Canada's new tariffs: Businesses are bracing for higher costs

Canada's new tariffs: Are small businesses 'cannon fodder' in the trade war?

At 12:01 a.m. Tuesday, Canada hit $28 billion worth of U.S. imports with new dollar-for-dollar tariffs

Canadian businesses are opening Tuesday for the first time under the federal government's new dollar-for-dollar tariffs on $28 billion worth of U.S. imports. As many owners brace for higher costs and supply-chain issues, experts say consumers may not notice much impact.

The new levies took effect at 12:01 a.m. Tuesday, hitting nearly 700 American products at rates ranging from 15 per cent to 50 per cent. Affected items range from commodities such as steel and aluminum to household goods such as toilet paper and niche products including coin-operated arcade games.

The dollar-for-dollar tariffs are the federal government's response to the 50-per-cent levies imposed by U.S. President Donald Trump's administration on Aug. 22 on hundreds of products worth more than $28 billion — from plywood and cement to wine and hockey sticks.

Dan Kelly is president of the Canadian Federation of Independent Business (CFIB), which represents more than 100,000 small and medium-sized firms across the country. He says this latest escalation in the trade war has some of his members feeling like their businesses have been deemed expendable by the government.

"They feel like they're ... cannon fodder in the trade war with the United States. That's not a good feeling," Kelly told CBC News.

"The previous rounds affected large commodities, and things like cars. This round is focused on my members, small and medium-sized business owners across Canada, who are in really rough shape right now."

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JS Furniture is a Manitoba-based home furnishings and appliance retailer with locations in Winnipeg, Portage la Prairie, Steinbach and Winkler. General manager Brian Kyca estimates American goods account for 60 per cent of the company's sales by volume.

"What seems to be hit the hardest is going to be laminate-style bedroom suites," Kyca said in an interview.

"It seems the large items such as dressers, and chests, and drawers, are going to be subject to a 50 per cent tariff, and the smaller items, such as the headboards, footboard rails, night stands, and mirrors are going to be subject to 25 per cent."

According to Kyca, gauging the impact has been a frustrating and confusing ordeal, with only "vague" information available from agencies such as the Canada Border Services Agency.

For now, he said, JS Furniture plans to absorb the higher costs while trying to work out deals with manufacturers shipping U.S.-made goods into Canada.

"I've got people, customers that purchased stuff a month ago that are awaiting delivery, that could be subject now to tariffs. And I don't want to be the one that's going to phone our customers and say, 'Oh, by the way, this is going to cost more,'" Kyca said.

"We'll eat those costs, because it's not the customer's fault."

However, he acknowledged there's a limit to how long the company can hold the line on prices.

Colin Mang, an economics professor at McMaster University, said businesses across Canada are facing the same delicate balancing act.

"What we did see last year was that retailers absorbed about 75 per cent of the tariff cost, and only passed on a quarter of the cost to consumers," he said.

"This time around, it will depend on how long retailers expect tariffs to remain in place. If they believe that the tariffs are only going to be in for a short time, they're very likely to just absorb the costs again. Of course, that will mean a significant impact on their profitability."

New tariffs 'unlikely to affect most people in their day-to-day lives'

Last week, Bank of Canada Governor Tiff Macklem weighed in on how the central bank expects Canada-U.S. tariffs to affect the economy.

"The counter-tariffs, and indeed the U.S. tariffs ... will add costs for some businesses," Macklem told reporters in Ottawa on Sept. 2. "These tariffs are very steep, but they are applied to a relatively narrow base."

"I'm feeling quite worried," CFIB president Kelly said. "The burden of counter-tariffs hits disproportionately hard on some, not on others."

Kyca said the Canada-U.S. trade war has put JS Furniture's plans to open more stores on hold. At the same time, he said the company's roughly 35 employees are starting to feel the impact, especially sales staff relying on commissions as consumers become more cautious with their spending.

"If people aren't coming in and buying furniture, they're not earning any money," Kyca said.

"People that do have disposable income are holding on to that money, and the people that are working day-to-day, cheque-to-cheque, are nickel-and-diming things," he added. "It's very frustrating."

Mang said Canada's new tariffs generally target U.S. goods with readily-available domestic alternatives. The idea, he says, is to give Canadian companies to an opportunity to capture a larger share of the domestic market, helping offset business lost in the U.S.

For consumers, he said, the situation isn't nearly as challenging.

"For the typical Canadian family, you're not gonna notice much of a difference because of these new counter-tariffs," Mang said.

"The key message is that this is unlikely to affect most people in their day-to-day lives."

Jeff Lagerquist is a senior writer with CBC News based in Toronto. Originally from Erin, Ont., he studied journalism at Toronto Metropolitan University. Jeff previously worked as a senior reporter for Yahoo Finance Canada. He was also a reporter and digital producer for CTV National News, BNN Bloomberg and The Financial Post. He was also a Columbia University energy journalism fellow for 2025.