“Trade wars are good, and easy to win.” — Donald J. Trump, 2018
Fast-forward to 2025, and the echo of that infamous statement still reverberates through boardrooms, trade talks, and now, Canadian strategy documents.
Canada, once a model of multilateral trade diplomacy, is sharpening its economic elbows. In response to renewed U.S. tariffs on Canadian aluminum, lumber, and electric vehicles (EVs), Ottawa isn’t just grumbling. It’s retaliating—and with purpose. But as the Great White North flexes its trade muscles, the question Canadian businesses are asking is: what’s next?
In 2024, the U.S. Trade Representative (USTR) imposed a fresh round of tariffs. It was executed under Section 301 of the Trade Act of 1974, citing “unfair Canadian subsidies” and national security concerns (USTR, 2024).
Canada’s Deputy Prime Minister Chrystia Freeland called the move “economically irrational and legally indefensible” (CBC News, 2024).
In response, Canada activated retaliatory measures under the Special Import Measures Act (SIMA) and the Customs Tariff Act, targeting over $12 billion in American goods—from Kentucky bourbon to agricultural machinery.
Retaliation isn’t Canada’s natural mode. It’s typically the quiet partner in the North American handshake. But when cornered, it strikes diplomatically and strategically.
In July 2024, Canada announced:
“We will always defend Canadian workers and industries. Retaliation is not escalation–it’s preservation.”
–Mary Ng, Minister of International Trade (Global News, 2024)
Now, let’s talk business. Different regions across Canada, from manufacture facilities in Mississauga to wheat export companies in Saskatchewan to tech businesses in Montreal are experiencing genuine market changes.
Canadian manufacturers exporting products across borders will now face more obstacles. The barrier created by these trade duties specifically impacts metals exporters and companies in agriculture as well as clean energy fields operating from Canada.
According to a 2024 report by the Canadian Chamber of Commerce, over 62% of small to medium-sized exporters to the U.S. have faced increased logistics and customs costs since the tariff escalation. Companies in the EV parts sector located in Ontario face severe risks due to interruptions in their cross-border supply network and stalled contractual talks with suppliers.
The Canadian trade retaliation produces side effects which increase U.S. import prices thereby causing price inflation that ultimately impacts multiple sectors.
Quick stat: The U.S. is Canada’s largest trading partner, accounting for over 75% of exports in 2023 (Statistics Canada, 2024).
Small and medium enterprises encounter geopolitical board movement in the same way as a heavy destructive weapon. The former reliable and inexpensive American parts have become costlier, as well as delivering extended delivery times. As a result:
Take the case of a mid-sized Toronto manufacturer sourcing sensors from Illinois—tariffs have added 18% to its cost base overnight.
Firms that relied heavily on U.S. inputs must now consider “friendshoring” with allies like the EU, Japan, or South Korea under recently refreshed trade deals like CETA and CPTPP.
Canadian agricultural exporters, particularly in dairy, grains, and pork, are on edge. U.S. retaliatory pressure could extend to food products next, especially as U.S. farm lobbies lean on Washington.
Meanwhile, Canadian food retailers importing U.S. processed goods are passing costs down the supply chain. For example, a Regina grocer now pays 9% more for American cereals and snacks post-tariffs, affecting retail price points and consumer behaviour.
As financial strategists at Online Accountant, here’s what we’re advising our clients:
Many companies fail to classify goods properly under the Customs Tariff Schedule—potentially overpaying. Seeking advanced tariff rulings or appealing under SIMA can save thousands annually.
Ensure all exports comply with CUSMA’s rules of origin, especially manufacturers using third-country components. Non-compliance may trigger setbacks, such as dietary penalties and rejected opportunities for favoured treatment.
Digital products should be prioritized for expansion by businesses providing such products. Tariffs and trade barriers do not apply to digital services under WTO agreements and CUSMA thus creating a safe entry point during unstable market conditions.
Products face increasing barriers in traditional trade, yet modern digital businesses continue to operate freely across international borders.
-Prof. Michael Geist, University of Ottawa (Geist, 2023)
Every trade war creates losers—and a few savvy winners. Here’s where Canadian businesses can seize the upside.
Canadian buyers are actively looking for domestic alternatives to U.S. goods. This means huge opportunities for:
The government has also introduced tax credits and grants to incentivize local manufacturing under the Strategic Innovation Fund (SIF) and Net Zero Accelerator.
Now is the time to double down on:
The feds are actively supporting businesses through the CanExport Program, which offers up to $50,000 for international expansion projects.
If you’re in the cleantech, EV, or renewable energy sectors, federal funding is surging. Tariffs are nudging Ottawa to fast-track domestic battery plants, hydrogen hubs, and solar R&D clusters.
What Laws and Regulations Should You Monitor?
As the 2024 U.S. election approaches, political incentives to escalate trade rhetoric will rise. Trump-aligned candidates are pushing “America First 2.0”, suggesting tariffs on allies may intensify.
However, Canada’s response is growing increasingly sophisticated—combining retaliatory tariffs, legal action, and long-game diversification.
“Canada’s economic future will be decided not in Washington, but in how we respond to Washington.”
-Chrystia Freeland, 2024 budget statement
Canadian businesses are at a crossroads. Tariffs implemented in retaliation act as warnings for market behaviour. Despite its top status as our closest ally, the United States will show unpredictable behaviours. It’s time to adapt accordingly.
