For Canadian businesses, it’s been a rollercoaster ride since U.S. president Donald Trump took office, marked by back-and-forth tariff threats and trade policy uncertainty. On Aug. 1, 2025, the latest decision landed: a 35 per cent tariff on Canadian exports that don’t meet the rules of origin under the Canada-U.S.-Mexico Agreement (CUSMA). While the CUSMA exemptions were hailed as good news, compliance – and all the paperwork that goes with it – will be a headache for many small to mid-sized Canadian businesses (SMBs).

“There has been a steep learning curve as it relates to tariffs and customs,” says Christina Zurowski, Canadian Indirect Tax – cross border leader, at Doane Grant Thornton LLP. “From a customs perspective, a lot of the basic rules haven’t changed – what’s changed is layering in the tariffs. People’s attention to what might be CUSMA compliant in the past was never front and centre for these organizations.”

Additionally, some Canadian businesses are feeling indirect impacts. For example, steep tariffs on aluminum remain in place, so food and beverage manufacturers face higher expenses for aluminum cans imported from the U.S.

With cross-border trade now more costly and complex, Canadian SMBs need new survival strategies that can help mitigate the impact and build long-term resilience.

Understand CUSMA compliance

Roughly 86 per cent of Canadian exports to the U.S. should be able to cross the border duty free, as long as they meet North American rules of origin requirements, according to RBC Economics. Generally, goods must either be wholly obtained or produced within Canada, the U.S. or Mexico, or meet specific product-specific requirements.

For SMBs, the first step is having a clear understanding of what it means to be CUSMA compliant and where potential risks lie. “Understanding how those rules work is one of the first pieces organizations need to address,” Zurowski says. “For a lot of our clients, that’s the starting point – helping to demystify and clarify how the rules actually work versus some of the assumptions that might be out there.”

One area that was eye opening for many businesses, adds Zurowski, is that the importer of record is responsible for clarifying and confirming the status of the goods. To qualify for duty-free treatment under CUSMA, the importer must have a valid certification of origin, which typically comes from the Canadian exporter.

“Even if you obtain information from your suppliers, you are still the one at risk if it’s determined to be incorrect,” Zurowski says. “So, you need to be sure that you are confident and comfortable in your relationships with your suppliers because you will be relying on them as well.”

Look for suppliers closer to home

While there is relief on the tariff front, rising costs from U.S. suppliers – whether for raw materials, packaging or finished goods – are putting pressure on Canadian SMBs. One way to tackle this challenge is through supplier diversification, which has become a new reality in the evolving Canada-U.S. trade relationship.

“For the longest time, it has been very convenient for businesses in Canada to work with U.S. suppliers and customers,” says Behrouz Bakhtiari, assistant professor, operations management at McMaster University in Hamilton, Ont. “The U.S. has been an amazing trading partner until very recently, so it did not make sense for any Canadian business to want to pivot.” However, he stresses that diversification reduces risk. “As the saying goes, you can’t have all your eggs in one basket.”

While Bakhtiari recognizes diversifying supply chains is more challenging for small businesses, it’s important to get started. “I don’t think we can ever again – or for the foreseeable future – look at the U.S. the way we looked at it before,” he says. “Even if it’s one supplier that you can diversify away from the U.S. market, it’s a way to mitigate risk. Necessity breeds innovation – and we have to become more innovative.”

Gary Newbury, a retail supply chain expert, also sees opportunity despite the hurdles. “Can we find suppliers inside Canada who we wouldn’t even think about in the past?” he says. “It might be more expensive, but it’s in Canada and it’s duty free – especially if interprovincial trade barriers come down.”

He adds that this could ultimately help lift the Canadian economy, as businesses source more ingredients and products domestically where possible. And getting the goods “could happen just as quickly as moving across the border – without all that paperwork requirement.”

Harness government support and local talent

SMBs can also look beyond their supply chains. Bakhtiari encourages SMBs to tap into government resources and local expertise to help them adapt to the evolving trade landscape.

For example, the federal CANExport program (currently closed to new applications) offers up to $50,000 to help SMBs explore international markets to grow their business. Bakhtiari also points to Ontario’s proposed Protect Ontario Through Free Trade Within Canada Act, which would remove existing barriers to strengthen internal trade, reduce costs and encourage initiatives to buy locally.

“Small businesses are more vulnerable, and they don’t have access to the capital that large businesses do,” he says. “So, I would encourage governments at all levels to throw more support behind small businesses.”

The federal government is also helping Canadian businesses respond to global trade pressures through the Regional Tariff Response Initiative (RTRI). The $1-billion funding program over three years is designed to help businesses boost productivity, lower costs, strengthen supply chain resilience and enhance competitiveness.

Beyond funding, Bakhtiari says there’s the untapped potential of working with local universities and co-op programs. “Talent is something many small businesses haven’t focused on enough,” he says. “I understand human resources is an issue in small businesses, but they could hire a co-op student and have them look at how their business could leverage these government programs.”

Co-op and upskilling programs can also bring in valuable skills in such areas as automation and analytics. These capabilities could help with purchasing and pricing, especially when navigating supplier relationships in today’s trade environment. “We need to look inward and we need to invest in talent,” Bakhtiari says. “It’s not about protectionism, it’s about creating these opportunities for our talent to stay here.”

Source: The Globe and Mail