 4, 2025; however, the proposed tariffs appear to be postponed, as Canada and the US are in ongoing conversations.
Canada’s provincial governments have also announced some retaliatory measures, including limiting or removing the sale of American alcohol.
While this will have far reaching economic effects, Canadian businesses that engage in cross-border trade will need to prepare for the potential impacts of this change and take action to minimize the impact. We can help you navigate these changes and mitigate risks to your business while staying compliant.
A tariff, which is a tax imposed by a country on imported or exported goods, is generally collected and enforced by a country’s customs authority or agency. For example, in Canada, the Canada Border Services Agency (CBSA) administers duties and taxes on imported goods, including tariffs. Tariffs are generally imposed in addition to any customs duties that apply to a specific product. Then, GST and provincial taxes also apply (but can later be recovered in some cases).
Like duties, the importer of record is generally responsible for paying any tariffs that are applied. The importer of record could be the buyer or the seller. The cost of tariffs is ultimately passed on to the final user or consumer.
On February 2, 2025, the federal government released the full list of US products proposed to be subject to 25% import tariffs.
The tariffs affect a variety of goods, including food and drink, automotive parts, clothing and footwear, cosmetics, luggage, home wares, furniture and appliances, motorcycles, drones, firearms, tobacco, lumber, paper, and more. The federal government said the second list will be made available in the coming days, for a 21-day public comment period prior to implementation. It will include products such as cars, trucks, buses, steel and aluminum, aerospace products, and fruits and vegetables.
The federal government is also proposing measures to ease the effects of the countermeasures on Canadians by launching a process to allow businesses to request exceptional relief from the tariffs. This “remission process” will allow Canadian businesses to request relief from the payment of tariffs or a refund of tariffs already paid. The federal government said it will consider requests for remission of tariffs that apply beginning on February 4, 2025 to address:
If the federal government decides to impose further tariffs, it notes that the remission process will also be available for those goods.
In addition, many of Canada’s provinces have proposed countermeasures to the tariffs.
British Columbia
BC Premier David Eby has directed the BC Liquor Distribution Branch to stop purchasing American liquor immediately from Republican-led "red states” and remove American brands from public liquor store shelves, effective February 4, 2025. He also directed the BC government and Crown corporations to buy Canadian goods and services, where possible.
Manitoba
Manitoba Premier Wab Kinew announced the province will pull American liquor off the shelves on February 4, 2025. He added further measures will be announced soon.
Newfoundland and Labrador
Newfoundland and Labrador Premier Andrew Furey announced the province will pull American liquor off the shelves on February 4, 2025.
Nova Scotia
Nova Scotia Premier Tim Houston has directed the Nova Scotia Liquor Corporation (NSLC) to remove American liquor from stores, beginning February 4, 2025. In addition, the province will seek opportunities to cancel existing contracts with American businesses and maintain the option to reject bids outright. Houston will also double the cost of tolls at the Cobequid Pass for commercial vehicles from the US.
Ontario
Ontario Premier Doug Ford has ordered the Liquor Control Board of Ontario (LCBO) to remove American products, effective February 4, 2025. As the only wholesaler of alcohol in the province, the LCBO will also remove American products from its catalogue so that Ontario-based restaurants and retailers can't order or restock US products. Ontario is also banning other American companies from provincial contracts until the tariffs are reversed.
Quebec
Quebec Premier François Legault has directed the Société des alcools du Québec (SAQ), to remove all American products from its shelves, starting February 4, 2025. He also instructed the SAQ to halt the supply of American alcoholic beverages to grocery stores, restaurants, and bars.
New Brunswick
New Brunswick Premier Susan Holt announced its response plans to US tariffs. In the plan, New Brunswick shared plans to:
PEI
PEI Premier Dennis King announced that it will take immediate steps to remove American products from liquor stores and limit procurement with US-based companies. The province also noted that it will cancel existing contracts with US companies and limit commerce where possible.
Other provinces have expressed solidarity as a nation and will likely announce response plans in the coming days.
The imposition of these tariffs is expected to have significant repercussions for Canadian (and American) businesses, and the broader economy. If Canadian businesses act as the importer of record, they will face higher operational costs, which can squeeze profit margins, reduce cash flow, and limit their ability to reinvest in growth. If increased costs are passed on to Canadians, it may contribute to inflation.
On the other hand, if US purchasers act as the importer of record, higher prices could reduce demand for Canadian goods, leading to a decline in exports. This is particularly concerning for vulnerable industries like manufacturing, energy, forestry, and aerospace which rely heavily on US markets. Analysts from the Bank of Canada warn that a drop in exports could weaken Canada’s GDP, slow economic growth, and increase unemployment.
Overall, these tariffs create financial uncertainty for Canadian companies, disrupt trade relationships, and put downward pressure on economic growth. Without effective countermeasures or alternative markets, Canada risks slower economic expansion and potential long-term challenges for key industries.
We can help implement strategies to prepare for escalating trade tensions and help businesses understand how these changes affect them, including providing guidance on:
We’re closely monitoring policy changes and can help you navigate the regulations to find ways to alleviate the effects of tariffs and maintaining cash flow, while staying compliant. Reach out to your advisor for more details on how these tariffs could impact your business.
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