When two heavyweights come together, the world seems to stop and stare. They wonder who is going to come out on top. Whatever the outcome, they hope they’ve placed their bets in the right place. “In the red corner”…”In the blue corner…” The new U.S. – Canada Trade Tariff War is the biggest economic fight in recent history. Your business needs to be ready for the whopping 25% tariff that has been implemented.
Keeping up with the new trade U.S.-Canada trade tariffs seems like an impossible task. This article is here to break down exactly what there is to know about this heavyweight bout.
New Tariffs and Tax Rates
From February 4, 2025, the U.S. has imposed a 25% additional duty on imports from Canada and Mexico, and a reduced 10% tariff specifically on Canadian energy resources. These measures were enacted under the International Emergency Economic Powers Act, with the administration citing a national emergency at the U.S. borders.
In retaliation, Canada has announced a 25% tariff on $30 billion worth of U.S. goods, effective the same day. The Canadian government has emphasized that it will not stand by as the United States imposes unjustified and unreasonable tariffs on Canadian goods.
Economic Implications of the U.S.-Canada Trade Tariff War
These escalating tariffs have drawn criticism from business leaders on both sides of the border. They both warn that such measures could lead to higher costs for consumers, job losses, and disruptions to supply chains. Industry groups are urging both governments to return to the negotiating table to resolve the conflict before it inflicts further economic damage.
Economists predict that the tariffs could cause significant inflation, complicating the Federal Reserve’s ability to lower interest rates. The trade war could have broad implications, potentially affecting global growth, impacting various industries, including the automotive and tech sectors.
Historical Context
The U.S. and Canada have long been each other’s largest export markets, with a deeply integrated economic relationship. For almost four decades, trade between the two countries has been governed by a succession of free trade agreements. The most recent of which is the Canada-United States-Mexico Agreement (CUSMA), which entered into force in July 2020.
How VAT IT Compliance Can Help in this Trade Tariff War
Amid these trade tensions, businesses operating in the U.S. and Canada face increased complexity in managing their VAT compliance and sales tax obligations. VAT IT Compliance specializes in helping companies navigate these challenges by providing:
- Cross-Border VAT and Sales Tax Expertise: Ensuring compliance with U.S. state sales tax regulations and Canadian GST/HST requirements, even as trade policies evolve.
- Technology Solutions: Leveraging advanced software to automate VAT and sales tax calculations, filings, and reporting, reducing the risk of errors and penalties.
- Strategic Advisory Services: Providing tailored advice on restructuring supply chains and optimizing tax efficiency in response to changing trade dynamics.
As trade tensions between the U.S. and Canada continue to unfold, businesses must stay proactive in managing their compliance obligations. VAT IT Compliance is here to support companies in navigating these complexities and maintaining seamless operations across borders.
Get in touch with our team of global VAT experts to ensure your business remains compliant wherever you do business!
