Delayed tariffs will give Canadian businesses time to prepare and strategize
A 30-day delay in the implementation of U.S. tariffs and Canadian countertariffs provides Canadian businesses with much needed breathing room to study and prepare for the new levies.
The trade war triggered by U.S. President Donald Trump has sent experts across North America scrambling to estimate its possible economic effects, but at the border between Canada and the U.S., it also initially created a tizzy about how, exactly, to comply with the tariffs.
Mr. Trump’s 25-per-cent levies on Canadian goods and Ottawa’s countertariffs on $30-billion worth of U.S. imports were originally set to roll out on Tuesday, before the two countries agreed to postpone the levies by at least 30 days, an arrangement similar to the one reached earlier on Monday between the U.S. and Mexico.
Among the main questions facing Canadian companies on Monday were how the U.S. would define Canadian products; whether and to what extent they’d be affected by Ottawa’s long list of retaliatory levies; and whether they would be able to pay for the tariffs at all.
On Monday morning, it was still uncertain how the Trump levies would apply to Canada.
In a presidential executive order on Saturday, the White House said it would impose a 25-per-cent tariff on “products of Canada,” along with a 10-per-cent tax to Canadian energy imports. But the U.S. didn’t publish the details of how it would determine what qualifies as a Canadian good until around midday on Monday, according to Kenn Jordan, partner for trade and customs at consultancy KPMG Canada.
On the Canadian side of the border, on the other hand, importers were scouring the Trudeau government’s detailed list of items targeted by Ottawa’s countertariffs trying to ascertain whether it would affect them or their suppliers, said Jim McKinnon, president and chief executive officer of Willson International, a Mississauga-based customs brokerage.
The list includes items ranging from food products to pneumatic tires to suitcases. Ottawa has said it would target another $125-billion worth of U.S. imports after 21 days.
Another headache for companies moving goods across the border would be paying the tariffs. Ottawa’s countertariffs would apply to Canadian importers and have raised concerns that smaller companies would struggle to manage the upfront costs. But many Canadian companies would also face added costs and cash-flow challenges linked to the Trump tariffs because they are set up as importers of record in the U.S., handling the clearing of customs at the border for goods headed to their American customers.
Now those companies would have to remit large amounts to the U.S. government in tariffs.
Complicating matters further is the fact that many small and medium Canadian suppliers rely on customs brokers to help them move goods across the border, including paying for any applicable levies.
The Trump tariffs have customs brokers wary of advancing large amounts of cash on behalf of their clients. Mr. McKinnon said his company is asking its customers to raise their credit limits and put up larger deposits to ensure their exports would continue to move across the border.
Willson International has also been urging clients to set themselves up to be able to pay the U.S. government directly for the tariffs. But that process, he said, can take two weeks or more.
In Cambridge, Ont., Marcia Hilliard-Baird, chief executive officer of Spa Dent Inc., said her company, a small manufacturer of personal-care products, is registered as an importer of record for 50 per cent of the value of products it exports to the U.S. And the business relies on the American market for 60 per cent of its revenue.
As of Monday, the company was not yet set up to pay U.S. tariffs itself, Ms. Hilliard-Baird said. The 30-day pause would give the company time to move more shipments across the border tariff-free and devise a strategy to limit the financial impact of the levies.
“I’m breathing and it was great, great news to hear that,” she said.
Because of the U.S. tariffs, Spa Dent is accelerating by a year-and-a-half to two years its plans to open a production plant in Florida to serve its U.S. clients, she said. But the short-term reprieve from the duties will give the company time to ramp-up business from Canadian clients, which would lessen the impact of U.S. tariffs on the company’s Ontario plant.
In the long term, the business is planning to keep and grow higher-paying jobs in fields such as research and development and quality management in Canada, she said.
This article was first reported by The Globe and Mail
