‘Everyone's in crisis mode': How Canadian companies are rushing to prepare for day one of Trump's tariffs

Yahoo

28-02-2025

For the past month, customs broker Steve Bozicevic has been receiving constant inquiries from Canadian companies asking about harmonized tariff schedule (HTS) codes, ten-digit figures that identify goods crossing into the United States and determine duties on imports.
'I wake up every morning and get about ten emails asking which HTS code to use. I used to never get these,' the chief executive of Toronto-based A&A Customs Brokers said.
For decades, most Canadian businesses have enjoyed duty-free shipping into the U.S. due to North America's free-trade agreements. But with U.S. tariffs set to come into effect on Tuesday, companies have been working around-the-clock with consultants and customs brokers to figure out everything from how to classify goods and minimize duties to who should pay export levies and how to settle them.
'When the truck arrives on March 4, the U.S. 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 U.S. Customs and Border Protection Agency (CBP). They don't know how to settle. Everyone's in crisis mode.'
Canadian businesses from coast to coast will wake up to a new reality on Tuesday if the U.S. moves ahead with Donald Trump's plan to impose 25 per cent tariffs on all Canadian goods and 10 per cent on energy.
'There is no good-based sector that is insulated from the threat of tariffs,' said Wendy Wagner, partner at Gowling WLG who leads the law firm's international trade and customs practice.
There is no good-based sector that is insulated from the threat of tariffs
Wendy Wagner
'Things like HTS codes weren't as important before. Now, every little detail matters,' added Tyler Gompf, co-founder and partner of Manitoba-based Global Drain Technologies, which supplies specialty drain products for primarily U.S.-based clients. In recent weeks, the business owner opened an account with the U.S. customs agency and designated his company as the importer who will pay duties 'so that payment happens immediately on March 4 when the product ships across the border,' he said.
Bozicevic said that a business that sells rubber floor mats used to declare its goods as articles made of rubber, but if tariffs come into effect, that company may identify it as a rubber floor mat, or a finished product ready for consumption.
'Even though it kind of means the same thing, it may have a different duty rate,' Bozicevic said.
The U.S. tariffs due to come into effect Tuesday may only be the start. Trump has also said he will also impose global tariffs of 25 per cent on steel and aluminum imports on March 12 and reciprocal tariffs on all countries with which it has a trade imbalance.
Canada, meanwhile, has indicated it will meet U.S. levies with retaliatory 25 per cent tariffs of its own on $155 billion of U.S. imports, which Ottawa said it will apply in two phases. The first package would target food items, appliances and apparel, alongside pulp and paper. The second would come into effect three weeks later and include vehicles, aerospace products, steel and aluminum, fruit and meat products.
If those levies come into effect, it will increase costs for companies on both sides of the border, Wagner said.
Things like HTS codes weren't as important before. Now, every little detail matters
Tyler Gompf
Alongside the scramble to manage logistical changes on day one, the threat of a tariff war is also forcing businesses to explore new strategies and workarounds.
Among the contingency plans? 'Permanent and temporary solutions around how to have a physical presence in the U.S.,' said Mackenzie West, the director of market development at customs broker GHY International.
West said a lot more companies are exploring the option of opening up in the U.S. to manage or eliminate cross border flows.
Toronto-headquartered Kala Therapy, which makes and sells medical-grade red-light therapy products from face masks to skincare wands, has shifted more inventory to the U.S. to minimize fulfillment disruptions and to prevent sudden cost jumps, said CEO and co-founder Cam Stajer.
Kala currently fulfills U.S. orders from its Canadian warehouse. Its direct-to-consumer business makes up the bulk of its sales, with the U.S. accounting for a 'significant portion' alongside Canada and the U.K., Stajer said.
Stajer has also sought out new production and shipment hubs beyond China and North America to try to bypass tariffs, and increased orders and renegotiated costs from suppliers to keep its business humming.
Other companies are looking to exploit existing loopholes, such as a U.S. trade rule known as 'first-sale for export.' It allows importers to lower U.S. tariffs by basing the value of their items on the first or earliest sale in a string of transactions, such as the initial sale between the manufacturer and the middleman.
'It's a complicated program that was leveraged in textiles, but we're seeing more appetite to learn and deploy it,' West said, though he warned it was not something that could be implemented overnight.
'Businesses have to be very detailed and compliant to even begin thinking about establishing a program like that. But at this point, exporters are looking under every rock to explore all of the available options they have.'
Shifting sourcing and manufacturing to the U.S. is another longer-term strategy that hinges on factors such as certifications, lead times and cost considerations, said Don Thompson, the founder and CEO of Beacon Commerce, which helps Canadian businesses sell on Amazon both in the U.S. and Canada.
He estimates that 25 per cent of his clients, particularly those in the grocery and natural health sector, are exploring sourcing in the U.S. and searching for U.S. facilities that can produce their goods stateside.
One of his clients, a major producer of household essentials, had planned to open a new factory in Florida in 2026, but bumped up its launch to 2025 due to the tariff threat.
In the gut of every Canadian exporter … is a pit at the bottom of their stomach on whether this will creep up again
Mackenzie West
Many other companies are in wait-and-see mode when it comes to the U.S.
Beck's Broth, a Guelph-based business that makes high-protein bone broth drinks, delayed its U.S. launch by several months due to the tariff threat, said the company's COO and co-founder Domenique Mastronardi.
'We would have loved to launch in the U.S. 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,' she said.
The company is now aiming to launch in the U.S. in the second-quarter of this year. It will move its goods to U.S. warehouses and absorb the costs of any potential tariffs so the 'burden doesn't fall on the customer,' Mastronardi said.
New Brunswick coffee company Saltwinds entered the U.S. market last year through selling on Amazon. But it is now investing all of its ad dollars, inventory and attention on the Canadian market, said Laura Richard, its co-founder and COO. American retailers have been reluctant to talk and aren't necessarily looking to stock Canadian brands given the current trade and political climate, Richard said.
The tariff threat, the loss of the U.S. market and rising coffee prices could have been 'disastrous' she said.
'But Canadians have stepped up to the plate and shown us how big the market here can still be for us,' she said.
Likewise, Beacon Commerce's Thompson said that about half of his clients are 'betting on the horse we know' and investing in Canada rather than the U.S. until the dust settles.
Even if Trump's tariffs fail to materialize, the threat alone means companies may continue to explore contingency plans well into the future.
'In the gut of every Canadian exporter … is a pit at the bottom of their stomach on whether this will creep up again,' West said.
As Kristen Hopewell, the Canada research chair and director of the Liu Institute for Global Issues at the University of British Columbia (UBC) who specializes in Canada-U.S. relations and international trade, put it, North America's integrated market is 'clearly in jeopardy.
Questions remain on how tariffs will apply to energy
Canadian business leaders have lost confidence in the U.S.
'Businesses need predictable and stable trading relationships to operate effectively,' she said. 'And that's exactly what Trump has thrown into disarray.'
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