US-Canada Tariff: 7 Protection Strategies for Canadian E-commerce Businesses and Online Sellers

Mar 17, 2025 | Canada Digital Marketing News

The US-Canada tariff war from March 2025 has created unprecedented challenges for Canadian small businesses particularly in the e-commerce sector. Understanding the effects and creating strong plans will help you to safeguard your company as 25% tariffs already affect around $60 billion worth of American goods and possible escalation looms on April 2, 2025.

How the Tariff War Is Impacting Canadian E-commerce Businesses

Direct Cost Increases

Canada’s retaliatory tariffs mean that if your e-commerce company buys goods or components from the US, you are probably going to see significant price hikes. The federal government has imposed 25% tariffs on approximately $60 billion worth of American goods in response to Trump’s initial tariffs and steel/aluminum tariffs. These counter-measures target a wide range of products including:

  • Electronics and computers
  • Sports equipment
  • Appliances
  • Apparel and footwear
  • Tools and various consumer goods

For businesses selling these products, the tariffs create an immediate 25% price increase on inventory costs, forcing difficult decisions between absorbing these costs (reducing margins) or passing them to consumers (potentially losing sales). As CBC reports, many small businesses are caught in this challenging position with no good options.

Supply Chain Disruptions

The state of affairs now poses major supply chain difficulties:

  • Delayed shipments as businesses navigate new tariff regulations
  • Inventory management difficulties due to uncertain supply and pricing
  • Limited ability to find domestic alternatives for certain products

According to the CBC, some specialized equipment simply isn’t manufactured in Canada, as in the case of Cluck Clucks restaurant chain, leaving businesses with no choice but to pay the higher tariffs or halt expansion plans entirely.

Consumer Purchasing Power

The overall economic impact of the tariff war is likely to reduce consumer purchasing power, affecting e-commerce sales:

  • Higher prices across various product categories
  • Reduced discretionary spending as consumers face inflation in essential goods
  • Potential economic slowdown affecting overall consumer confidence

Economists warn that “consumers [will] pay higher prices for cars and parts imported from the United States and for food purchases that are hard to replace with Canadian or overseas products at equivalent cost”.

Cross-Border E-Commerce Challenges

For Canadian e-commerce businesses that sell to US customers, additional complications include:

  • US tariffs making Canadian products more expensive and less competitive in the American market
  • Declining US demand for Canadian goods as prices increase
  • Shipping and customs delays at the border due to new tariff processing

As one business owner noted in a CNBC report: “Our customers are eager to purchase… Now, [orders remain] idle on the dock.”

Financial Strain

The combined effects create significant financial pressure:

  • Reduced profit margins in an already competitive sector
  • Cash flow challenges as costs increase but prices can’t always be raised proportionally
  • Potential liquidity issues, especially for businesses operating with thin margins

Florence Jean-Jacobs, principal economist at Desjardins Group, explains: “They will have to choose between reducing their profits or increasing their selling prices, which will weaken their power to retain and attract customers”.

Government Support Programs Available

The Canadian government has introduced several support programs that e-commerce businesses might access:

These programs may provide some relief, but businesses will need to navigate application processes during an already challenging period. The full impact remains uncertain, especially with the threat of additional tariffs potentially coming on April 2, 2025, which could further escalate the situation for Canadian e-commerce businesses.

Strategies to Weather the Tariff Storm

Diversify Supply Chains and Markets

Reduce US Dependency

Small online retailers should actively seek alternative suppliers outside the US to minimize exposure to the 25% counter-tariffs that began on March 4, 2025, with more coming on April 2. This includes exploring suppliers from Europe, Asia, and Latin America to replace American sources for affected products.

Expand Your Customer Base

If you’re heavily dependent on US customers, prioritize growing your Canadian customer base and exploring international markets protected by favorable trade agreements. The CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) and CETA (Canada-EU trade agreement) offer access to markets without the tariff complications currently affecting US trade.

Leverage Government Support Programs

Several government initiatives have been launched specifically to help businesses affected by the tariff situation:

Operational Strategies

Consider Partial US Operations

Some Canadian businesses are establishing assembly or partial manufacturing operations in the US to avoid tariffs. While this requires investment, it can be more economical than absorbing the 25% tariff costs in the long run.

Move Up the Value Chain

Rather than exporting raw materials or basic products, focus on producing higher-value finished goods. The transportation costs can be more easily absorbed within the profit margins of these premium products.

Implement Tariff Engineering

Work with tax and trade experts to potentially reclassify products to categories with lower or no tariffs.

Digital Transformation

Strengthen Your Online Presence

Investing in website optimization, SEO, and digital marketing can help reach new customers and diversify revenue streams beyond affected markets. According to BDC, this is particularly important as businesses need to find new customers to replace potentially lost US sales.

Explore E-commerce Automation

Implementing automation tools can help reduce operational costs to offset some of the increased expenses from tariffs. This might be the silver lining – forcing efficiency improvements that will benefit your business long after the tariff situation resolves.

Industry Collaboration

Join chambers of commerce or trade associations to access collective resources, share strategies with other affected businesses, and have a stronger voice in policy discussions. The Canadian Federation of Independent Business (CFIB) is actively advocating for expanded support for SMBs affected by the tariffs.

Economic Outlook for 2025-2026

Despite the tariff challenges, there are some positive indicators for the Canadian economy:

However, these projections don’t fully incorporate the potential impacts of wide-ranging US tariffs, which could significantly affect growth and inflation if expanded. The current tariff situation is creating uncertainty that may impact business investment and trade relationships.

Taking Action

While new tariffs could arrive on April 2, 2025, the situation is still uncertain, thus Canadian e-commerce SMEs should give flexibility and diversification first priority and use government support programs to help them through this difficult moment.

The comprehensive list of products from the United States subject to 25% tariffs effective March 13, 2025 should be carefully reviewed by all e-commerce businesses to understand specific impacts on your supply chain and product offerings.

For businesses looking to navigate these complex waters, the Business Development Bank of Canada has created a special support page with additional resources tailored to businesses affected by the current tariff situation.

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