Tariffs Unpacked: What Every Canadian Needs to Know

As trade disruptions between Canada and the United States continue to evolve, understanding how tariffs work and their potential impacts has become increasingly important for every Canadian. This guide aims to break down the complex world of tariffs into clear, practical information to help you navigate the current trade landscape.

Tariffs Explained

At their core, tariffs are a tax that a government places on goods imported from other countries. When Canadian businesses import products tariffed by the Government of Canada from the US or elsewhere, they must pay taxes to the Canada Border Services Agency (CBSA). The CBSA calculates tariffs as a percentage of the “value of duty” of imported goods 1.

For example, if a Canadian retailer imports $10,000 worth of goods subject to a 25% tariff, they would pay an additional $2,500 in tariff duties. These costs ultimately impact the final price of goods and services throughout the economy. 

‍
Who Pays for Tariffs?

Despite claims suggesting otherwise, the financial burden of tariffs rarely falls solely on the exporting country. In reality, the costs are distributed across multiple participants in the chain.

Importers pay first, but costs often trickle down to consumers. When goods cross the border, the importing business makes the initial tariff payment to customs authorities. However, these businesses must then decide how to handle this additional cost:

1. Pass costs to consumers: Most commonly, importers raise prices to offset the tariff costs.
2. Absorb the cost: Sometimes importers reduce their profit margins rather than raise prices, especially in highly competitive markets.
3. Seek alternative suppliers: Companies may look for domestic or non-tariffed international sources.

Research by the Bank of Canada indicates that a significant portion of tariff costs ultimately reaches consumers through higher retail prices 7. For example, when Canada imposed retaliatory tariffs on U.S. goods in previous trade disputes, products like peanut butter, wine, and apparel saw retail price increases of 15-30% 5 6.

The Impact of Tariffs on the Canadian Economy

The Canadian economy is susceptible to tariffs due to its high integration with U.S. markets, with approximately 20% of Canada’s GDP tied to exports to the United States 7.

Economic analyses from Canadian financial institutions have shown that sustained, broad-based tariffs represent a significant risk to Canadian economic growth:

• BMO Economics estimated that a 25% tariff could reduce real GDP growth by over 1.5 percentage points on a quarterly basis 2. 
• The Bank of Canada projected that permanent 25% U.S. tariffs and Canadian retaliation could lower GDP points by approximately 2.5 percentage points in the first year 3.
• Industries with high export dependency, such as manufacturing, could face substantial losses if trade tensions persist. 

Additionally, tariffs affect inflation through several channels:

• Direct price increases on imported goods subject to tariffs
• Indirect price increases as businesses pass through higher input costs
• Currency effects as the Canadian dollar potentially weakens in response to trade tensions.

The Bank of Canada noted that tariff measures contributed to a 0.8% increase in the Consumer Price Index (CPI) during previous trade disruptions 2 7.

Navigating Tariffs as a Canadian

Whether you’re a business owner, worker, or consumer, there are steps you can take to manage the impacts of tariffs.

For Businesses: ‍

1. ‍Diversify supply chains to reduce dependence on single markets
2. ‍Explore Export Development Canada (EDC) financing and insurance programs to help diversify export markets 6. ‍
3. Monitor provincial development programs that offer support and financial assistance to assist businesses in adapting supply chains 6. 

For Workers:

1. Stay informed about which industries and regions face the greatest tariff exposure.
2. Research government employment support programs available to affected workers. 
3. Consider skills development opportunities in growing sectors such as technology or renewable energy, through programs like the Canada training benefit or provincial workforce development initiatives.

For Consumers

1. Buy Canadian. Use apps and websites to identify Canadian-made products, such as the “O SCANada”, “Maple Scan”, “Buy Beaver”, and “Shop Canadian” apps. 

‍

Looking Forward

While we cannot individually change trade policy, we do have meaningful choices in how we respond. 

When you choose to support a local business facing higher costs, you’re helping sustain Canadian jobs. When you develop new skills to adapt to changing industry demands, you’re building economic resilience. When you find creative ways to absorb costs rather than pass them to consumers, you’re helping Canadian families put food on the table. 

These small acts of economic solidarity, multiplied across communities, can help mitigate the negative impacts of tariffs across the country. Throughout Canadian history, our ability to adapt to changing circumstances while looking out for one another has always been a defining national trait. 

By approaching these economic challenges with both personal responsibility and community mindfulness, we can work toward solutions that distribute the burden more equitably and potentially emerge with stronger local economic ties than before. Your choices as a business owner, worker, or consumer contribute to how we collectively respond to these challenges. 

References

_{1 Canada Border Services Agency. "Tariffs and Tariff-Related Information." CBSA-ASFC.gc.ca. https://www.cbsa-asfc.gc.ca/travel-voyage/tariffs-tarifs/index-eng.html}

_{2 Doane Grant Thornton. "How New Tariffs Could Affect Canadian Businesses." DoanGrantThornton.ca. https://www.doanegrantthornton.ca/insights/how-new-tariffs-could-affect-canadian-businesses/}

_{3 NerdWallet. "Tariffs in Canada." NerdWallet.com. https://www.nerdwallet.com/ca/p/article/finance/tariffs-in-canada}

_{4 MNP. "Tariffs: What You Need to Know." MNP.ca. https://www.mnp.ca/en/insights/directory/tariffs-what-need-know}

_{5 Government of Canada. "Canada Announces Robust Tariff Package in Response to Unjustified US Tariffs." Canada.ca. https://www.canada.ca/en/department-finance/news/2025/03/canada-announces-robust-tariff-package-in-response-to-unjustified-us-tariffs.html}

_{6 Export Development Canada. "How Canadian Tariffs on US Goods May Affect Your Business in 2025." EDC.ca. https://www.edc.ca/en/article/how-canadian-tariffs-on-us-goods-may-affect-your-business-in-2025.html}

_{7 Edward Jones. "Potential Tariff Impact." EdwardJones.ca. https://www.edwardjones.ca/ca-en/market-news-insights/stock-market-news/market-pulse/potential-tariff-impact}