A threat of 100% tariffs on all Canadian goods entering the United States, recently raised by President Donald Trump in response to Canada’s evolving trade relationship with China, would represent one of the most disruptive shifts in modern North American commerce. Such a move would reverberate across supply chains, consumer markets, and investment decisions on both sides of the border.
What Triggered the Tariff Threat?
President Trump warned that if Canada proceeds with a trade deal involving reduced tariffs on Chinese electric vehicles and reciprocal reductions on Canadian agricultural exports, the U.S. would respond with a 100% tariff on all Canadian imports. He argued that Canada could become a “drop‑off port” for Chinese goods entering the U.S. market.
This threat comes amid ongoing tensions, including previous U.S. tariffs of 25–35% on various Canadian goods and Canada’s retaliatory measures.
How a 100% Tariff Would Affect Canadian Businesses
Manufacturing & Automotive
Ontario’s auto corridor (Windsor–Oshawa) relies heavily on U.S. assembly plants. A 100% tariff would instantly make Canadian‑made vehicles and components uncompetitive.
Agriculture & Food Processing
Canadian canola, beef, pork, and processed foods would face steep price barriers. Canada’s recent gains in Chinese canola access would be overshadowed by losing its largest export market.
Energy & Natural Resources
Oil, natural gas, lumber, and minerals flow south daily. A 100% tariff would disrupt long‑standing contracts and pipeline economics.
SMEs & Cross‑Border Service Providers
Small exporters food brands, apparel makers, industrial suppliers would be hit hardest because they lack the capital to relocate production or absorb tariff costs.
How U.S. Businesses Would Be Affected
Higher Input Costs
U.S. manufacturers rely on Canadian steel, aluminum, auto parts, and chemicals. The 2018 steel/aluminum tariffs already caused layoffs and cost spikes; a 100% tariff would be far more severe.
Consumer Price Inflation
U.S. homebuilders depend on Canadian lumber. Past tariffs added thousands to the cost of a new home; a 100% tariff could double that impact.
Supply Chain Disruptions
Integrated supply chains especially in automotive, aerospace, and agriculture would be thrown into chaos.
Retaliation Risk
Canada has historically responded proportionally, targeting politically sensitive U.S. exports such as whiskey, ketchup, and agricultural goods.
Pros & Cons of a 100% Tariff
Potential Pros (U.S. Perspective)
- Pressure on Canada’s China strategy
- Short‑term boost to select U.S. domestic producers
- Political leverage in renegotiating North American trade dynamics
Major Cons (U.S. & Canada)
- Massive price increases for U.S. consumers
- Severe disruption to North American manufacturing
- Retaliatory tariffs from Canada
- Damage to USMCA stability
- SME casualties on both sides of the border
Why USMCA/CUSMA Will Not Protect Businesses From These Tariffs
Many Canadian and U.S. companies assume that USMCA/CUSMA guarantees tariff‑free trade. It does not.
1. USMCA does not prevent a President from imposing tariffs
Under U.S. law, the President can impose tariffs under:
- Section 232 (national security)
- Section 301 (unfair trade practices)
- IEEPA (emergency powers)
These authorities override trade agreements.
Example: In 2018, the U.S. imposed steel and aluminum tariffs on Canada despite NAFTA being in force. USMCA offers no additional protection.
2. USMCA dispute panels are slow and limited
Even if Canada challenges the tariffs, panels take months or years, and the U.S. can simply ignore rulings as it has done in softwood lumber cases.
3. Rules of origin don’t matter if the tariff is universal
A 100% tariff on all Canadian goods means even fully Canadian‑made products are hit.
4. Businesses must prepare for a scenario where USMCA is irrelevant
Trump has already stated that USMCA “could expire.” A 100% tariff threat is consistent with that posture.
What businesses should do instead
- Build tariff‑shock scenarios into 2025–2026 planning
- Map exposure to U.S.‑bound goods and U.S.‑sourced inputs
- Prepare alternative routing, sourcing, and pricing models
- Document origin, valuation, and classification now to support future refund claims
What SMEs Should Do Right Now – Leverage Tarif Edge
Practical, immediate steps for small and mid‑sized exporters and importers
SMEs are the most exposed because they lack the buffers of large multinationals. The right moves now can determine survival later.
1. Conduct a Tariff Exposure Audit
Identify:
- Which products cross the border
- Their HS classifications
- Their landed cost sensitivity
- Whether they qualify for duty‑free treatment under other programs
2. Build a “100% Tariff Scenario” Pricing Model
SMEs should model:
- New landed costs
- Margin erosion
- Customer attrition risk
- Whether U.S. customers will absorb any portion of the increase
3. Diversify markets immediately
Even small steps help:
- Asia‑Pacific (Japan, Korea, Singapore)
- Middle East
- EU (CETA)
- Domestic Canadian buyers
4. Strengthen documentation and compliance
If tariffs hit, refund and drawback opportunities will become critical. SMEs must have airtight:
- Origin documentation
- Valuation records
- Classification files
- Proof of export
5. Engage industry associations and Chambers
SMEs should coordinate messaging and advocacy now before tariffs are imposed.
When and How to Engage Peacock Tariff Consulting
The moment SMEs need expert intervention
Peacock Tariff Consulting is built for exactly this environment: high‑risk, high‑uncertainty, cross‑border disruption.
Engage immediately if you are:
- Exporting any goods to the U.S.
- Importing U.S. inputs into Canadian production
- Operating in automotive, agriculture, food, energy, or manufacturing
- An SME without an internal trade compliance team
- A Chamber, Board of Trade, or industry association preparing member guidance
What Peacock Tariff Consulting delivers
- Tariff Exposure Maps for SME and Chamber audiences
- Scenario‑driven pricing models for 25%, 50%, and 100% tariff shocks
- Audit‑ready classification and origin files
- Refund and drawback strategies if tariffs are imposed
- Executive‑level briefings for boards, investors, and municipal leaders
- Rapid‑response compliance support during policy changes
When to engage
- Now, before tariffs are announced to build defensible compliance files
- At announcement, to model cost impacts and customer communication
- After implementation, to pursue refunds, re‑routing, and tariff mitigation
SMEs that prepare early will survive. Those that wait will not.
Conclusion
A 100% tariff on Canadian goods would not be a simple bilateral dispute it would be a continental economic shockwave. The U.S. and Canada are each other’s largest trading partners, and their supply chains are intertwined at every level. While tariffs may offer short‑term political leverage, the long‑term economic fallout would be profound for businesses, workers, and consumers on both sides of the border.