The looming tariff threat has become a reality.
Today, the United States (US) shattered its 30-day trade war détente with Canada and imposed 25-percent tariffs on virtually all imported Canadian goods, and 10-percent tariffs on energy imports. As promised, Canada responded with in-kind tariffs on $30 billion of US goods to start, which could be upped to $155 billion after a 21-day consultation period.
One Canadian CEO told BetaKit he paid triple the usual shipping cost to get product over the border before tariffs kicked in.
Leaders across the Canadian tech industry have swiftly denounced the US decision.
The Technology Councils of North America (TECNA), which represents nearly 60 tech groups in the US and Canada, reiterated that tariffs will “penalize American business and workers, increase operating costs, and reduce profitability across multiple sectors.” Canadian tech hubs Communitech, BC Tech Association, and Québec Technology Association are all TECNA members.
Council of Canadian Innovators (CCI) President Benjamin Bergen, whose organization represents tech scale-ups, called for Canada to take this opportunity to reduce the country’s reliance on US trade.
“For decades, Canada’s trade strategy has assumed stability in our relationship with the US. That assumption is no longer valid,” Bergen said in a statement. “It is time to take bold action to secure our economic future—by backing Canadian firms, ensuring they have access to growth capital, and positioning them as leaders in global supply chains.”
The Canadian Federation of Independent Businesses called for Prime Minister Justin Trudeau to immediately recall Parliament “to ensure…that every dollar Canada collects in tariffs is returned to affected businesses as quickly as possible.” A group of Canadian tech leaders penned a letter to Trudeau demanding the end to prorogation last month.
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According to a survey of 195 founders by non-profit organization Startup Canada, 42 percent of entrepreneurs are requesting financial support—such as through grants, subsidies, or tax breaks—to help their businesses navigate tariffs. Thirty-two percent want “clear and timely information” on tariffs, and nearly a quarter want support to diversify their supply chain.
In a press conference today, Trudeau said that the government is exploring short-term support measures, but its priority is to get the tariffs lifted.
Arlene Dickinson, an investor and member of the government-appointed Council on Canada-US Relations, wrote in a LinkedIn post that support programs will be announced to help affected businesses.
“You are not in this alone. Entrepreneurs and [business] builders will do what we’ve always done—find a way to turn this challenge into opportunity and into strength,” Dickinson said.
Increased costs
Some Canadian hardware startups are facing increased costs and big decisions about how they will be incurred.
In some cases, Canadian small businesses felt immediate impacts: Last night, Montréal-based gourmet dog food startup Healthybud waited with bated breath to see if its shipment of goods across the border from BC to California would get through before 9 p.m. PST.
“We just made it,” Healthybud CEO Kyle Feigenbaum told BetaKit. But due to the flurry of shipments trying to cross the border before the deadline, he said he paid three times the standard amount for that shipping route.
Now, Healthybud has to decide whether to pass along increased shipment costs to consumers. Last month, Feigenbaum told BetaKit that Canada’s decision to impose retaliatory tariffs would hurt their US sales. Matt Bertulli, CEO of Vancouver-based phone case manufacturer Pela Case, said “retaliatory tariffs would punish us twice.”
According to Dax Dasilva, founder and CEO of point-of-sale and commerce giant Lightspeed, retailers will be hit particularly hard after a turbulent few years of sales since the COVID-19 pandemic.
“Tariffs are another roadblock to growth at a time when retailers were starting to feel relief from these pressures,” Dasilva wrote in an email to BetaKit.
Limited reprieve
SRTX, the Montréal-based manufacturer of Sheertex tights, temporarily laid off roughly 40 percent of its staff last month in anticipation of US tariffs. Due to its products’ classification under the US-Mexico-Canada Agreement, CEO Katherine Homuth said the company had to pivot to importing materials from the US instead of overseas to avoid a nearly 41-percent duty.
Some SRTX direct-to-consumer shipments into the US would have been subject to an additive 16-percent plus 25-percent tariff if the US scrapped the de minimis exemption. This loophole allows shipments into the US under $800 to cross the border duty-free.
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However, it appears that SRTX and other retailers depending on the de minimis loophole have gotten a lucky break—for now. The White House amended its executive order on Sunday to keep it in place until the US implements a system to collect tariff revenue for items that fall under the exemption.
In addition to this small relief, the widespread push to buy Canadian products has created a silver lining for some Canadian startups. Since the US first threatened tariffs, the Canadian tech ecosystem has produced a bounty of searchable databases and grocery scanning apps to help consumers identify and purchase Canadian-made goods.
Homuth told BetaKit that Canadian retailers such as Costco Canada have “stepped up” and placed large orders, taking stock that would have been sold in the US and subject to tariffs.
Tre’Dish, a Toronto-based online grocery platform, has seen a surge of Canadian companies signing up to sell their products on its marketplace. Now, CEO Peter Hwang says more than 70 percent of products sold on the platform are made domestically.
With files from Alex Riehl. Feature image courtesy Harry Spink via Unsplash.