Read on Global NewsHow Tariffs Are Impacting Cross-Border Holiday Shopping for Canadian Businesses
Canadian businesses are experiencing a significant decline in American customers during the crucial holiday shopping season due to the elimination of the de minimis exemption. The Trump administration's removal of the $800 tariff-free threshold has resulted in unexpected fees and increased costs for cross-border shoppers, causing many U.S. consumers to reconsider purchases from Canadian retailers. This policy change, intended to curb drug trafficking and limit low-quality imports, is having unintended consequences for legitimate small businesses that rely on cross-border trade.
The holiday shopping season typically brings a surge of cross-border commerce between Canada and the United States, but this year Canadian businesses are facing an unexpected challenge. The elimination of the de minimis exemption by the Trump administration has created significant barriers for American customers shopping with Canadian retailers, resulting in declining sales and increased costs during what should be the most profitable time of year.
The De Minimis Exemption Elimination
Until August 29, 2025, the de minimis exemption allowed packages valued at under $800 to be imported tariff-free into the United States, avoiding the customs process entirely. This provision enabled small businesses to ship products across the border with minimal administrative burden and cost. However, the Trump administration eliminated this exemption as part of broader trade policy changes aimed at curbing drug trafficking and limiting imports from discount sellers like Temu and Shein.
The policy change has had immediate and dramatic effects on cross-border commerce. Small businesses that previously relied on the exemption now face complex customs procedures, brokerage fees, state taxes, and tariffs that can nearly double the cost of shipments to American customers. This sudden increase in costs has created significant uncertainty and hesitation among U.S. consumers who previously enjoyed seamless cross-border shopping experiences.
Impact on Canadian Small Businesses
The elimination of the de minimis exemption has created particular challenges for small Canadian businesses that depend on American customers. Many of these businesses report dramatic declines in U.S. sales since the policy change took effect. Some retailers have seen their American customer base shrink by as much as 50-60%, with the timing being especially problematic given the crucial holiday shopping season.
Businesses are responding to these challenges in various ways. Some are absorbing the tariff costs themselves to maintain customer relationships, while others are focusing on expanding their domestic Canadian customer base. Many are also adjusting their product offerings and marketing strategies to emphasize their best-selling items and communicate clearly about who bears the additional costs.
Consumer Response and Market Adaptation
American consumers have reacted with surprise and frustration to the new tariff requirements. Many were unaware of the policy change until they received unexpected bills from shipping carriers for brokerage fees and import taxes. This confusion has led to decreased consumer confidence in cross-border shopping, with many customers choosing to avoid international purchases altogether rather than risk unexpected additional costs.
The situation highlights the fragility of small businesses that depend heavily on cross-border trade with the United States. While challenging in the short term, some business owners see this as an opportunity to diversify their customer base and develop more resilient business models that are less dependent on any single market.
