Higher Costs, Admin Nightmare: Canadian Businesses Brace for Impact of De Minimis Exemption End
When U.S. President Donald Trump threatened to impose 25 percent tariffs on Canadian goods, the organic snack foods company Made with Local quickly halted orders from customers south of the border. Based in Dartmouth, Nova Scotia, CEO Sheena Russell recognized the stark reality of Trump's executive order: the anticipated end of the de minimis exemption for shipments entering the U.S. from Canada would introduce significant complications and costs for her business.
"If our team needs to babysit every single $70 order for two boxes of granola bars going to the States … it quickly makes it not really worth it," Russell lamented. The de minimis exemption has allowed businesses to ship packages valued under $800 to the U.S. without incurring duties, making it easier for Canadian companies to compete. According to Russell, this development threatens not only her company’s profits but also raises the specter of lost U.S. sales.
This brewing crisis, where tariffs and the potential loss of the exemption collide, has left many Canadian businesses feeling cornered. Katherine Homuth, CEO of Montreal's Sheertex, which manufactures pantyhose, voiced her concerns through social media. The company has already announced temporary layoffs affecting 40 percent of its workforce, attributing much of the damage to the tariffs but highlighting the removal of the de minimis exemption as another debilitating blow.
Sheertex faces not just the 25 percent tariff, but also additional duties—16 percent—because more than nine percent of its raw materials come from outside Canada or the U.S. With 85 percent of sales generated from U.S. customers, Homuth’s situation demonstrates how intertwined Canadian businesses have become with the American market. "We are in a worst-case scenario," she shared, echoing the fears of many business owners.
Although Russell’s operation is less reliant on U.S. sales, the consequences of the tariff and exemption removal threaten to derail what she described as a "robust U.S. growth strategy plan." Prior to the tariff announcement, she had aspirations for growth this fiscal year, but these plans remain suspended, as uncertainty reigns. Russell has begun treating incoming U.S. orders as experiments, hoping to glean insights to guide her forays back across the border.
Rachael Newton runs Nixit, a Toronto-based company making menstrual products, including cups manufactured locally. Nixit’s dual fulfillment centers—one each in the U.S. and Canada—were meant to facilitate smooth transactions. The looming end of the exemption worries Newton, who, like many, has begun stockpiling products as she prepares for the worst. She acknowledges the inflated prices of Nixit’s offerings, and passing on additional costs to customers will be particularly challenging.
Newton conveyed her gratitude for the stockpile, indicating it offers her company some breathing room, yet also noted it is not an everlasting solution. "It’s still going to cause problems down the line," she warned, capturing the anxiety many industry leaders face. The growing dread among businesses is palpable, as they look to adapt to this shifting economic climate influenced by policy decisions made far beyond their control.
The Canadian business community is bracing for significant challenges as the end of the de minimis exemption looms, with many fearing it could lead to increased operational costs, and potential layoffs, crippling their ability to serve the U.S. market efficiently.
The ramifications of these tariff policy shifts are expected to reach beyond immediate financial impacts, posing longer-term survival questions for many businesses already struggling amid economic uncertainty. While some companies hope to exploit the additional time granted by Trump's decision to delay the tariff implementation, others are proactively seeking solutions to mitigate the impending disaster.
This report by The Canadian Press was first published on February 6, 2025, encapsulating the growing urgency felt among Canadian entrepreneurs as they navigate the tumultuous waters of U.S.-Canada trade relations under Trump's administration.