Tariffs and Their Expanding Impact: May 5th 2025

Global Trade Landscape

Tariffs are reshaping global trade, forcing businesses to rethink supply chains, pricing strategies, and market expansion. The latest developments include:

U.S.-China Tariffs: The U.S. has imposed 145% tariffs on Chinese imports, while China has retaliated with 125% tariffs on American goods. However, China has quietly compiled a list of U.S. goods exempt from its tariffs, including ethane, some semiconductor products, and certain pharmaceuticals.
Tariff Pause: President Trump announced a 90-day pause on new tariffs, set to expire on July 8, 2025. If trade deals aren’t reached, tariffs may be reimposed sooner.
Automobile Tariffs: The U.S. has exempted certain auto imports from new tariffs, but duties on auto parts went into effect on May 3, 2025.
Malaysia-U.S. Tariffs: The U.S. imposed a 10% baseline tariff on all countries and a 24% tariff specifically targeting Malaysian goods. A special parliamentary session in Malaysia is being held today to discuss the impact.
Canada Tariffs: The U.S. has imposed 25% tariffs on most Canadian goods, with a 10% tariff on energy and potash.
Steel & Aluminum Tariffs: The U.S. has maintained 25% tariffs on steel and aluminum imports from all countries.
De Minimis Elimination: As of May 2, 2025, goods under $800 from China or Hong Kong are no longer exempt from tariffs.

Key Upcoming Tariff Dates

Several critical dates are approaching that could further impact trade:

May 2, 2025 – The De Minimis exemption was eliminated for goods under $800 from China and Hong Kong, meaning all such imports are now subject to tariffs.
May 3, 2025 – 25% tariffs on automobile parts went into effect under Section 232, impacting imports from all countries.
July 8, 2025 – The 90-day pause on reciprocal tariffs will expire, potentially leading to reimposed tariffs if trade negotiations don’t progress.
Ongoing – Canada and the U.S. are engaged in discussions regarding retaliatory tariffs, with Canada considering expanding its list of affected goods.

Industry-Specific Responses

Automotive Industry

Canadian automakers are adjusting their strategies to cope with the 25% U.S. auto tariffs. The government has introduced a performance-based remission framework allowing automakers to import a limited number of U.S.-assembled vehicles tariff-free, provided they continue manufacturing in Canada.
Some companies are exploring joint ventures with U.S. firms to shift production stateside.
General Motors has already lowered its 2025 profit expectations, anticipating a $5 billion tariff impact.

Aerospace Sector

Canadian aerospace firms, including Bombardier, are facing higher costs for aircraft components due to tariffs.
Some companies are stockpiling parts before tariffs take full effect, while others are seeking tariff exemptions based on national security concerns.

Agriculture & Food Processing

Canadian farmers exporting wheat, pork, and canola to the U.S. are experiencing steep price hikes.
The government has provided temporary 6-month relief for U.S. goods used in Canadian food processing and packaging.
Some farmers are shifting exports to European and Asian markets to reduce reliance on the U.S.

Manufacturing & Energy

The Canadian government has introduced the Large Enterprise Tariff Loan Facility (LETL) to support businesses struggling with financing due to tariffs.
This program provides liquidity to companies in food security, energy security, and national security sectors.

Small Business Strategies Amid Tariffs

Small businesses across Canada and the U.S. are facing higher costs due to tariffs on imported goods, raw materials, and essential supplies. Many are implementing cost-cutting measures, adjusting supply chains, and seeking government relief.

Cost-Cutting & Price Adjustments

Retail & E-Commerce: Many small retailers are raising prices to offset increased import costs.
Coffee Shops & Food Industry: Local coffee shops in Cupertino and San Jose are increasing prices due to 10% import tariffs on coffee beans.
Manufacturing & Energy: The Canadian government has introduced the Large Enterprise Tariff Loan Facility (LETL) to support businesses struggling with financing due to tariffs.

Supply Chain Adjustments

Alternative Sourcing: Businesses are exploring domestic suppliers or shifting imports to low-tariff regions to reduce costs.
Stockpiling Inventory: Some companies are stockpiling parts before tariffs take full effect, particularly in industries like aerospace and automotive.
Joint Ventures & Relocation: Canadian automakers are considering joint ventures with U.S. firms to shift production stateside and avoid tariffs.

Government Relief & Policy Responses

Governments are stepping in to support businesses affected by tariffs:

Canada’s Tax Relief Measures: The Canada Revenue Agency (CRA) is deferring GST/HST remittances and corporate tax payments until June 30, 2025, providing temporary relief.
Ontario’s Budget Response: Ontario’s government will table its budget on May 15, focusing on economic recovery, worker support, and free trade initiatives.
U.S. Chamber of Commerce Advocacy: The U.S. Chamber of Commerce has requested tariff exemptions for small businesses, but the White House has instead promised tax cuts as economic relief.

Consumer Behavior & Economic Outlook

Shifting Spending Habits: Consumers are prioritizing essential purchases over luxury goods due to rising costs.
Potential Recession: Ontario’s Financial Accountability Office predicts that tariffs will slow GDP growth from 1.7% to 0.6%, potentially leading to a modest recession and 68,100 fewer jobs in 2025.
Retail & E-Commerce Struggles: U.S. shoppers are stunned by rising import taxes on platforms like Temu and Shein, leading to reduced spending.

Tariff Updates