Tariffs Are Reshaping US–Canada Trade: What Cross-Border Small Businesses Should Review Now

Summary

The United States and Canada have both raised tariffs on cross-border trade in recent weeks, with rates escalating as high as 50 percent, according to Accounting Today — leaving businesses on both sides caught in the middle. A companion report captures Canadian exporters describing the strain in blunt terms, with the economic pain Prime Minister Mark Carney warned about now showing up in real small-business revenues. Tariffs are not just a trade story; they are a tax and cash-flow story. Who bears the duty, whose books carry it, and who acts as importer of record all shape the tax result on both sides of the border.

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Our Take

For small businesses operating across the Canada–US border, tariffs are best treated as a structural change to work through, not a one-off cost. Practical tax angles worth reviewing: first, the transaction chain — who is the US importer of record and who bears the duty under the contract determines where the cost is deductible and how prices and margins are set. Second, related-party structures — a Canadian exporter selling through a US affiliate should revisit entity choice and transfer pricing, since profit attribution and filing obligations in both countries depend on them. Third, duties capitalized into inventory flow into cost of goods sold over time, so inventory valuation and cash-flow projections deserve a fresh look. Fourth, duty relief, drawback and remission programs, and the direction of trade policy itself, can all shift the economics. Every situation differs, so consult a CPA familiar with cross-border Canada–US taxation before making changes.

Disclaimer: This article is general information only and does not constitute tax advice; it should not substitute professional tax counsel. Please consult a licensed CPA for advice specific to your situation.