Canada and the United States have long maintained one of the most significant trade relationships in the world. In 2024, bilateral trade in goods surpassed $1 trillion for the third consecutive year, with the United States accounting for 75.9% of Canada’s total goods exports and 62.3% of its total goods imports, according to a recent report from Statistics Canada.
But that deeply integrated trade partnership is now facing a major upheaval. A sweeping series of tariffs introduced by the U.S. administration in early 2025 has set off a retaliatory response from the Canadian government, sending ripple effects across Canada’s business landscape—especially in retail and manufacturing.
On March 4, 2025, the United States imposed a blanket 25% tariff on all Canadian goods not compliant with the Canada–United States–Mexico Agreement (CUSMA), alongside a 10% levy on Canadian energy exports. This was quickly followed by targeted tariffs on steel, aluminum, and automobiles. In turn, Canada implemented $30 billion in counter-tariffs on U.S. imports, with additional phases planned.
“These developments are reshaping cross-border trade, driving uncertainty and cost increases across Canadian industries,” notes Statistics Canada in its latest analysis, based on the Canadian Survey on Business Conditions conducted from April 1 to May 5, 2025.
Exporters Under Pressure
Exporters to the U.S.—which make up 86.6% of all Canadian exporters—are particularly vulnerable. Nearly one-third (32.2%) of these businesses expect the new U.S. tariffs to have a high impact, while another 19.8% anticipate a medium impact.
Over the next three months, 71.9% of exporters expect to face cost-related obstacles, with 30.4% forecasting a decrease in overall exports. Profitability is expected to decline for 35.4% of exporters, and 42.9% foresee rising operating expenses.
In response, nearly three-fifths (56.8%) of exporters have already taken action. Of these, 24.6% sought new customers outside the U.S., and 18.1% delayed major investments or expenditures. Among manufacturing exporters, 82.5% have implemented mitigation strategies—43.8% of them by pursuing alternative customers abroad.
Looking ahead, the business climate remains cautious. “Among exporters to the United States, 6 in 10 (60.5%) expect greater uncertainty over the next 12 months,” according to Statistics Canada. While 34.4% anticipate a decline in U.S. sales, 21.8% expect higher sales within Canada, and 11.0% foresee growth in other international markets.
Input costs are also projected to rise: 52.1% of exporters expect higher material input costs, and nearly half (46.7%) plan to increase their selling prices. Despite these headwinds, 65.7% of exporters remain either very or somewhat optimistic about their business outlook over the next year.
Importers Hit with Rising Costs
Importers are also dealing with fallout from Canada’s counter-tariffs. In 2023, 69.2% of all Canadian importers sourced goods from the United States, with an average of 28.8% of their total purchases coming from U.S. suppliers.
Among these businesses, 32.7% expect a high impact from Canadian tariffs on U.S. goods. Over half (53.8%) anticipate higher operating expenses, and 42.9% expect to increase their selling prices. About one-third (35.4%) foresee a decline in profitability.
To manage these risks, 57.5% of importers have made strategic adjustments. One-third (33.4%) have found alternative suppliers outside the U.S., while 24.6% increased domestic sourcing, and 19.2% stockpiled inventory.
In the manufacturing sector, 75.5% of importers took similar actions. “Over two-fifths (44.5%) sought alternative suppliers outside the United States, and one-third (33.9%) increased domestic sourcing,” said Statistics Canada.
Uncertainty is a consistent theme. Over half (52.6%) of U.S. importers expect more business volatility over the next 12 months, and 53.7% anticipate higher selling prices. Meanwhile, 60.3% foresee higher material input costs.
Despite the challenges, 71.5% of importers reported being optimistic about the year ahead, indicating resilience in the face of shifting trade conditions.
Tariffs Resonate Across All Sectors
The effects of these tariffs extend beyond importers and exporters. Across all industries, including retail and services, 18.1% of businesses expect U.S. tariffs on Canadian goods to have a high impact, and 18.5% report the same for Canada’s retaliatory tariffs on U.S. imports.
Over the last three months, 26.4% of all businesses have taken action to mitigate risk. These include sourcing outside the U.S. (12.2%), increasing domestic sourcing (12.0%), delaying investments (7.5%), and stockpiling inventory (6.7%).
In the manufacturing sector, more than half (54.3%) of all businesses took mitigation steps, including 32.2% that found non-U.S. suppliers and 26.4% that boosted domestic sourcing.
Looking forward, 43.1% of all businesses expect heightened uncertainty over the next year. Additionally, 40.4% expect higher material input costs, and 34.3% anticipate rising selling prices.
Still, business confidence persists. According to Statistics Canada, “Among all businesses, 7 in 10 (70.0%) reported being either very optimistic or somewhat optimistic about their outlook over the next 12 months.”
Retail Sector Adjusts to a New Trade Landscape
Retailers in particular are watching closely, with supply chains, pricing strategies and inventory planning now under constant review. The combination of higher input costs, delayed shipments, and shifting consumer demand is forcing businesses to adapt quickly or risk losing competitiveness.
With U.S.-Canada trade relations evolving rapidly, businesses across the country are bracing for continued uncertainty—yet responding with a spirit of adaptation and strategic resilience.
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