Who pays U.S. Import Tariffs?

What are import tariffs, and how do they apply to Canadian exports?

Tariffs are taxes or duties that a government places on imported goods.

Tariffs primarily serve two main goals:

1. To shield domestic industries by increasing the cost of imported goods—making locally made products more competitive.
2. To provide a valuable source of income for the government, especially in nations with high trade volumes.

In the United States, tariff payments are handled by the Customs and Border Protection (CBP) agency at various entry ports. The specific duties owed depend on several factors, including the product’s classification code, declared value, country of origin, and related shipping costs.

Who pays tariffs?

In general, responsibility for payment of the tariff will be agreed between the shipper and recipient upfront. This forms part of the shipment’s Incoterms®  – a uniform set of international trade standards that outline who is responsible for transportation, cargo insurance, export and import formalities, payment of duties and taxes, and at what point risk transfers from the seller to the buyer. This helps all parties meet their obligations.

The impact of the US tariffs

Recently, the United States has introduced a series of new tariffs and import duties, many aimed at imports from China, the European Union, and Canada. These rapid policy shifts have created added pressure for foreign SMEs that often lack the financial cushion and operational flexibility of larger corporations.

The US rolled out policy changes quickly, with minimal lead time, leaving SMEs scrambling to adapt while trying to meet US expectations for fast and reliable delivery.

Ongoing trade disputes have increased international shipping costs, particularly along major trade lanes between Asia and the U.S. Some exporters have had to reroute goods, manage more complex customs clearance procedures, or deal with port delays. These disruptions can lead to higher expenses, like demurrage, warehousing fees, and other unplanned logistics costs.

Who will end up covering these increased costs? Most SME’s can’t realistically absorb the costs, but passing them on to customers can make their products less competitive. It’s no surprise, then, that this period has been deeply concerning for many businesses, but SMEs can still take steps to navigate these new challenges effectively.

How can Canadian businesses mitigate the impact of US tariffs?

To lessen the impact of tariffs introduced this year, businesses should take strategic steps to adapt. Here’s how:

Start by looking at your supply chain to see where your business is vulnerable to tariff impacts. Consider asking yourself the following critical questions:

• Which components or raw materials are you exporting to the U.S?
• From which countries are these goods sourced?
• Are any of these items subject to existing or potential tariffs?

Even if you are shipping goods to the US from Canada, tariffs on other countries may apply if the product was manufactured with materials sourced from another country. Tools like supply chain mapping software or even spreadsheets can help you track and find risks. That way, your business can anticipate cost increases and adjust procurement strategies before disruptions happen.

Instead of relying on a single country, especially one subject to high US import tariffs, your business can:

• Seek out alternative suppliers in countries with favorable trade agreements with the US (e.g., certain Southeast Asian nations).
• Consider nearshoring or reshoring to Canada or the US to reduce dependence on international shipping and avoid geopolitical risks.

Expanding and diversifying your supply chain can reduce the impact of tariffs and make your business more resilient to other disruptions, like pandemics or natural disasters.

There’s a big world out there! If US tariffs are cutting into your profit margins, you can consider other markets:

• Domestic markets, where tariffs are not a factor.
• Other global regions with lower import duties and friendlier trade regulations
• Target emerging markets with growing demand for your products and fewer trade barriers.
• Look into regional trade agreements your country is part of, which might open doors to neighboring markets.

By not relying solely on the US, you’ll reduce your exposure to tariff-related risks and open up new revenue opportunities elsewhere.

Strong partnerships can offer more flexibility and better pricing during turbulent times:

• Work closely with freight forwarders, customs brokers, and logistics providers to understand shipping timelines and costs.
• Develop relationships with suppliers that allow for better negotiation on terms or alternative sourcing options.
• Foster transparency and collaboration throughout the supply chain to make joint decisions that benefit all parties.

Reliable partners are crucial when adapting logistics strategies or when immediate shifts in supply are needed.

US tariff policies can change quickly and often without much warning. SMEs need to:

• Monitor government announcements from the US Trade Representative (USTR) and the Department of Commerce.
• Subscribe to industry newsletters or join trade associations that give updates and analysis on trade policy.
• Work with customs brokers or trade compliance consultants who can guide you through new changes to import duty rules.

Staying informed empowers your business to respond swiftly, whether that involves stockpiling inventory ahead of a new tariff or fast-tracking entry into alternative markets.

For SMEs, managing tariffs goes beyond cutting costs; it’s about building long-term resilience. By taking a forward-thinking approach—focusing on supply chain diversification, exploring new markets, and strengthening strategic partnerships—your business can not only weather trade disruptions but also position itself for future growth.

US tariffs: FAQs

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