The tariffs affect approximately C$27.6 billion in Canadian exports. Although the dispute centres on alcohol, dairy and motor vehicles, the affected lists include many consumer products sold online.
The tariff does not apply to everything shipped from Canada. It applies only to Canadian-origin products included under specific U.S. tariff codes.
However, if your products are included, the effect on your costs and profit margins could be substantial.
What Changed?
The United States introduced the tariffs under Section 338 of the Tariff Act of 1930.
According to the White House announcement, the tariffs were introduced in response to Canadian policies affecting:
- Alcoholic beverages
- Dairy products
- Motor vehicles and automotive trade
The new tariffs took effect on August 22, 2026.
Which Products Are Affected?
The tariffs cover more than alcohol, dairy and vehicles. The official product lists include hundreds of U.S. Harmonized Tariff Schedule, or HTS, classifications.
Examples of affected products include certain:
- Beer, wine and spirits
- Cheese, butter and dairy products
- Vehicles and automotive products
- Furniture
- Clothing and textiles
- Electronics
- Cement and plywood
- Hockey sticks and fishing rods
- Swimming pools
- Household and consumer goods
These are only examples. Whether a product is affected depends on its exact HTS classification.
Some products are excluded from the new tariff, including energy, potash, fish, critical minerals and products already covered by certain other U.S. tariff programs.
Excluded does not always mean tariff-free. A product may be subject to a different tariff instead.
Does CUSMA Provide an Exemption?
No. This is one of the most important details for Canadian merchants.
The new 50% tariff applies to covered products even when they qualify under CUSMA, which is called USMCA in the United States.
CUSMA may still reduce a product’s regular customs duty or provide protection from certain other tariffs. However, it does not remove the new Section 338 tariff.
Does the Tariff Apply to Everything Shipped From Canada?
No. A product’s country of origin is not necessarily the same as its shipping location.
For example, a finished product manufactured in China and stored in a Canadian warehouse will normally remain Chinese-origin. A product manufactured in Canada may be considered Canadian-origin, even if some imported materials are used.
The tariff generally applies when:
- The product is Canadian-origin.
- Its HTS code appears on one of the tariff lists.
Your business address, warehouse location or status as a Canadian company does not determine the product’s origin.
How Much Could the Tariff Cost?
The tariff is calculated using the product’s declared customs value.
For example:
- Product customs value: US$200
- Additional 50% tariff: US$100
- Other duties, brokerage and processing fees may also apply
The 50% rate is an additional tariff. Depending on the product, other customs charges may be added on top of it.
Who Pays the Tariff?
The importer of record is responsible for paying the tariff when the product enters the United States.
For ecommerce orders, the cost will ultimately be paid by either the merchant or the customer.
If duties are not collected at checkout, the customer may receive an unexpected bill from the carrier before the package is delivered. This can lead to refused packages, poor reviews and expensive returns.
Whenever possible, show customers the complete landed cost at checkout or clearly explain that additional duties may be collected upon delivery.
What Canadian Ecommerce Merchants Should Do
1. Check Every Product
Create a list of the products you sell to U.S. customers and record:
- Country of origin
- HTS classification
- Customs value
- CUSMA eligibility
- Applicable U.S. tariffs
Compare each product’s HTS code with the official tariff lists. A customs broker can help if you are uncertain about classification or origin.
Do not assume that every product in the same collection will receive the same treatment.
2. Recalculate Your Profit Margins
Calculate the actual profitability of every affected product:
Selling price - product cost - tariff - brokerage - shipping - payment fees = profit
You may need to:
- Increase U.S. prices
- Reduce discounts
- Stop offering free shipping
- Introduce a minimum order value
- Temporarily stop selling certain products in the U.S.
- Promote unaffected products instead
Avoid increasing prices across your entire catalogue. Focus first on the products that are actually affected.
3. Make Duties Clear at Checkout
Review your shipping settings and policies for U.S. customers.
Clearly explain:
- Whether duties are included in the price
- Whether customers may pay additional charges at delivery
- Who is responsible for brokerage fees
- What happens if a package is refused
- How tariffs are handled when products are returned
Consider using Delivered Duty Paid shipping so duties can be calculated in advance instead of surprising the customer at delivery.
4. Consider U.S. Fulfillment
If you have consistent U.S. sales, importing inventory in bulk and using a U.S. fulfillment centre may reduce shipping, brokerage and processing costs.
It can also provide:
- Faster U.S. delivery
- Easier returns
- More predictable customer pricing
- Fewer individual cross-border shipments
A U.S. warehouse does not eliminate the tariff. Duties are generally paid when inventory enters the United States. The benefit comes from consolidating shipments and reducing the cost of processing each order separately.
5. Review Your Products and Suppliers
For heavily affected products, consider whether you can:
- Find an alternative supplier
- Source from another country
- Manufacture or assemble the product in the U.S.
- Replace the product with an unaffected alternative
- Negotiate lower manufacturing costs
Do not attempt to avoid tariffs by routing products through another country or changing labels. Country of origin is based on where the product was manufactured or substantially transformed.
6. Adjust Your Marketing
Shift U.S. advertising toward products that remain profitable.
You may need to:
- Remove affected products from Google Shopping campaigns
- Create separate Canadian and U.S. product feeds
- Adjust Meta catalogue availability
- Promote unaffected collections
- Use different prices and offers for each market
Advertising revenue can appear strong even when duties have eliminated most of the profit. Include tariffs when reviewing product-level marketing performance.
7. Strengthen Canadian Sales
If some products become difficult to sell profitably in the United States, redirect part of your marketing budget toward Canadian customers.
Canada has also announced counter-tariffs of 15%, 25% and 50% on selected U.S. products, effective September 8, 2026. This may make some Canadian-made products more competitive at home. Department of Finance Canada
A Simple Action Plan
Canadian merchants should begin with five steps:
- Confirm the country of origin and HTS code for every U.S.-bound product.
- Identify which products are included on the tariff lists.
- Request current landed-cost estimates from a customs broker or carrier.
- Recalculate product-level profit margins.
- Update U.S. prices, checkout information and advertising campaigns.
The Bottom Line
The August 2026 tariffs are not a blanket 50% tax on everything shipped from Canada. They apply to specific Canadian-origin products listed under particular tariff classifications.
For affected merchants, the first step is to determine exactly which products are covered. From there, you can adjust pricing, shipping, marketing and fulfillment based on the actual cost.
The tariff itself may be outside your control, but you can control how clearly you communicate with customers and how quickly you adapt your business.
This article provides general information and does not constitute customs, tax or legal advice. Consult a licensed customs broker or qualified trade professional before making pricing, sourcing or fulfillment decisions.
