Overview of U.S. tariffs
The announcements from U.S. President Donald Trump on April 2 have left many small businesses wondering how cross-border trade will be impacted. Although details remain uncertain and the situation may be temporary, Canada and Mexico seem to be exempt from the broad reciprocal tariffs that the U.S. is applying to most other countries. Here’s what we know:
- The U.S. is imposing a 25% tariff on all imports that don’t comply with the Canada-United States-Mexico Agreement (CUSMA). What is considered CUSMA-compliant?
- 10% tariff is applied to non-CUSMA compliant potash and energy products.
- 25% tariff on aluminum and steel imports from all countries into the U.S. has been in effect since March 12.
- 25% tariff on all cars and trucks not built in the U.S. was announced on March 26 and took effect on April 2.
For more information, please visit the White House Fact Sheet: President Donald J. Trump Declares National Emergency to Increase our Competitive Edge, Protect our Sovereignty, and Strengthen our National and Economic Security.
Though Canada and Mexico are excluded from “reciprocal tariffs”, other tariffs that were previously mentioned remain on the table, such as:
- Tariffs on Canadian lumber, which would be in addition to the existing 14.7% tariffs, as well as on Canadian dairy products.
- Copper, semiconductors, and pharmaceuticals are also under consideration for tariffs, though no details have been provided on the timing or rates.
- The elimination of the duty exemption for low-value shipments under $800 (de minimis exemption).
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What has Canada done to strengthen the border?
Canada has invested over $1 billion in new equipment and security measures to combat drug trafficking and illegal immigration, which aims to address U.S. concerns and avoid Trump’s tariffs. Specifically, Canada has increased investment in technology (such as, new drones and helicopters), increased personnel, and enhanced intelligence sharing. The government has also introduced new policies and programs to improve security and efficiency. Despite these investments and efforts, Trump is proceeding with tariffs, stating that Canada hasn't done enough.
See here for more detail on Canada’s Border Plan.
How much of U.S. drug and immigration issues are linked to Canada?
According to U.S. and Canadian government data:
- Less than 1% of fentanyl entering the U.S. comes from Canada.
- Over the past two years, about 6% of illegal immigrants at the U.S. border were stopped at our border.
If my business exports goods to Mexico, but they are shipped through the U.S., will they be impacted by tariffs?
No. Goods that are simply transiting through the U.S. on their way to Mexico should not be impacted by tariffs. As long as the goods do not undergo any changes or enter U.S. commerce, they are not subject to the U.S. tariffs. However, if the goods are processed or enter the U.S. market before continuing to Mexico, they may be subject to the applicable tariffs.
How can federal and provincial governments ease financial pressures on SMEs?
Canadian governments need a unified and proactive response to minimize harm to businesses and the economy. Governments must focus on reducing the tax burden, cutting red tape, addressing internal trade barriers, and strengthening border measures to help small businesses stay competitive.
What are the reciprocal tariffs the U.S. is applying to other countries?
President Trump has announced a 10% tariff on all imports from all countries, effective April 5, 2025, at 12:01 a.m. EDT.
Additionally, for countries with which the U.S. has the largest trade deficits, a higher, individualized reciprocal tariff will apply, starting April 9, 2025, at 12:01 a.m. EDT.
What is the elimination of de minimis treatment for China?
The de minimis rule allows low-value imports (valued at or under $800) to enter the U.S. duty-free. However, under a new Executive Order, this exemption will no longer apply to goods from the People’s Republic of China (PRC) and Hong Kong, effective May 2, 2025, at 12:01 a.m. EDT. As a result, all covered goods from these regions will now be subject to applicable duties and tariffs. The new policy applies to all imported goods valued at or under $800 that would have otherwise qualified for the de minimis exemption. This includes shipments arriving through private carriers (e.g., couriers, freight forwarders) as well as postal shipments.
For shipments arriving through the international postal network:
- Starting May 2, 2025, items containing goods valued at or under $800 will be subject to a duty of either 30% of their value or $25 per item, whichever is greater.
- After June 1, 2025, the per-item duty will increase to $50.
- These duties replace any other previously imposed tariffs or duties on affected goods.
This policy is currently targeting goods from China and Hong Kong. Imports from other countries that qualify for the de minimis exemption will continue to receive duty-free treatment.
What are the Chinese tariffs and how will they impact my business?
The Chinese government has put in place 100% tariffs on Canadian canola oil, canola meal, peas, and 25% on Canadian pork and aquatic products including lobster, among others, effective March 20, 2025. These measures are in direct response to the tariffs Canada introduced in October 2024 on Chinese-made electric vehicles, steel, and aluminum products.
Given that the Chinese tariffs primarily target agri-businesses, the federal government has announced the expansion of support programs to help those impacted by the trade disruptions, including: Business Risk Management programs like Agri-Invest and Agri-Stability, as well as Farm Credit Canada’s Trade Disruption Customer Support program.
Is my business eligible for the Work-Sharing program?
Work-Sharing is an agreement between employers, employees and the Government of Canada (Service Canada). The Work-Sharing Program helps employers and employees avoid layoffs, when there is a temporary decrease in the normal level of business activity that is beyond the control of the employer.
The Government of Canada has introduced special measures to better support employers and their employees in the wake of U.S. tariffs threats. These special measures, including expanded employer and employee eligibility, are in effect from March 7, 2025, until March 6, 2026.
Eligibility has been expanded:
- to businesses that have been in operation in Canada for 1 year
- to include non-profit and charitable organizations experiencing a reduction in revenue levels as a direct or indirect result of the tariffs
- to include cyclical or seasonal employers
- to employers experiencing a decrease in work activity over the past six months of less than 10% and allowing utilization of Work-Sharing to exceed 60%
- to employees who are not year-round, permanent, full-time or part-time employees, specifically seasonal or cyclical employees
- to employees assisting the employer recovery efforts
For more on the Work Sharing program, please visit this webpage.
Where are Canada’s other Free Trade Agreements (FTAs)?
Canada has 15 free trade agreements (FTAs) covering 51 countries1. These agreements provide Canadian businesses with preferential market access, reduced tariffs, and stronger trade rules. Here’s an overview of some of Canada’s key FTAs:
