Canadian technology firms are dealing with ongoing economic uncertainty and logistical issues after the U.S. increased tariffs and modified key import policies, intensifying its trade conflict with Canada.
President Donald Trump failed to finalize a U.S.-Canada trade agreement by the August 1 deadline. Consequently, he signed an executive order raising tariffs on Canadian imports into the U.S. from 25 to 35 percent for items not covered under the Canada-United States-Mexico Agreement (CUSMA). Another order, signed a day earlier, ends the de minimis exemption by August’s end, closing a loophole that allowed duty-free exports of goods valued under $800 USD to the U.S.
Canadian Prime Minister Mark Carney expressed “disappointment” in a statement shortly after midnight, indicating that negotiations with the U.S. continue. Canadian trade minister Dominic LeBlanc affirmed that discussions would carry on over the coming weeks. The 35-percent tariff faces a challenge at a U.S. federal appeals court for allegedly violating the U.S. constitution.
Benjamin Bergen, president of the Council of Canadian Innovators, emphasized the importance of focusing on domestic business growth and approaching negotiations with economic sovereignty.
The tariff increase and changes to the de minimis exemption could harm Canadian businesses exporting goods to the U.S., including tech startups that sell or use hardware components. Kyle Feigenbaum, CEO of Healthybud, highlighted that such changes could be detrimental to small companies with U.S. sales.
Feigenbaum noted that Healthybud avoided new tariffs by establishing a U.S. warehouse prior to the trade war. Companies that previously relied on the $800 duty-free allowance now face additional tariffs and associated costs from necessary export paperwork. Dan Kelly from the Canadian Federation of Independent Businesses (CFIB) said these logistical challenges could negatively affect smaller Canadian companies.
A CFIB survey showed nearly a third of Canadian exporters use the de minimis rule, with many seeking government assistance for CUSMA-related paperwork. Furthermore, 30 percent of exporters are unsure about their compliance with CUSMA.
Stephanie Lipp, CEO of MycoFutures, noted the need to reassess plans due to trade considerations. Although her mushroom-based leather company hasn’t launched, trade changes are influencing strategies.
Persistent uncertainty since February has had significant effects on Canadian businesses, including rising costs and planning difficulties. Sleep tech startup Smart Nora recently declared bankruptcy, partly due to fundraising troubles linked to the trade war. The ongoing uncertainty over a trade deal between the U.S. and Canada is harming businesses and the economic outlook.
Kelly likened the situation to the COVID-19 pandemic, where initial government support waned over time. The Canadian government introduced a multibillion-dollar aid package to help businesses cope. He suggested reinvesting funds from reciprocal tariffs, like those on steel and aluminum, back into Canadian businesses.
The trade tensions have impacted Montreal-based Paperplane Therapeutics, which sells technology to U.S. clients. CEO Jean-Simon Fortin cited increased costs and logistical hurdles. Both Fortin and Feigenbaum expressed concern over CUSMA’s potential renegotiation next year, complicating long-term planning.