What Shippers Need to Know to Protect Themselves from the Trade War with Canada

Just a week ago, it looked like a tariff hike on Canadian goods was averted with a last minute trade deal between the U.S. and Canada. But, suddenly, the deal was called off. Now, we’re in a full-blown trade war with our neighbor to the north. Both the U.S. and Canada are hitting the other country with new tariff hikes. Of course, that means serious ramifications for U.S. importers and exporters who ship from and to Canada.

The 50% tariff on many Canadian goods that was supposed to go into effect last week but was paused by President Trump is now being implemented. Canada announced dollar-for-dollar retaliatory tariffs. Then yesterday, President Trump announced a 50% tariff (double the current amount) on all Canadian cars and trucks, starting September 1st. Canada said its retaliatory tariffs will go into effect on September 8th.

Omid Ghoreishi lays out those tariff details in an Epoch Times article.

What went south in the U.S.-Canadian negotiations to spiral us into trade war? Not surprisingly, messaging from the two countries on what happened is conflicting. Here are a couple quotes pulled from an Aldgra Fredly-penned article in the Epoch Times:

After the breakdown, U.S. Trade Representative Jamieson Greer said, “Tonight, Canada declined to finalize the trade deal under the terms agreed earlier this week. Despite the U.S. offer to Canada to receive the best treatment of any major exporter to our market, new demands and walk-backs of other commitments by Canada have upended the careful balance reached in the past days.”

Canadian Prime Minister Mark Carney said, “In recent weeks, we made important progress toward improving Canada’s position as having the best deal in the world with the U.S. However, last-minute changes in the U.S. proposed terms were unfair, uneconomic, and called into question the reliability of any deal.”

That’s just the tip of the iceberg when it comes to the rhetoric from the countries’ political leaders. We’re more interested in what it all means for shippers, so we’ll leave the political situation at things have turned cold as the arctic between the Trump Administration and the Carney Ministry. Ultimately, it means U.S. importers and exporters need to know what the shipping consequences of the trade war are and how to deal with them….

Cash-Flow Shocks & Border Delays

Cross-border shipping has typically been pretty fluid and predictable between the U.S. and Canada. The biggest change in recent years was the tri-party trade deal between Canada, the U.S., Mexico going from NAFTA to USMCA, which the administration of President Trump’s first term negotiated. Most considered that a positive change. You’d probably be hard-pressed to find people who’d consider our new trade war situation a positive development.

With the trade war, we lose the predictability of the duty framework laid out by previous trade agreements. Maybe after it’s all over and done, we’ll be in a better place, but for now the trade conflict puts shippers in risk of stalled freight and frozen liquidity.

Beyond administrative challenges, shippers are at risk of facing a cash-flow crisis. Tariffs must be paid upfront before cargo is released. For Canadian exporters, cash flow issues are already reportedly delaying shipments, which you can read about in a Canadian Press article by Christopher Reynolds also published by Yahoo! Finance. With tariff hikes coming from both the U.S. and Canada, many American shippers will likely soon be facing similar issues, and some likely are already.

Bottlenecks at the border have the potential to mount. Goods arriving at the border with shippers unprepared with the liquidity to pay the increased tariffs have the potential for compounding costliness from additional detention fees.

Tips to Protect Your Supply Chain from Liquidity Problems Caused by Tariff Hikes

• Run Pre-Transit Landed Cost Analyses: Never dispatch a truck or shipping container of goods without calculating the exact duty exposure first. If you don’t know your financial obligations before your cargo leaves the loading dock, you’re exposing your business to incredible risk.
• Use Bonded Warehousing for Emergencies: If your goods are caught in the trade war crossfire, a Customs Bonded Warehouse could be a life-saver. Customs bonded warehouses let you store imported cargo without immediately paying duties, giving you up to five years to pay them. This can help with cash-flow issues, allowing businesses to sell goods before paying the duties on them.

HTS Code Accuracy Is Crucial

Customs officials have increased scrutiny on imported goods and their paperwork to crack down on tariff evasion. That makes goods’ Harmonized Tariff Schedule (HTS) codes crucial. Wrong codes don’t just mean paying the wrong tariff amounts but expensive fines and delayed or seized goods.

Shippers should never be using “close enough” classifications. Rather than a gentle administrative warning, minor classification mismatches can trigger red flags that will permanently affect how a company’s goods will be scrutinized by customs or have shippers paying multiple times what they would have been paying at customs if their paperwork was correct the first time.

How to Protect Your Supply Chain from HTS Code Mistakes

• Audit Your Product Catalog: Review the HTS codes for every single item you move across the border. Cross-reference them directly against the newly published U.S. and Canadian (or whatever other country you’re importing from or exporting to) tariff target lists.
• Partner with an Expert Customs Broker: Don’t leave documentation to chance or generic or AI automated templates. Work with a customs broker either you or your freight forwarder vetted to make sure you’re in customs compliance and your paperwork is verified before it reaches any border agents.