If your business relies on products coming across the border from Canada — or even if you’re simply into cross-border shopping trips — what might proposed U.S. tariffs on imported goods mean to you?
The answer, for now, is an imprecise “it depends”: on which products might have tariffs levied on them, how much the tariffs are, and if the tariffs even stick in light of discussions between U.S. and Canadian leaders and existing trade agreements between the two countries.
An across-the-board 25% tariff on products from Canada as well as Mexico was promised by incoming President Trump in November, a move many observers considered an initial negotiating position. On Monday, Jan. 6, Canada’s Prime Minister Justin Trudeau announced he is stepping down. Trump responded in a social media post that if Canada merged with the U.S. as “the 51st state,” there would be no tariffs.
One certainty is a change in tariffs would have an impact on businesses and, downstream, consumers. Because a lot of goods move between British Columbia and Washington, perhaps most tangibly seafood heading north, lumber coming south and petroleum sloshing in both directions.
Even though we don’t yet know this particular chess match’s endgame, we do know the pieces in play.
What is a tariff?
A tariff is a tax that governments charge on goods entering their country from another country. That tax is paid by the business doing the importing and goes to the government — in this case, a U.S. importer of goods from Canada would pay the tax (tariff) to the U.S. government.
“They can decide if they want to pass that tariff price on to the consumer,” said Jennifer Bettis, research and program manager with the Border Policy Research Institute at Western Washington University. “Sometimes they might change the price of the product as a reaction to that tariff. But the importing business, the company, is the entity that pays the tariff.”
At this point, tariffs between the U.S. and Canada are relatively rare.
“Most people don’t realize that there are essentially no tariffs on trade between Canada and the United States,” said Edward Alden, visiting professor at WWU’s College of Business and Economics. “There are a few exceptions like softwood lumber for construction, which the U.S. believes is unfairly traded so it is penalized.”
But generally, Alden said, if a product meets content requirements — the products “need to be largely made in North America” — tariffs don’t currently apply.
That’s primarily because of a trade deal called the USMCA (United States-Mexico-Canada Agreement). Negotiated by the previous Trump Administration and implemented in 2020, USMCA replaced NAFTA (North American Free Trade Agreement) which itself had been in effect since 1994. Under NAFTA, according to the financial reference website Investopedia, tariffs on many goods passing between the three major economic powers were eventually phased out.
USMCA is a 16-year agreement, and all three countries are required to review it in 2026 to decide whether it will be renewed for another 16-year term.
What’s at stake?
According to data recently pulled together by BPRI, Canada is Washington state’s largest partner for imports. Canada is also the state’s second-largest export market, behind China. Canadian imports into the state totaled $19.9 billion in 2023.
Specifically from British Columbia to Washington, data provided show the top three imports in 2023 were oil and gas ($3.3 billion), lumber ($653 million) and electrical power generation ($317 million).
In the other direction, Washington’s top three exports to B.C. were electrical power ($974 million), refined petroleum ($638 million) and seafood products ($247 million).
All told, according to BPRI’s new “Trade in the Borderlands” interactive report, Washington imported more than $7 billion worth of goods from B.C. in 2023, and exported more than $5 billion in goods to the province in the same year.
And trips aren’t necessarily one way. Take oil that’s imported from B.C. for refining in Whatcom or Skagit counties, then exported back to Canada.
“That’s a good example of how important it is to think about this from a supply chain relationship perspective, because if we’re tariffing what we’re importing and then we’re trying to export it again, it’s going to really mess up these markets,” said Laurie Trautman, BPRI’s director. “It’s not just something you’re skimming off the top of an import.”
Other state products that may make one or more cross-border roundtrips, according to various international trade resources, range from beef to aerospace parts.
Any other considerations?
From a trade policy perspective, Alden said one of the big questions for the region is the scope of any exemptions to U.S. tariffs that might be imposed.
“The bigger risk here may be Canadian retaliation,” he said, with its own new import tariffs, similar to what happened when the first Trump administration imposed tariffs on steel and aluminum in 2018. “We export a lot of aerospace parts and machinery which are logical retaliation targets. Fruit could be another target, and wine.”
Trautman — noting BPRI’s policy expertise is the border — also recalled that some British Columbians intentionally boycotted coming to the U.S. when those earlier tariffs were announced. Bettis added that it wouldn’t help if an already relatively weak Canadian currency (at the end of 2024, the weakest it’s been since 2015) were further undercut by threats of tariffs.
“That’s going to make it harder for Canadians to justify coming across the border and spending their money in places like Whatcom County,” Bettis said. “So there might be these kinds of unintended consequences where people are not as willing to come and spend their money here because they have less of it.”
What about shopping trips?
While businesses that import may be directly affected by any new tariffs, cross-border travelers who make the trek to buy products for personal use may have less to worry about. (Think shopping runs south to Trader Joe’s in Bellingham, or north to specialty Asian markets in B.C.)
Both Trautman and Alden said existing duty-free exemptions remain in place.
However, Alden said customs officers might get more serious about enforcing and charging individual shoppers duties if new tariffs, and retaliatory tariffs, become a reality.
At the moment, though, when it comes to tough tariff talk, all that’s certain is “more uncertainty,” said BPRI’s Bettis. “It’s really hard to say with any solidity that ‘this industry is going to be impacted this amount.’ We just don’t know.”
Frank Catalano writes about business and related topics for CDN; reach him at frankcatalano@cascadiadaily.com.
