Canada/U.S. Tariffs Update: Implications for the Tech Sector

As of March 4, at 12:01 a.m. EST, U.S. President Trump’s Executive Order (EO) imposing 25% tariffs on Canadian goods and 10% tariffs on Canadian energy has officially come into effect. The EO also applies 25% tariffs on Mexico, and an additional 10% tariffs on China for a total of 20% on Chinese imports. Further, President Trump has indicated that semiconductors and chips could face tariffs of 25% or higher starting April 2, with the possibility of further increases over time.

Canada’s Countermeasures and Government Response 

Prime Minister Trudeau’s previously announced countermeasures on $155B of U.S. goods initially paused for 30 days, have now been activated in a phased approach:

• March 4: Finance Canada re-issued the list of Phase 1 tariffs, covering $30B in U.S. goods, including electronic goods (e.g., video game consoles, lab equipment, and home appliances). However, ICT equipment (e.g., laptops, computers, routers) and digital services remain exempt.
• March 25: Finance Canada is holding consultations on Phase 2, which will apply to an additional $125B in U.S. goods. Stakeholders are encouraged to submit feedback before the deadline.
• CUSMA and WTO Challenges: Canada will challenge the tariffs through both CUSMA renegotiations and the World Trade Organization (WTO).
• Business and Workforce Support: The government has committed to expanding Employment Insurance (EI) eligibility and introducing direct business support programs.
• Exemptions: Canadian businesses can apply for remission exemptions in exceptional cases through Finance Canada.

Impact on the Tech Sector – Procurement and Supplier Agreements

The federal government has indicated potential non-tariff measures targeting U.S. businesses, including a review of procurement policies. While specific details remain unclear, several provinces and municipalities have already outlined their intent to scale down, or even ban procurement from U.S.-based companies, despite potential legal challenges in breaking existing contracts.

Provincial Responses:

• Ontario: Premier Doug Ford announced plans to terminate a $100M procurement contract with Starlink and ban U.S. firms from future government procurement.
• British Columbia: Premier David Eby emphasized prioritizing Canadian companies for public procurement.
• Nova Scotia: Premier Tim Houston announced a doubling of commercial vehicle tolls for U.S. businesses and removal of U.S. suppliers from provincial procurement.
• Quebec: Premier François Legault stated that businesses will gain access to liquidity programs and that a 25% tax will be imposed on U.S. companies bidding on public contracts.
• Newfoundland: Premier Andrew Furey issued a press release stating that the government will be reviewing and stopping immediately, where possible, procurement from the U.S.

Municipal Responses:

• Winnipeg: Public tenders now require contractors to seek alternatives to U.S. suppliers.
• Vancouver: City Council passed a motion to eliminate American suppliers from procurement.
• Montreal: Mayor Valérie Plante committed to barring major U.S. tech companies from city purchases and imposing a 25% penalty on other U.S. suppliers, despite potential legal challenges in altering existing contracts.
• Toronto: The city is implementing a ‘Buy Canadian’ policy.
• Brampton: Reviewing existing contracts for potential exits and prohibiting new procurement from U.S. companies.
• Ontario City Councils: Several municipalities are evaluating U.S.-based spending to transition toward Canadian suppliers.

Competition Bureau Standards on Product Labelling

Retailers are not required to put “made in Canada” labels on their products, but if or when they do, the Competition Bureau has strict standards for those claims:

• Made in Canada: This means at least 51 per cent of the direct costs of making the product came from a Canadian source, and the “last substantial transformation” of the product took place here. Baking a loaf of bread, for instance, is the final step in turning ingredients that may have come from somewhere else into the thing for sale. If the ingredients did come from abroad, especially for a food product, a “made in Canada” label is required to disclose that.
• Produced in Canada: Same as “made in Canada,” but the percentage cost is at least 98 per cent.

Economic Outlook

Economic analysis has highlighted the massive impact that the proposed tariffs would have on the Canadian economy:

• The Bank of Canada estimates that wide-ranging 25 percent tariffs and full retaliation would lower Canadian GDP by 2.5 percentage points in the first year. In the second year, it is about 1.5 percentage points lower.

TECHNATION Advocacy and Recommendations to our Members

TECHNATION is actively engaging with federal and provincial policymakers to ensure the tech sector’s priorities are reflected in Canada’s response, particularly regarding hardware, software procurement and investment flows.

We are also advocating for sector-specific exemptions for critical technology inputs to minimize disruption to Canada’s innovation economy.

We recommend members with concerns about public sector procurement prepare a one-page briefing detailing:

1. Corporate footprint in Canada (number of staff, size and scale of operations, current and future investment, key economic impact in Canada)
2. Expected tariff impacts on Canadian operations

Please share your briefings with TECHNATION’s Government Relations and Policy team, enabling us to represent industry concerns effectively.

Please do not hesitate to reach out for any additional questions and clarification.

—The TECHNATION Government Relations and Policy Team