Understanding the New Canada Surtax

On March 4, 2025, Canada implemented a 25% surtax on a range of U.S.-manufactured products valued at C$30 billion (approximately US$21 billion). This measure applies regardless of the shipment's origin, meaning that even if a U.S.-manufactured product is shipped from a third country, it will still be subject to the tariff upon entry into Canada. The official announcement and the list of affected products can be found on the Department of Finance Canada website.

Additionally, Canada originally planned a second phase of tariffs, covering an additional C$125 billion (approximately US$87 billion) worth of U.S. goods. However, this second phase has been postponed until April 2, 2025 to allow for continued trade negotiations and potential resolution. Source: Reuters.

Why Is This Surtax Being Introduced?

This surtax is a retaliatory measure in response to U.S. tariffs on Canadian products. The U.S. imposed 25% tariffs on a range of Canadian goods, prompting Canada to respond with equivalent countermeasures. More details on Canada’s official stance can be found in the Government of Canada's trade response.

What Products Are Affected?

The surtax currently applies to C$30 billion worth of U.S. goods, including:

• Nutraceuticals & Supplements – Health and wellness products, such as vitamins and protein powders.
• Cosmetics & Personal Care – Makeup, skincare, hair products, and perfumes.
• Plastics & Industrial Goods – Plastic packaging, containers, and other manufacturing materials.
• Clothing, Footwear & Accessories – Apparel brands selling U.S.-manufactured goods will face increased costs.
• Books, Printed Materials & Stationery – Publishers and distributors shipping books or promotional materials.
• Toys, Games & Collectibles – Children’s products, including educational toys and board games.

A second wave of tariffs, covering C$125 billion of additional U.S. goods, is currently postponed until April 2, 2025.

For a full list of affected HS codes and product categories, refer to the Government of Canada's official tariff list.

How This Will Impact E-commerce & Cross-Border Shipping

1. Increased Costs for U.S. Businesses Selling to Canada

• A 25% surtax is already in effect on C$30 billion worth of U.S. goods.
• The second phase of tariffs, covering an additional C$125 billion in U.S. products, is delayed until April 2, 2025 but remains a looming risk.
• U.S.-based e-commerce brands selling to Canadian customers will need to adjust pricing, absorb costs, or find alternative sourcing to maintain profit margins.
• Canadian consumers may shift purchasing habits to domestic brands or non-U.S. suppliers to avoid price hikes.

2. Courier Imports Remission Order (CLVS) No Longer Provides Duty-Free Entry

Under normal circumstances, goods valued under CAD $40 (B2B) or CAD $150 (B2C) could enter Canada duty-free under the Courier Imports Remission Order (CLVS). However, the new surtax applies even to shipments that qualify under CLVS, meaning low-value shipments that were previously duty-free may now be subject to the 25% surcharge.

More details are available in CBSA Customs Notice 25-03.

3. Potential Supply Chain Shifts & Manufacturing Relocation

To avoid these tariffs, some U.S. businesses may explore:

• Relocating manufacturing to Mexico or Asia to qualify for different trade agreements.
• Using Canadian fulfillment centers to store and distribute inventory within Canada.
• Implementing drop-shipping models from international suppliers to bypass direct importation into Canada.

How Businesses Can Adapt & Stay Competitive

Step 1: Conduct an HS Code Audit

Check if your products are affected by reviewing the official tariff list: Government of Canada – Full List of Affected Products.

Step 2: Adjust Pricing & Margins

Recalculate landed costs, factoring in:

• The 25% surtax.
• Additional customs duties and taxes.
• Adjustments in shipping fees due to international logistics rerouting.

Step 3: Explore Alternative Fulfillment & Logistics Solutions

• Store inventory in Canada to avoid import fees on individual shipments.
• Diversify sourcing to include suppliers in Mexico, Europe, or Asia.
• Leverage FirstMile’s Xparcel International to optimize shipping routes and minimize exposure to import taxes.

How FirstMile & Xparcel International Can Help

At FirstMile, we specialize in cross-border shipping solutions that minimize costs and ensure compliance with international trade regulations. Our Xparcel International service offers:

• Dynamic Carrier Selection – Choose the most cost-effective shipping partners.
• Optimized Routing – Avoid high-cost entry points and streamline distribution.
• Customs & Duty Support – Ensure full compliance with Canada’s new surtax regulations.
• Flexible Final-Mile Delivery – Access multiple carrier options for faster and cheaper delivery.

If your business ships to Canada, contact FirstMile today to develop a customized shipping strategy that keeps your costs low and your delivery times reliable.

What’s Next? Stay Informed & Take Action

Given the political and trade-driven nature of these tariffs, businesses should:

• Monitor U.S.-Canada trade relations and be prepared for further changes.
• Assess the second phase of tariffs, scheduled for April 2, 2025, and its potential impact on pricing and sourcing.
• Develop contingency plans for long-term cross-border trade stability.

Final Thoughts

This surtax represents a significant challenge for U.S. businesses exporting to Canada, but by implementing proactive pricing, alternative sourcing, and strategic shipping solutions, companies can adapt and remain competitive.

At FirstMile, we help businesses navigate these regulatory changes and minimize shipping costs. Contact us today to explore how Xparcel International can keep your business competitive despite these new trade restrictions.