Canadian businesses should consider how they may be affected by significant U.S. tariffs that could be introduced next year. U.S. president-elect Donald Trump recently posted on social media that he is considering an executive order to enact a 25% tariff on all products entering the United States from Canada and Mexico starting January 20, 2025. If these changes are enacted, Canada may choose to respond with its own retaliatory tariffs on U.S. goods, as has happened in the past.

25% Tariffs on Canadian exports to the US is a game changer. There are various ways to proactively reduce the risk and minimize the impact. A key concern are many Canadian companies are non-resident importers into the US and will bear the entire burden of the duties/surtax. Canadian companies selling into the US should ensure that there are appropriate clauses in the sales agreement that allows the Canadian vendor to pass along any increase in duties to the negotiated sale price. Exporters need to start the risk analysis strategy now and not wait. In addition, there is a good chance that Canada will put on retaliatory tariffs on US goods. So, if you import from the US you need to plan for Canadian duties as well. Expect turbulent trade days ahead.

These changes, if enacted, could have a broad and significant effect on many Canadian businesses, including those that sell into the United States. In particular, Canadian businesses that are non-resident importers into the United States that do not take timely action may bear the full burden of any tariffs.

To read this edition of TaxNewsFlash-Canada, go to: https://assets.kpmg.com/content/dam/kpmg/ca/pdf/tnf/2024/11/ca-us-vows-25-percent-tariffs-on-imported-canadian-goods.pdf?j=42390066&e=kejordan@kpmg.ca&l=17643611_HTML&u=778196892&mid=524007686&jb=2&utm_medium=Email&utm_source=SFMC&utm_campaign=31OCT_Tax_Personal_Year-End_NONGDPR_TNF%20-%2020241031_162832