Canadian businesses scramble as US tariffs take effect Tuesday

In an article by the Financial Post, Steve Bozicevic, director of customs and trade compliance at A&A Customs Brokers in Toronto, said he has received a surge of inquiries from Canadian businesses about harmonized tariff schedule (HTS) codes.

These ten-digit codes classify goods entering the US and determine the duties they incur.

“I wake up every morning and get about ten emails asking which HTS code to use. I used to never get these,” Bozicevic said.

For decades, most Canadian companies shipped goods to the US without duties under free-trade agreements.

With new tariffs coming into effect on Tuesday, businesses have been scrambling to classify goods correctly, reduce duty costs, and determine who will pay export levies and how to process them.

“When the truck arrives on March 4, the US won’t let it cross unless it knows who’s going to be paying duties and taxes,” Bozicevic said.

“And right now, you have all of these shippers — they don’t have accounts with the US Customs and Border Protection Agency (CBP). They don’t know how to settle. Everyone’s in crisis mode.” 

The US plans to impose 25 percent tariffs on all Canadian goods and 10 percent on energy.

Wendy Wagner, partner at Gowling WLG, noted that no industry is shielded from these tariffs. “There is no good-based sector that is insulated from the threat of tariffs,” she said. 

Tyler Gompf, co-founder and partner at Manitoba-based Global Drain Technologies, said his company acted pre-emptively by opening an account with US customs and registering as the importer.

That step ensures duties are paid immediately when shipments cross the border.

“Things like HTS codes weren’t as important before. Now, every little detail matters,” Gompf said. 

Bozicevic explained how companies are reclassifying goods to manage duty costs.

A business that once declared its rubber floor mats as articles made of rubber may now classify them as finished products to change the applicable duty rate.

“Even though it kind of means the same thing, it may have a different duty rate,” he said. 

The tariffs taking effect on Tuesday may be just the beginning. The US also plans to impose a 25 percent tariff on steel and aluminum imports starting March 12, along with reciprocal tariffs on countries with which it has a trade imbalance.

Canada has announced it will respond with its own 25 percent tariffs on $155bn of US imports in two phases. The first round will include food, appliances, apparel, and pulp and paper.

The second, which will begin three weeks later, will target vehicles, aerospace products, steel, aluminum, fruit, and meat.

Wagner warned that these measures will drive up costs for businesses on both sides of the border.

As businesses adapt, many are exploring long-term solutions.

Mackenzie West, director of market development at customs broker GHY International, said companies are considering both temporary and permanent options to establish a physical presence in the US to manage cross-border operations. 

Kala Therapy, a Toronto-based company that manufactures medical-grade red-light therapy devices, has already moved more inventory to the US to prevent fulfillment disruptions and avoid sudden cost increases.

CEO Cam Stajer said the company is also diversifying production and shipment hubs beyond China and North America to bypass tariffs. To keep costs stable, Kala has also increased orders and renegotiated supplier agreements.

Other businesses are exploring trade loopholes such as the ‘first-sale for export’ rule. This rule allows importers to calculate duties based on the first sale in a chain of transactions, such as the initial sale between a manufacturer and a middleman.

West noted that while this strategy has been used in the textile industry, companies need to be highly detailed and compliant before they can implement it. “It’s a complicated program that was leveraged in textiles, but we’re seeing more appetite to learn and deploy it,” he said. 

Shifting manufacturing to the US is another strategy companies are considering.

Don Thompson, CEO of Beacon Commerce, which helps Canadian businesses sell on Amazon, said 25 percent of his clients—particularly in the grocery and natural health sectors—are exploring US-based production.

One client, a major producer of household essentials, accelerated plans to open a factory in Florida, moving the launch from 2026 to 2025 due to tariff concerns. 

Not all companies are making immediate changes. Some have delayed US expansion due to uncertainty. Beck’s Broth, a Guelph-based bone broth company, postponed its US launch by several months.

“We would have loved to launch in the US already. We planned for the start of 2025. But we’ve been forced to pump the brakes, take a step back and re-evaluate our timelines,” said COO and co-founder Domenique Mastronardi.

Beck’s Broth now aims to launch in the US in the second quarter of this year and plans to move inventory to US warehouses while absorbing tariff costs to keep prices stable for customers. 

New Brunswick-based Saltwinds, which sells coffee through Amazon, has pulled back on US expansion plans.

Co-founder and COO Laura Richard said the company is redirecting investments into the Canadian market because American retailers are hesitant to work with Canadian brands given the current trade situation.

“The tariff threat, the loss of the US market, and rising coffee prices could have been disastrous,” she said. However, strong Canadian sales have helped offset those concerns. 

Thompson noted that half of his clients are choosing to invest in Canada instead of the US while waiting for trade conditions to stabilize. Even if Trump’s tariffs do not materialize, businesses remain cautious. 

West said Canadian exporters remain anxious about potential future trade disruptions.

Kristen Hopewell, director of the Liu Institute for Global Issues at the University of British Columbia, emphasized the impact on business operations.

“Businesses need predictable and stable trading relationships to operate effectively,” she said. “And that’s exactly what Trump has thrown into disarray.”