Canadian Trade and Trump 2.0: Preparing for Renewed Challenges

Trade Update • Nov. 18, 2024

ith Donald Trump returning to the White House for a second term, Canadian businesses with ties to the U.S. face mounting uncertainties. The aggressive trade tactics of his previous administration, which redefined cross-border commerce, continue to loom over Canada’s trade landscape.

Memories of significant tariffs, like the 25% duties on Canadian aluminum and steel under the guise of national security, and the tense renegotiation of NAFTA (now the United States-Mexico-Canada Agreement (USMCA/CUSMA), remain fresh.

In order to prepare for this new Trump 2.0 term, Canadian businesses might ask: what challenges could emerge, and how can they safeguard their cross-border trade operations?

Tariffs – A Looming Threat

Tariffs were central to Trump’s first-term trade agenda, and experts anticipate similar tactics this time. Universal tariffs ranging up to 20% on imports are projected, aimed at shrinking the U.S. trade deficit and financing tax cuts. Unlike before, Canada is unlikely to be exempted. Industries accounting for 75% of Canada’s exports—including automotive, chemicals, energy, and forestry—could feel the brunt of these tariffs, amplifying the broader economic impact.

Such measures would hurt Canadian exporters’ competitiveness and ripple across the economy. TD Economics forecasts a 10% tariff could reduce Canadian exports to the U.S. by 5% by 2027. Retaliatory actions from Canada, similar to the 2017 steel and aluminum dispute, could further strain trade, driving up costs for companies dependent on U.S. goods and inflating consumer prices.

USMCA/CUSMA

The hope is that USMCA will offer some protection from sweeping tariffs. While this free trade agreement was designed to preserve trade relationships, making outright trade wars more complex, Canada’s growing trade deficit with the U.S. could work against it. While many American companies have shifted production to Canada and Mexico to avoid tariffs on Chinese goods, USMCA’s review is slated for 2026 and contentious issues like Canada’s supply-managed dairy sector may serve as leverage during renegotiations.

Additionally Canada’s political landscape, shaped by federal elections scheduled for October 2025 and a Conservative Party leading in the polls, could play a pivotal role in setting the tone for future trade negotiations.

“Buy American” Policy

Trump’s previous administration prioritized “Buy American”(U.S.-made goods and services) policies. While Biden upheld similar policies, Trump’s second term could see an escalation, potentially scrapping Biden’s Inflation Reduction Act while introducing parallel initiatives. To counteract, Canada has invested heavily in subsidies to attract industries, particularly in green energy and electric vehicles, with federal and provincial contributions. Whether these efforts continue will hinge on Canada’s post-2025 leadership.

Trade Diversification: A Renewed Priority

During the NAFTA renegotiations, Canada aggressively pursued trade diversification to reduce dependence on the U.S., resulting in agreements like the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the Comprehensive Economic and Trade Agreement (CETA) with the EU. If universal tariffs or USMCA renegotiations resurface, diversification efforts may once again become a priority for Canadian policymakers and businesses.

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: 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 reduce the impacts of tariffs through strategic solutions tailored to their needs. Our experts can audit your supply chain to identify inefficiencies, uncover cost-saving opportunities, and ensure compliance with evolving trade regulations. We also employ tariff engineering techniques to optimize product classification and sourcing strategies, minimizing duty exposure and maximizing profitability.

By partnering with GHY, your business gains access to the tools and expertise needed to streamline operations and stay competitive in a challenging trade environment.

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