Table of Content

• The latest on U.S. Tariffs on Canada
• What is a tariff?
• What do tariffs mean for businesses?
• Who pays tariffs on imports?
• Industries most affected by U.S. tariffs on Canada
• The potential impact on the Canadian economy
• Canada's response to US tariffs
• 8 Tips for Canadian businesses to prepare for tariffs
• Remaining resilient during uncertain times
• FAQ

Today, Canadian businesses are weathering strong economic headwinds on every front. One of the most pressing issues is U.S. tariffs on Canadian goods. With $3.6B in cross-border trade at risk every day, tariffs between Canada and the U.S. have the economic muscle to increase or squeeze the margins of companies nationwide—literally overnight. 

For small business owners, tariffs pose yet another serious threat to their bottom line. According to the Intuit QuickBooks Small Business Insights survey, more than 60% identify rising costs as their single greatest challenge. Since tariffs can raise inflation, drive up expenses, and ultimately shrink profits, that challenge is only growing today.

Whether you run a small retail store or a manufacturing company, changes in U.S. tariffs can influence how you source goods, manage cash flow, stay competitive, and protect your bottom line. Discover how tariffs work, who pays for them, what industries are hit hardest, and how you can minimize their impact. 

What is a tariff?

A tariff, put simply, is a tax imposed on imported goods. Governments use tariffs to protect domestic industries, generate revenue, or influence trade negotiations. Essentially, there are three types of tariffs that Canadian businesses should factor into their supply chain decisions:

1. Protective tariffs: Designed to make imports costlier and give local industries a price advantage
2. Retaliatory tariffs: Imposed in response to another country’s tariffs
3. Revenue tariffs: Introduced primarily to raise money for government operations

The latest updates on U.S. tariffs

Because Canada and the U.S. rely heavily on each other’s resources, tariffs can hurt both sides. Instead of safeguarding jobs, they may raise costs, reduce demand, and eventually cause layoffs.

Here’s a quick rundown of the latest tariff changes:

• In 2025, the U.S. rolled out a series of tariffs targeting Canadian goods. While initial measures were delayed, many have since taken effect. On April 3, 2025, Canadian exports of everyday goods started to face a 25% tariff, while energy products carried a 10% tariff. 
• Additional tariff waves added steel and aluminum at 50%, autos at 25%, and semi-finished copper products at 50%. Even low-value shipments that once entered duty-free are now subject to duties after the U.S. suspended its long-standing de minimis exemption.
• Canada responded with retaliatory tariffs of its own, applying 25% to billions of dollars in U.S. goods. Some of those countermeasures were repealed in late 2025 to ease tensions, but others—especially on steel, aluminum, and vehicles—remain in place as of October 2025.
• Adding to the uncertainty, the U.S. Supreme Court agreed to hear a case challenging whether these tariffs were legally imposed. A ruling in favour of the administration could lock in tariffs for years, while a ruling against may require refunding billions in collected revenue. 

For Canadian businesses, the message is clear: trade conditions remain unpredictable, and flexibility is essential.

What do tariffs mean for businesses?

The Canada-U.S. trading relationship is substantial in scope and size.  Since approximately 75% of Canada's exports travel south of the border, tariffs are a major factor for companies across the board—in several ways: 

• Profit margins decrease when businesses pay more for goods, materials, or services from other countries.
• Cash flow becomes tighter because businesses require more working capital to cover higher upfront costs.
• Pricing strategies change as businesses consider whether consumers will accept price increases.
• Supply chain contracts get renegotiated when costs exceed the initial terms.

Consider how a Canadian company that ships auto parts to Detroit might react to higher tariffs. This company's production costs would increase significantly if tariffs raise raw steel prices by 50%. Unless the steel supplier can pass those costs on, the profitability of this auto parts business would shrink significantly.

Who pays tariffs on imports?

Importers are responsible for paying tariffs when goods cross the border. From there, the costs usually ripple outward. Here are a few examples of how tariffs can affect businesses on both sides of the border:

• Scenario #1: A Canadian retailer importing $200K in U.S. appliances may see an additional $50K in tariff charges. Unless it raises prices, this shop’s margins would collapse.
• Scenario #2: A U.S. automaker sourcing Canadian steel may cut jobs or scale back production if tariffs add $1M to material costs.
• Scenario #3: A cross-border boutique importing U.S. apparel might pivot to Canadian or overseas suppliers, even though switching often takes time and money.

Bottom line: Both businesses and consumers ultimately feel the pinch of higher tariffs.

Industries most affected by U.S. tariffs on Canada

Tariffs hit some sectors harder than others. For many companies, higher tariffs translate into rising costs that can’t be easily absorbed internally—putting pressure on supply chains, pricing, and even the job market. 

The sectors hit hardest by U.S. tariffs are:

• Automotive and manufacturing: Since a significant portion of cross-border trade consists of parts and raw materials, tariffs quickly raise costs.
• Retail and consumer goods: In the face of rising import costs for goods like apparel, shoes, and household products, most small retailers that can't pass on the costs of higher tariffs are pressured to drop prices.
• Food and beverage: Grocery stores and restaurants that import dairy, poultry, or alcohol from the U.S. are subject to higher prices and fewer choices.
• Agriculture: New trade restrictions can reduce the competitiveness of Canadian farmers who export wheat, baked goods, or meat products to the U.S.
• Electronics: Costs have gone up for IT and e-commerce businesses that depend on servers, chips, or networking technology manufactured in the U.S.

For small and mid-sized businesses in these industries, these higher costs are often too significant to absorb, forcing them to increase their prices or cut staff and investment.

The potential impact on the Canadian economy

Tariffs don’t stop at individual industries—they ripple through the entire economy. In fact, the ripple effects of U.S. tariffs on Canada could significantly affect businesses, consumers, and the economy as a whole.

Here are 4 negative ways the tariffs may impact our nation.

• Business costs rise: Small and medium-sized companies that rely on U.S. imports will face increased costs. This may lead to shrinking business profits or higher prices for consumers.
• Inflation picks up: With businesses passing on costs, Canadian consumers may see price hikes for everyday goods—from groceries to gas—which will contribute to inflation.
• Supply chains are disrupted: Many businesses rely on cross-border supply chains. Tariffs may force companies to search for alternative suppliers, which can be time-consuming and expensive.
• Trade and economic growth slow: If businesses cut back on imports due to higher costs, trade between Canada and the U.S. could slow down. Jobs may be cut, potentially stalling the economy.

But there are always exceptions to the rule. According to the latest research from Abacus Data, 84% of Canadians reported purchasing more local products since tariffs began, suggesting a shift toward “buying Canadian” is gaining momentum.

Canada's response to U.S. tariffs

The federal and provincial governments have stepped up and taken action. On a federal level , Canada has implemented programs to help businesses adapt to today's ever-shifting trade landscape—in addition to imposing retaliatory tariffs against the United States.

One of such programs is the Regional Tariff Response Initiative (RTRI). Over a three-year period, the Government of Canada will allocate $1B to promote market diversification, supply chain resilience, and productivity improvements. This is in line with the strategy to protect Canadian businesses and workers from the impact of tariffs. The steel sector alone, where the repercussions of higher tariffs have been severe, will receive up to $150M from RTRI's coffers.

Other measures, including loan facilities, remission orders for specific imports, and funding initiatives, will also be rolled out to help businesses shift their focus to new markets.

Federal government providing tariff relief

Since the first wave of tariffs, businesses facing exceptional circumstances have been able to apply for tariff relief—remission orders that allow certain companies to bypass tariffs if they can prove no alternative supplier is available.

Products on the “U.S. tariffs on Canada” list include:

• Meat
• Yogurt
• Cheese
• Fruits
• Vegetables
• Coffee
• Tea
• Furniture
• Appliances
• Kitchenware
• Glassware

Temporary relief is available for imports used in manufacturing, food packaging, and healthcare.

To help businesses and workers counteract the financial impact of U.S. tariffs, the Government of Canada has also launched relief programs, sector-specific measures, and direct support for employees. These initiatives aim to ease cash flow pressures, protect key industries, and protect jobs coast to coast.

Business relief programs

• Duty Drawback Program: Refunds duties for re-exported imported goods.
• Tax deferrals: Deferred corporate income tax and GST/HST payments (from April 2 to June 30, 2025).
• Large Enterprise Tariff Loan (LETL): Liquidity support for large businesses impacted by tariffs.
• Strategic Response Fund: Funding for major, game-changing initiatives to increase competitiveness.
• Business resources and tools: One-stop access to hundreds of federal services and programs.

Sector-specific assistance

• Steel sector measures: Specific initiatives to safeguard and stabilize Canada's steel sector, such as tariff-rate quotas (TRQs) on steel imports, which limit foreign steel volumes and apply surtaxes on excess imports
• Export assistance: Tools and advice to help Canadian businesses minimize risk and expand into new markets.
• Agriculture support: Initiatives for farmers and agri-food producers struggling due to tariffs, such as the AgriStability program.

Employee support

• Employment Insurance (EI) Work-Sharing Program: Helps employers and workers prevent layoffs during recessions.
• Temporary Employment Insurance: Provides workers affected by tariffs with temporary EI benefits.

Provincial governments responding to U.S. tariffs

Many provinces have taken swift action, showing unprecedented solidarity to combat the tariffs imposed by the U.S. Here’s a snapshot of their current measures:

• Liquor bans: Provinces such as British Columbia, Manitoba, Newfoundland and Labrador, Nova Scotia, Ontario, Quebec, and PEI, under orders from their Premiers, have removed U.S. alcohol from their liquor store shelves.
• Contract freezes: New Brunswick, Nova Scotia, and PEI have suspended existing contracts with U.S. companies or stopped signing new cross-border deals due to Canada-U.S. tariffs.
• Support programs: New Brunswick has launched programs to provide training for workers and entrepreneurs, and collaborated with other provinces and territories to reduce trade barriers. Nova Scotia has also doubled the toll costs for commercial vehicles entering from the U.S.
• Protect Ontario Financing Program: On top of the small business loans available in Ontario, eligible companies hit by tariffs can access loans through the Protect Ontario Financing Program, which offers up to $1B to support the steel, aluminum, and auto sectors. 

These steps aim to pressure U.S. producers and, at the same time, support local businesses and economies coast to coast. As the situation continues to unfold, provinces and territories across Canada are expected to announce even more measures to defend Canadian jobs, industries and supply chains. 

9 tips for Canadian businesses to prepare for tariffs

It may be challenging for small business owners and solopreneurs to navigate these new tariffs. To help you get started, here are 9 proactive steps you can take as a Canadian entrepreneur or business owner:

1. Assess your supply chain: Identify which suppliers are affected by tariffs and research alternative suppliers within Canada or from countries with lower trade barriers.
2. Find backup suppliers: Explore domestic or international sources to reduce dependency on U.S. goods. Alternatively, you can negotiate better terms or bulk discounts with existing suppliers to offset higher costs.
3. Adjust pricing strategically: If you need to implement and communicate price increases, consider a gradual approach or bundle products to keep customers satisfied.
4. Diversify revenue streams: Find new markets outside the U.S. to decrease your reliance on American customers.
5. Integrate automation: Optimizing your business through automation can help maintain or improve your profitability and cost-efficiency.
6. Prioritize business efficiency: With tools like QuickBooks, you can stay on top of your finances and grow your business, even in a tough trade environment.
7. Review cash flow and pricing strategies: Adjust your pricing models and assess your cash flow to account for increased costs.
8. Monitor government support programs: The Canadian government may introduce more relief measures for businesses impacted by tariffs. It's best to stay informed about potential tax breaks, grants, or financial assistance programs.
9. Apply for tariff relief: The Canadian government has launched a new remission process for businesses to request relief from the U.S. tariffs.

Staying resilient with QuickBooks

U.S. tariffs cloud the big picture, making it harder to predict where the economy is headed—but businesses that plan ahead can take steps to weather any storm. With QuickBooks, you have the tools to stay financially agile and resilient in challenging times.

Whether you’re managing rising costs, dealing with supply chain shifts, navigating customer price pressures or preparing for new tariffs, use QuickBooks Online to effectively manage your cash flow and monitor your overhead costs, so you can focus on growing your business—no matter what happens beyond our border.

Get started today—find a QuickBooks plan that’s right for your business.