{"id":111939,"date":"2025-02-26T20:58:29","date_gmt":"2025-02-26T20:58:29","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/despite-u-s-tariff-pause-canadian-businesses-should-consider-strategizing\/"},"modified":"2025-02-26T20:58:29","modified_gmt":"2025-02-26T20:58:29","slug":"despite-u-s-tariff-pause-canadian-businesses-should-consider-strategizing","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=111939","title":{"rendered":"Despite U.S. Tariff Pause, Canadian Businesses should Consider Strategizing"},"content":{"rendered":"


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Executive summary<\/h2>\n

After discussions with U.S. President Donald Trump, Prime Minister Justin Trudeau announced that both countries will delay implementing tariffs after Canada made additional border security commitments. Since the threat of 25 per cent tariffs on most Canadian goods and retaliatory measures remain viable, businesses will want to consider tariff mitigation strategies and lowering reliance on single markets.<\/p>\n

Editor\u2019s note: This article has been updated following news of the pause in implementing tariffs.<\/i><\/p>\n

U.S. tariffs\u2014and Canada\u2019s retaliatory measures\u2014are paused for at least 30 days following discussions between Prime Minister Justin Trudeau and U.S. President Donald Trump over border security commitments.<\/p>\n

Trump\u2019s executive order, which is still scheduled to take effect after the pause, imposes a 25 per cent tariff on all Canadian goods except for energy and energy resources. The tariff rate for energy and energy resources will be 10 per cent and includes crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water and critical minerals. There will be no de minimis<\/i> exception applicable.<\/p>\n

Despite the executive order warning of increased tariffs should Canada retaliate, Canada initially responded with a 25 per cent tariff on an array of products originating<\/a> from the United States to be imposed in two steps.<\/p>\n

The first phase targeted goods like orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, pulp and paper. The extended list would include products such as passenger vehicles and trucks, including electric vehicles, steel and aluminum products, certain fruits and vegetables, aerospace products, beef, pork, dairy, trucks and buses, recreational vehicles and recreational boats.<\/p>\n

Trudeau further indicated the provincial and federal governments were considering non-tariff measures. Although specific measures were not announced, critical minerals, energy procurement and other partnerships were mentioned. The measures would attempt to distribute the impact evenly as possible across regions and industries.<\/p>\n

All tariffs mentioned above are ad valorem,<\/i> meaning calculated as a percentage of the value for duty.<\/p>\n

While businesses may welcome this pause, the tariff threat remains viable \u2014 meaning now is an opportunity to strategize to avoid potential costs. The applicability of these strategies will depend on the circumstances of each business and the relevant country\u2019s implementation of these tariffs. Guidance from an RSM tax or trade professional can assist with realizing the right strategies for your business.<\/p>\n

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  1. Bonded warehouses<\/b> \u2013 Goods which entered and stored in a bonded warehouse prior to export to another destination are not subject to tariffs in the country where the warehouse is located.<\/li>\n
  2. Transfer pricing<\/b> \u2013 In related party transactions, transfer pricing ensures the price of the good is equivalent to the price in an arm\u2019s length transaction. Companies should revisit their transfer pricing strategy to ensure the lowest defensible price is used.<\/li>\n
  3. First sale valuation <\/b>\u2013 Utilizing a sale earlier in the supply chain (known as the first sale) to determine the value of the good typically results in a lower valuation and by extension, lower tariffs. Certain goods imported into the United States can use the first sale valuation method. Last year, the Canada Border Services Agency held a consultation on changes<\/a> to the presumptive method to value imported goods to require use of the \u201clast sale.\u201d<\/li>\n
  4. Tariff engineering <\/b>\u2013 Tariff engineering involves changes to the manufacturing process, manufacturing locations and supply chain to change the valuation, classification and\/or origin of goods to qualify for lower tariffs.<\/li>\n
  5. Exclusion <\/b>\u2013 <\/b>The 2018 tariffs imposed by the U.S. on Canadian steel and aluminum contained an exclusion for goods \u201cproduced in the United States in a sufficient and reasonably available amount or of a satisfactory quality.\u201d While the Federal Register providing technical details on these tariffs has not yet been released at time of writing, similar language may be used to exclude goods which are deemed sufficiently American, allowing importers to have certain goods excluded.<\/li>\n
  6. Diversifying the supply chain and customers <\/b>\u2013 The United States is the top export destination for a number of Canadian products. These tariffs underscore the importance of diversification to limit the negative impacts of tariffs.<\/li>\n
  7. Participate in the comment period <\/b>\u2013 The federal government indicated there would be a public comment period prior to the extension of tariffs to the wider group of goods. Those operating in potentially impacted industries can consider participating in available opportunities to provide input directly to the government.<\/li>\n<\/ol>\n

    Since the signing of the Canada-United States Free Trade Agreement in 1989, Canada and the United States have generally worked together to eliminate tariffs between the two countries. These new measures and the upcoming review of the current Canada-United States-Mexico (CUSMA) agreement in 2026 have raised concerns about what the future of this economic partnership<\/a> will look like.<\/p>\n

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    This article was written by Cassandra Knapman and originally appeared on 2025-02-04. Reprinted with permission from RSM Canada LLP.
    \u00a9 2024 RSM Canada LLP. All rights reserved.     https:\/\/rsmcanada.com\/insights\/services\/business-tax-insights\/us-introduces-tariffs-canada-responds-with-countermeasures.html<\/a><\/p>\n

    RSM Canada LLP is a limited liability partnership that provides public accounting services and is the Canadian member firm of RSM International, a global network of independent assurance, tax and consulting firms. RSM Canada Consulting LP is a limited partnership that provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. The member firms of RSM International collaborate to provide services to global clients but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmcanada.com\/about<\/a> for more information regarding RSM Canada and RSM International.<\/p>\n

    The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.<\/p>\n<\/div><\/div>\n