25% Tariff Looms Over Canadian Exports to the USA – How GHY Can Help

Trade Update • Dec. 12, 2024

resident-elect Donald Trump has announced plans to impose a 25% tariff on all products entering the U.S. from Canada and Mexico starting January 20, 2025. This drastic measure is tied to demands for action on border security and drug trafficking and threatens to disrupt trade relationships built under the U.S.-Mexico-Canada Agreement (USMCA).

Impact on Trade

The proposed tariffs would significantly impact Canada and Mexico, which together account for a substantial share of U.S. imports. In 2023, 75% of Canadian exports and over 83% of Mexican exports were destined for the U.S. These tariffs could also disrupt global supply chains, especially for industries reliant on Mexico as a low-cost manufacturing hub.

Key Concerns

• Violation of USMCA: The proposed tariffs contradict the agreement’s duty-free provisions, raising legal and diplomatic questions.

• Economic Fallout: Retaliatory measures from Canada and Mexico are likely, which could exacerbate trade tensions and increase costs for consumers and businesses.

Historical Context

During Trump’s first term, similar tariffs on Canadian aluminum and steel caused significant economic disruptions. The renegotiation of NAFTA into USMCA in 2020 did little to ease trade friction, with contentious issues like Canada’s supply-managed dairy sector still in play.

How Canadian Businesses Can Prepare

To navigate this uncertain environment, Canadian importers/exporters must adopt proactive strategies:

Leverage Tariff Engineering: Explore options with your Customs Broker to reclassify goods or adjust sourcing to mitigate tariff impacts.

Build Resilient Supply Chains: To minimize reliance on U.S. suppliers, businesses should explore alternative markets in Asia, Europe, and beyond, creating opportunities for growth while mitigating trade risks. Establishing multiple suppliers for the same product or component can provide the flexibility to scale production and pivot when one supplier is unable to meet demand. Having a backup supplier outside the U.S. ensures a reliable contingency plan to maintain operations smoothly.

Keep Perspective – Stay Calm: Tariffs are a well-known possibility, but their impact depends heavily on how they’re implemented—broadly or in specific sectors. Tariffs were used as a negotiation tool, often yielding less dramatic results than anticipated. Even universal tariffs don’t necessarily equate to lost sales. U.S. buyers have shown resilience, continuing to import hundreds of billion worth of goods (25% duties) from China in 2024.

Charting a Path Forward

While uncertainty defines Trump’s second term, Canadian businesses can navigate these challenges through preparation, adaptability, and strategic diversification. The road ahead may be turbulent, but it also presents opportunities for companies to strengthen resilience and explore new markets beyond their southern neighbour.

By staying proactive and flexible, Canadian businesses can not only weather potential disruptions but also thrive in an evolving trade environment.

How GHY Can Help?

GHY specializes in helping businesses navigate and mitigate the impacts of tariffs through tailored strategic solutions. Our experts can audit your supply chain to identify inefficiencies, uncover cost-saving opportunities, and ensure compliance with evolving trade regulations. By employing tariff engineering techniques, we optimize product classification and sourcing strategies to minimize duty exposure and maximize profitability.

With decades of experience managing trade disruptions, we’ve successfully guided businesses through similar challenges in the past. Our teams are dedicated to keeping our clients’ operations streamlined and competitive, even in uncertain times. As changes unfold, we’ll proactively communicate updates, ensuring you remain informed and prepared every step of the way.

Stay calm—GHY has your back.
While the trade environment may evolve, our unwavering commitment to your success and compliance remains the same. Partner with us to navigate the road ahead confidently.

Contact us today! gts@ghy.com, or call +1 (800) 667-0771.