Tariffs FAQ: What Canadian businesses need to know

With the trade environment changing rapidly, planning for the future has become increasingly challenging. At Export Development Canada (EDC), we understand the concerns of Canadian businesses and are here to provide the support and information needed to navigate these uncertainties.

In March, the federal government announced $6.5 billion in support of businesses impacted by the current trade war, including the launch of EDC’s Trade Impact Program (TIP). With this program, EDC is prepared to facilitate an additional $5 billion over two years in support to eligible companies across a range of products to help them navigate economic challenges.

On April 15, the government announced additional measures, including:

1. A performance-based remission framework for automakers, designed to incentivize continued production and investment in Canada.
2. A temporary six-month relief for goods imported from the U.S. that are used in Canadian manufacturing, processing and food and beverage packaging, and for those used to support public health, health care, public safety, and national security objectives.
3. The new Large Enterprise Tariff Loan facility (LETL)—offered by the Canada Development Investment Corp. (CDEV)—is now accepting applicants. This program will support eligible large businesses—including those that contribute to Canada’s food security, energy security, economic security and national security—that are facing difficulties in accessing traditional sources of market financing, by providing access to liquidity. 

Tariffs and the impact on Canadian exporters

Making sense of the United States-Canada trade environment isn’t easy—especially for Canadian exporters.

In early March, U.S. President Donald Trump’s administration imposed new tariffs on Canada under the International Emergency Economic Powers Act (IEEPA), adding a 25% tariff on most Canadian goods and 10% on energy exports, including potash. The Canadian government countered with $30 billion in retaliatory tariffs targeting U.S. exports to Canada, and at one point, threatened to target a further $125 billion in U.S. goods.

Since then, there have been several exemptions and delays. The new tariffs were later exempted on goods covered by the Canada-United States-Mexico Agreement (CUSMA), but President Trump followed through with a 25% import tax on all steel and aluminum entering the U.S. A similar 25% tariff on automobiles was exempted May 1 after the U.S. signed an executive order providing some exemptions on foreign car and parts imports compliant with CUSMA. In recent developments, on June 4, President Trump increased tariffs on steel and aluminum imports to 50%. About a quarter of all steel used in the U.S. is imported and Canada is its largest supplier.

The U.S. has placed tariffs on many other countries worldwide, introducing a baseline 10% tax that went into effect on April 5, while pausing much higher rates for dozens of other nations. As part of an ongoing trade dispute with China, the U.S. has raised tariffs on that country up to 145%, while China has retaliated with a 125% tax on U.S. products. However, following recent trade talks, the two countries agreed to a temporary 90-day reprieve, with the U.S. reducing tariffs on Chinese good to 30% and China cutting blanket tariffs on American products to 10%. 

Why is the U.S. imposing tariffs?

The U.S. administration has stated that tariffs will protect U.S. jobs, encourage its consumers to buy more American-made goods and boost manufacturing. However, the impact of the trade war is causing significant uncertainty and disruption in international trade and supply chains. Top U.S. retailers, including Walmart, are warning of rising prices, layoffs and supply shortages. 

Canada-United States trade

In 2023, trade between Canada and the U.S. exceeded $1.3 trillion, with $3.5 billion worth of goods and services crossing the Canada-U.S. border every day. Since 2015, bilateral trade has increased by more than $400 billion, thanks to mutual efforts to deepen this relationship. 

The current Canada-U.S. trade situation is creating significant uncertainty for companies on both sides of the border. In an ever-evolving news landscape, companies should stay informed on trade policy changes, explore tariff mitigation strategies and work with EDC to explore other potential global markets for diversification. 

To help Canadian exporters better understand these issues, we’ve compiled a list of our customers’ and prospects’ most frequently asked questions. This article aims to provide clarity and guidance for companies to help them stay informed. The Government of Canada also offers helpful resources for companies on how to manage the potential effects of the evolving Canada-United States relationship, many of which are highlighted below.

1. What’s a tariff?

Tariffs are taxes that governments impose on goods coming from another country. Like a sales tax, tariffs are paid on imported items and can affect both the cost of goods you import and the competitive price of your exports. Unlike import duties determined by the U.S. Harmonized Tariff Schedule (HTS), tariffs aren’t based on specific product factors, like country of origin, product purpose, weight, or value. They’re often used to protect domestic industries from foreign competition. 

2. How could tariffs impact my business? 

Increased costs: Tariffs can increase the cost of goods you import, affecting your production costs, pricing and profit margins. 

Reduced competitiveness: For exporters, tariffs can make your products more expensive in foreign markets, reducing your competitiveness. 

3. How do I know if I’ll have to pay tariffs?

Canadian exporters can use tools, like the Canada Tariff Finder, the Tariff Tracker and the Canadian Chamber of Commerce Business Data Lab’s Canada-U.S. Trade Tracker, to get information on tariffs for specific products and countries.

Understanding the rules of origin and the Harmonized System (HS) classification is also crucial in determining how tariffs will apply to your goods.

4. Where can I get help understanding CUSMA compliance?

By understanding CUSMA requirements, Canadian exporters can ensure compliance, avoid tariffs and build resiliency during times of market uncertainty.

The Trade Commissioner Service (TCS) provides information on trade agreements, tariffs, sanctions and on CUSMA compliance. Through Service Canada, TCS has a dedicated support line at 1-833-760-1167 to answer common questions about CUSMA compliance, including rules of origin and exporter eligibility.

Read EDC’s insightful article on Complying with CUSMA: What Canadian exporters, importers need to know.

5. What are the rules of origin under CUSMA?

Rules of origin are the criteria used to determine the country source of the materials used to make a product destined for export. They allow customs officials to decide whether goods are entitled to preferential tariff treatment under the applicable free trade agreement (FTA).

Rules of origin are negotiated as part of every FTA. When no FTAs are in place, the World Trade Organization’s (WTO) rules apply. CUSMA outlines general rules of origin in Chapter 4 of the agreement. More product-specific rules are found in Annex 4-B of Chapter 4.

A certification of origin verifies that your product was made, processed or significantly transformed in Canada, the U.S., or Mexico. To claim preferential tariff treatment under CUSMA, you must have a valid certification for any imported shipments valued above the low- value shipment (LVS) threshold set by the importing country. For example, in Canada, the LVS threshold is $3,300. 

Create a free MyEDC account to read more about rules of origin, or to ask a question of your own.

6. What are the steps to ensure your product meets the CUSMA rules of origin and complete a certification of origin?

As a Canadian company exporting to the United States and Mexico, compliance with the CUSMA can help unlock significant savings, offer stability in cross-border transactions and streamline documentation. The following steps can be helpful in this process:

• Determine your product’s HS code.
• Assess if your good meets the rules of origin (product‑specific rules of origin are written based on HS codes).
• Complete a certification of origin (there’s no requirement for this information to be provided on a specific form. It may be provided on an invoice or any other document).
• Consider using a template certificate to avoid errors.
• Provide the certification of origin to your U.S. importer, so they can claim the preferential tariff treatment.
• Request an advance ruling for certainty about how the good will be treated upon entry into the U.S.
• Contact a certified customs broker for additional support (see more below).

Remission applications

The federal government has outlined a process and provided a template for Canadian businesses to request relief from the payment of tariffs, or a refund of tariffs already paid. If you intend to use the remission process, be ready to provide detailed information about your operations, how you’re affected by the tariffs and why your business requires assistance. 

7. What is an importer of record?

An importer of record (IOR) is the entity—individual, business or designated agent such as a customs broker—responsible for ensuring compliance with all import regulations, paying any applicable duties and tariffs and ensuring that the goods are properly classified. When drawing up new contracts, specify who the importer of record is. Consult with a legal team to ensure the contract language is clear.

If an entity no longer wishes to be the IOR, they need to update their importer identity information with the U.S. Customs and Border Protection (CBP). 

8. How can I find a customs broker?

The role of a customs broker is to facilitate trade and help exporters manage risk. Many people associate customs brokers with importing, but in today’s volatile trade environment, their services and specialized expertise can benefit exporters. For example, if you don’t know the Incoterm rules, your business may have an issue clearing customs. A customs broker can help you understand customs and documentation requirements for your product to leave Canada and enter global markets, including the United States.

Not all brokers are the same. To identify the right custom broker, you can start with the Canadian Society of Customs Brokers (CSCB), which provides a directory of licensed customs brokers in Canada.

Additionally, the Canada Border Service Agency (CBSA) lists all approved customs brokers in Canada.

Read more about this topic at EDC’s Export Help Hub.

9. What sectors will be most affected by tariffs? 

The tariffs are impacting several sectors, disrupting global supply chains and causing increased prices for Canadian and American consumers. According to EDC Economics, the tariffs are disrupting Canada’s economy, affecting trade volumes, the value of the Canadian dollar and total Canadian employment. Currently, container-shipping traffic from China has dropped by almost 60%. The following sectors are being affected:

• Agriculture and agri-food: Canada’s agri-food sector, including grains, meat, dairy products, potash and fertilizer, is highly integrated with the U.S. market. Tariffs will impact the cost of these goods, affecting both Canadian producers and American consumers. Increased costs are leading to higher prices for food products and disrupting the supply chain, impacting the profitability of Canadian farmers and exporters. The Retail Council of Canada has warned that the trade dispute will have a negative impact on Canadians’ access to food and groceries. In March, in response to Canada’s 100% tariff on electric vehicles imported from China in October 2024, China announced new tariff measures on Canada, including a 100% tariff on canola oil, oilseed meal and peas and a 25% tariff applied to seafood and pork products.
• Automotive: Highly integrated with the U.S. market, the automotive sector relies on cross-border supply chains for parts and components. After threatening to impose 25% tariffs, the Trump administration gave the auto industry a reprieve on May 1 for companies compliant under CUSMA. President Trump signed an executive order, so that companies paying the auto tariffs won’t see other taxes—including the 25% duties on steel and aluminum—stacked on top of each other. The auto industry’s big three—Ford, General Motors and Stellantis—have been lobbying the U.S. for months, claiming tariffs will increase prices and devastate the North American industry. There are reports that Stellantis will move some auto production from Canada to avoid U.S. tariffs.
• Construction: The construction industry depends on a steady supply of materials and equipment from Canada. On March 12, the U.S. imposed tariffs of 25% on Canadian steel and aluminum products, while Canada imposed reciprocal tariffs the next day on a list of products totalling $29 billion. However,  on June 4, President Trump increased tariffs on steel and aluminum imports to 50%.
• Critical minerals: Vital for producing clean energy technologies and various high-tech applications, tariffs on critical minerals could disrupt supply chains and increase costs for industries reliant on these materials. Canada, with its rich deposits of cobalt, lithium, nickel, uranium and rare earth elements, plays a crucial role in the global supply of critical minerals. Tariffs could impact the competitiveness of Canadian exports and lead to supply shortages in the U.S. market.
• Lumber: The current tariff rate on Canadian softwood lumber is 14.54%. The additional 25% rate proposed in March was ultimately exempted for lumber on April 2. Canadian lumber makes up roughly 30% of the U.S. softwood lumber supply, which could impact homebuilding and manufacturing.
• Manufacturing: Sectors, including machinery, electronics and consumer goods, are deeply connected to the U.S. market. Tariffs are increasing the cost of raw materials and components, affecting production efficiency and pricing. 

10. Can an exporter circumvent tariffs?

Circumventing tariffs through illegal means can lead to severe penalties. Exploring legal avenues such as renegotiating contracts or shifting supply chains may help mitigate the impact. Increasing your existing production in the United States, or other markets, may also prove helpful.

Canada has 15 free trade agreements (FTAs) with 51 countries, which reduce or eliminate tariffs, providing Canadian companies with preferential access to global markets. These agreements, including the Comprehensive Economic and Trade Agreement (CETA) with the European Union and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with 10 countries in the Indo-Pacific region, can help simplify operations abroad and offer better predictability and protection in international markets.

Leveraging FTAs with countries in Europe, the Indo-Pacific, or elsewhere in the Americas can provide new opportunities for growth and diversification. Despite these benefits, FTAs don’t eliminate all tariffs on all goods. Even with preferential market access, your products or services may be subject to duties.

Another strategic tool worth exploring to give your company a competitive edge is mergers and acquisitions—the process of buying another company or combining operations.