How tariffs reach Canadian prices, and who ends up paying

A Canadian retailer orders kitchen kettles from an overseas supplier. By the time the kettles reach the warehouse, a new tariff has raised the cost of importing them. The retailer can keep the shelf price steady and earn less per kettle, raise the price and risk losing sales, or ask the supplier for a better deal. The choice depends on how easily shoppers can switch brands and how much room each business has to negotiate.

Who pays at the border?

A tariff is a duty on imported goods. For a commercial shipment entering Canada, the importer of record is responsible for accounting for and paying duties owed to the Canada Border Services Agency (CBSA). A customs broker can handle paperwork and remit payment on the importer's behalf. The CBSA can also hold the importer and owner liable alongside the importer of record where they are different parties. See the CBSA's guide to importer accountability and its memorandum on duty liability.

How much is due depends on what the product is, where it originates under the applicable rules, and the value used for customs. A business selling imported goods may buy them from a Canadian distributor. In that case, the distributor may be the importer that pays the duty, while the retailer sees the cost in a higher wholesale invoice.

How a 25% tariff could raise a shelf price by 8%

Say a kettle has a customs value of CA$40 and sells for CA$75 before sales tax. In this simplified example, a 25% tariff adds CA$10 in duty per kettle. The percentage applies to the CA$40 customs value.

Now assume the supplier cuts its price on a future order. After accounting for any effect of that discount on the duty owed, suppose the importer still faces CA$8 in extra landed cost per kettle. The importer raises its wholesale price by CA$7, absorbing CA$1. The retailer raises the shelf price by CA$6, absorbing another CA$1. The shopper sees the price move from CA$75 to CA$81, an 8% increase. The numbers are illustrative, and the split will vary by product and contract.

Why some prices rise sooner than others

• Inventory buys time. A shop may keep selling stock imported before a tariff took effect. It may reprice once higher-cost inventory arrives, or sooner if it sets prices based on what replacing that stock will cost.
• Competition limits price increases. When shoppers can switch to a close substitute, a retailer has more reason to accept a lower margin. A specialized product with few alternatives may see more of the duty passed through.
• Tariffs can reach products made in Canada. A Canadian manufacturer that uses an imported component covered by a tariff can face higher production costs. How much of that increase reaches buyers depends in part on how much the component contributes to the total cost.
• Switching suppliers takes time. A business may find a lower-cost source, but new suppliers can bring different lead times, minimum orders or quality requirements. Businesses may accept a smaller margin while they work through those changes.

What Canadian prices have shown

A Bank of Canada staff working paper studied posted prices at seven major Canadian retailers exposed to Canadian retaliatory tariffs. Prices of affected goods rose gradually, peaking about 6% higher after three months in the study's estimates. The authors interpreted that as roughly one-quarter pass-through of the 25% tariff in the episode they studied. The estimate describes those products, retailers and policy changes. Other tariffs can play out differently.

What to look for at the store

Compare the same size and model over time, check the unit price, and look at close substitutes. A price increase alone cannot tell you how much came from a tariff. Exchange rates, freight costs and the end of a promotion can all change what you pay. The Bank of Canada's tariff explainer describes how suppliers, importers and shoppers can share the cost.

The importer is responsible for the customs bill. The share a shopper ultimately pays depends on what happens between that bill and the next price tag.