Starting Friday (Aug. 29), the United States will eliminate the exemption on tariffs for small packages valued at US$800 (6,235) or less from around the world. This move significantly impacts Canadian small and medium-sized enterprises (SMEs) and e-commerce businesses that heavily rely on the US market. They are concerned about the rising operational costs and the potential loss of a large number of American customers. Reports indicate that 20% of stores expect to shut down within six months.
Canadian imports from the US will incur a 35% tariff, with only items covered under the US-Mexico-Canada Agreement (USMCA) being exempt. The recent cancellation of a long-standing exemption on small package tariffs puts even more pressure on businesses. Walsh, founder of the baseball equipment company Hockey Stick Man, stated that the imposition of small package tariffs will undoubtedly have a significant impact on e-commerce. All small exports to the US will now require formal customs declarations, which involve considerable paperwork, logistics, and costs for companies to transport their products to the US.
A senior policy analyst at the Canadian Federation of Independent Business (CFIB), Ogle, noted that approximately one-third of SMEs will face increased operating costs, which will weaken their competitiveness in the US market. More concerning is the potential ripple effect on the overall Canadian economy due to the US's removal of the small package tariff exemption.
CFIB surveys indicate that approximately 20% of SMEs are worried that the new tariffs could lead to their closure within the next six months. Fleece & Harmony, a small textile factory, reports that about 40% of its online business comes from the US. Since the onset of trade negotiations between Canada and the US, orders from the US have already decreased by about 25%. With the implementation of small package tariffs, businesses expect to lose even more customers.
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