New U.S. tariffs and Canada’s evolving counter-measures are reshaping costs, margins and supply chains. Below, we cut through the noise with data, scenarios and sector-specific playbooks.
Key Points
Announced in July and implemented August 1, the U.S. move increased rates on many items not covered by CUSMA; Ottawa responded with counter-tariffs, then partially rolled them back on Sept 1 (steel, aluminum and autos remain targeted). Details below.
Recent analyses suggest 60–80% short-run pass-through to core goods prices; Bank of Canada scenarios show inflation running higher in 2025–26 than otherwise.
Canada’s trade-weighted MFN applied tariff averaged ~3.4% in 2024 (agriculture ~14.7%, non-ag ~2.3%). Many lines are duty-free via FTAs—if origin rules are met.
Applied tariff averages — Canada (WTO/WITS)
Averages hide big variation by HS code; check your specific line and origin treatment.
What changed, and when
Bottom line: Policy remains fluid. Even if headline rates settle, the risk premium on cross-border supply chains is higher than it was a year ago.
Who pays? Consumers vs. businesses
📊 The economist’s view
Central banks and academic labs generally find that tariff costs are largely borne domestically via higher prices and/or thinner margins. Recent Bank of Canada scenarios show inflation running above baseline in 2025–26 as tariff effects filter through, even with moderating energy prices.
Translation for owners: Expect suppliers to push for increases; your ability to pass them to customers depends on how differentiated your product is and how tight local competition feels.
🧰 The owner’s reality
SMEs are disproportionately exposed: most Canadian exporters and many importers are small firms, and surveys show a majority of small importers initially ate most of the counter-tariff costs this year. Where switching suppliers is slow, margins take the first hit.
| SMEs’ share of exporting firms | ~97% of exporters are SMEs; ~40% of export value. |
|---|---|
| Pass-through | Short-run consumer pass-through estimates in mid-2025: ~60–80% on core goods. |
| De minimis (courier) | CUSMA courier shipments: duty-free under $150 (tax still applies $40–$150); others ~$20 threshold. |
Sector snapshots
🏭 Manufacturing & industrials
Input costs are rising where U.S.-sourced parts face 35% rates; Canadian retaliation still targets steel, aluminum and autos. Firms with North American qualification under CUSMA can still move goods duty-free if they meet Rules of Origin—paperwork matters more than ever.
🛍️ Retail & e-commerce
Products sourced directly from U.S. wholesalers may get pricier unless you can pivot to Canadian or FTA-partner supply. For small parcels, CUSMA’s higher courier thresholds reduce duty on low-value orders, but taxes and brokerage still apply.
🌾 Food & agri-food
Average agricultural tariffs are much higher than non-ag, and TRQs complicate planning. Over-quota imports can face very high rates; build scenarios for quotas and seasonality.
🧰 Services with imported gear
IT providers, trades and event firms importing equipment should reassess TCO, factoring duties, taxes, and time. Consider leasing or Canadian distributors that already cleared border costs.
🚗 Auto & parts
Autos remain politically sensitive. Tariffs on targeted components raise OEM/aftermarket costs; CUSMA-origin vehicles/parts can still qualify for 0% if value content and labour rules are met. Validate certificates from suppliers each quarter.
🏗️ Construction & building materials
Steel and aluminum exposure flows straight into project bids. Lock pricing windows, add escalation clauses, and pre-buy long-lead items when policy noise spikes.
🏥 Healthcare & life sciences supply
Devices and disposables often have low MFN rates, but supply security trumps tiny duty differences. Map dual suppliers across FTA partners and keep safety stock for regulated SKUs.
⚡ Energy & cleantech
Electrical hardware and batteries may have mixed duty rates; domestic incentives sometimes offset higher landed costs. Explore Canadian-made or FTA-origin components to keep project ROI intact.
🧳 Tourism & hospitality
Imported furnishings, equipment and food inputs can creep up in price. Hedge with Canadian distributors and long-term contracts; pass-through via transparent fees where possible.
📦 Logistics & 3PLs
Brokerage, storage and last-mile partners are revising SLAs for tariff paperwork and delays. A good customs broker is now a competitive advantage—negotiate bundled rates.
Tariff Impact Estimator (quick, illustrative)
Declared value (CAD)
Category (typical MFN)
Origin treatment
Province (tax total)
U.S. 2025 tariff exposure
Uses indicative category MFN rates (WTO/WITS) and provincial tax totals. U.S. 35% input simulates added exposure on items outside CUSMA. Verify your HS code, origin and carrier fees.
Owner’s playbook: 6 moves for the next 90 days
- Audit HS codes & origin — confirm your classification and whether your goods qualify for 0% under CUSMA/CPTPP/CETA. Documentation is ROI-positive.
- Dual-source critical SKUs — short-list an FTA-partner supplier to hedge the policy risk premium.
- Renegotiate landed terms — ask U.S. vendors to share costs or ship DDP via a Canadian distributor who already cleared the border.
- Price with transparency — modest increases with a “why now” note convert better than surprise hikes.
- Exploit de minimis (courier) — for B2C, structure bundles so more orders fall under $150 CUSMA duty-free (tax still applies).
- Financing buffer — tariffs tie up cash in inventory. Consider a working capital facility to smooth the hump.
Remember: The policy tape is moving. Build a monthly “tariff stand-up” with your accountant and customs broker.
Sources
- Bank of Canada — Monetary Policy Report & “In Focus” tariff scenarios (Jan & July 2025): inflation and growth paths under tariff regimes. See In Focus (Jan 29, 2025) and In Focus (Jul 2025); plus MPR PDF.
- Reuters — U.S. raises tariff on Canadian goods to 35% (orders signed late July; effective Aug 1, 2025). Report and announcement coverage.
- Department of Finance Canada — Canada’s response and partial removal (Sept 1, 2025) of counter-tariffs, with steel/aluminum/autos remaining targeted. Policy page.
- WTO / World Tariff Profiles 2024 — Canada averages: trade-weighted MFN ~3.4% (ag ~14.7%, non-ag ~2.3%). Canada profile (PDF).
- WITS (World Bank) — Duty-free share of tariff lines (~82%); historical tariff stats. Canada summary.
- CBSA — CUSMA low-value shipment thresholds (courier): $40/$150. Memorandum D8-2-16 and overview CBSA page.
- Statistics Canada / ISED — SME shares of exporters and trade value. The Daily (May 16, 2025) and Key Small Business Statistics 2024.
- CFIB — Small business pulse on tariff cost-sharing and impacts (summer 2025). Brief and update on partial rollback coverage.
