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Hessie Jones
Welcome to Tech Uncensored, Hi my name is Hessie Jones. Early February of this year, Donald Trump imposed significant tariffs on Canadian imports, effective February 4th. These tariffs included 25% duty on general goods, 10% duty on the energy resources coming from Canada. The stated rationale was to pressure Canada to enhance border security and curb these illegal drug flows into the US. We know now is a red herring.
So the implementation of these proposed tariffs has been subject to multiple delays. And threats of retaliation in the negotiations between Canadian and U.S. officials. On March 4th, the US tests were finally enforced and simultaneously Canadas first phase of retaliatory tariffs of 25% on $30 billion worth of American imports into Canada had actually taken effect.
But two days later, March 6th, Trump announced a delay on tariffs on goods compliant with the Canada, US, Mexico Trade Agreement until April 2nd. And this move was actually in response from the press. Of the CEOs of Ford, General Motors Stellantis, who told the president of their grave concerns of tariffs on the auto sector.
So throughout February and March of this year, there have been the cycle of continuous threats. And counter threats. Persisted between the two countries when it comes to these tariffs. So April 2nd it’s around the corner. And several significant events are expected to occur on this ongoing trade war between Canada and the US on this day, the US tariffs on Canadian goods, which were partially paused on March 6, are expected to fully resume. That’s the 25% Tariffs on all goods coming from Canada 10 and 10% on the energy products. These will be fully implemented at the same time Canada’s second wave of retaliatory tariffs are expected to take effect. And so this is the 25% tariffs on the $125 billion worth of US origin goods imported into Canada. And finally, the temporary exemption for Canadian goods that were compliant with the Canadian, US, Mexico Trade Agreement, which began on March 7th will be set to expire. So all of this has had reverberations across the Canadian business sector. Some of the business impacts are already being felt.
I’m going to give you a few stats that I’ve sourced 69% of business. Have experienced higher costs. And supply chain issues. Half of businesses surveyed are already thinking about switching suppliers that are less affected by the tariffs. 25% of businesses indicated that they’ve already lost market share. And 41% of businesses reported decrease competitiveness and demand. One thing that was interesting. I saw that 39% of businesses are considering postponing investments. Means that we’re already seeing this impact of growth. On Canadian businesses, a lot of businesses said they’re willing to cut production capacity as well as their workforce, and some are even contemplating moving their operations to the US to circumvent many of these tariffs. Of threats.
So there is this ongoing ongoing uncertainty. There’s unsettling among the investor consumer business community. Economists are talking about potential recession. And many Canadian businesses. Are asking questions and trying to figure out what are the revenue implications on their own operations in the short term. What extent will this have on the survival of the business in the long term? What should they know? What should they do to prepare?
So I am so happy to welcome Brigitte LeBlanc-Lapointe, who is a partner specializing in cross-border M and A and venture capital financing. She works at Norton Rose Fulbright, which is a global law firm and they specialize in key industries including financial institutions, energy, infrastructure, transport, to name a few. We’re going to talk to Brigitte, to dissect some of these legal implications for businesses when it comes to these US tariffs.
Welcome Brigitte.
Brigitte LeBlanc-Lapointe
Thanks so much for having me Hessie. Maybe I’ll start off the bat with a couple caveats. First, I am not a trade lawyer, although I work with some very smart ones. I’m not an economist and I’m not a fortune teller. But as a corporate transactional lawyer, I’ve been talking to a lot of founders. Their investors and others in the startup ecosystem about their tariffs related concerns. My second caveat is that this is a highly dynamic situation and we don’t have all of the answers and some of the answers may change along the way. So has your overview, did a fantastic job of underscoring just how much the landscape is evolving. What I’m sharing today shouldn’t be construed as legal advice, and businesses should consult with their own legal counsel to get advice. Tailored to their situation. So with. General observations out of the way. Let’s get started.
Hessie Jones
Thank you. Very. And I have to say, Brigitte, I have sourced lawyers to try to weigh in on this issue and unfortunately a lot of them were not able to do so because of the the caveat that that you had just talked about. I don’t think I I think it’s because of the volatility of the situation and the sensitivity of the information, liability is definitely a concern. So with that being said, let’s dive into the questions. Please take into consideration what. Said, and this is generally to provide some advice and guidance to businesses in general. So they understand what they can do with their businesses. Let’s start with the first question. What businesses will directly? Be impacted by tariffs and how will this be felt in the near term?
Brigitte LeBlanc-Lapointe
Yeah. So let me take a step back and explain what is a tariff. Customs tariffs are a duty applied to goods at the time of importation. Depending on the country of origin of the good. S expressed as a percentage of the value of the goods on the imported goods customs classification value and country of origin. Next, let me unpack who pays a tariff. So in terms of legal liability for payment of duties at the border for imported goods for imports into the US, typically the importer of the goods. IE the American business pays the tariffs at the border to US Customs and Border protect. Protection for goods coming into Canada. The. So in this case, the Canadian business typically pays the duty to Canada Border Services Agency. So with that backdrop, let’s get back to your question in terms of direct impacts of tariffs businesses in the US that import products of Canada. Would pay a tariff on those goods. And companies in Canada that import US goods captured by the retaliatory tariffs would pay a tariff on those goods. So of course, that begs the question of what is a good and for this audience in particular? Whether software is captured by the tariffs, with very few exceptions when the duties briefly came into effect in March, they applied to all tangible goods of Canadian origin that were entered through US customs for cons. That order did not appear to cover tangible goods or services, such as the transfer of digital software or other electronic transmission of technical data. That being said, software companies should be mindful about how the software is delivered. For example, physical delivery of software such as on a USB stick or ACD ROM. If you’re going retro, may change the analysis so as a lay person, I think it’s helpful to think of goods in this context. As something that is physically crossing a border. The impacts of tariffs will be felt most acutely by Canadian businesses that export Canadian goods to the US and by Canadians that import specified goods originating from the US.
Hessie Jones
Licensing is not included then because it’s not considered a physical good. So there’s not something that’s physically crossing over the border.
- So more broadly, what are the director or indirect impacts of services and products to consumers being who are going to be felt at some point in this cycle by the tariffs and how will it translate to the economy overall?
Brigitte LeBlanc-Lapointe
Yeah. So tariffs are used to restrict imports by increasing the price of goods purchased from another country, which makes them less attractive to domestic consumers. As I mentioned, when a tariff is imposed, importers pay the tariff to the government. To offset this additional cost, importers typically increase the prices of the goods they sell to retailers or directly to consumers, effectively passing the cost down the supply chain. In some cases, domestic producers may also increase their prices due to reduced competition, leading to higher prices for both import. Domestically produced goods. I think the general expectation from economists is that the looming US tariffs and retaliatory Canadian tariffs will reduce economic growth on both sides of the border and have a negative impact on on GDP growth.
Hessie Jones
You know, 11 little anecdote about that. I did see in the news. Other week about Chapman’s ice. They’re willing to absorb 25 the the tariff on on their ice cream in order to continue to make it affordable. For Canadians, so in in some cases that’s great, but they can’t do that forever. Right. Yeah. So. So let’s talk more about CUSMA like Canada, US, Mexico trade agreement. I purposely said that because that is the official name. Of this new trade agreement, so the US put a pause on it and we’re expected that this will be lifted on April 2nd. So could you talk about how these tariffs interact with the existing trade agreement under CUSMA and other legal avenues to to challenge it for potential conflicts?
Brigitte LeBlanc-Lapointe
So many Canadians experts feel that the imposition of new tariffs by the US is a violation of CUSMA, which eliminated tariffs on Canadian origin goods. As I understand it, Canada can challenge this under Kuzma, but the reality is it’s going to be a lengthy process and the remedy available is retaliatory tariffs, which is what Canada’s already doing. As an aside, Canada has challenged the US tariffs at the World Trade Organization level as well, which is a separate resolution. Then under CUSMA. But again, that process will take time and would likely have a similar result.
Hessie Jones
For Canadian businesses, I guess at this level, can they challenge the new tariffs like I mean, what tools would they have at their disposal?
Brigitte LeBlanc-Lapointe
There isn’t a clear path for individual Canadian businesses to mount a legal challenge to the US tariffs, and it would likely be very costly and and really impractical to do. Do so one concrete step Canadian businesses can take is to reevaluate whether the goods imported into the US are truly of Canadian origin and vice versa for goods imported from the US into Canada. This is going to be a bit technical, but if they conclude that those goods are correctly categorized as being of Canadian or US origin, they can consider whether any changes to the manufacturing process. Could be made to optimize costs and tariffs. What’s interesting is that in the past. Past companies favored characterizing goods as Canadian origin or US origin, so that these could be covered by Kuzma and be free of tariffs. Again, these determinations are quite technical, but it’s worth reconsidering that threshold question. OK. So let’s get into the business operations, because this is already having effects as I initially laid out on the. Supply chain. And so when it comes to contracts between, let’s say us and Canadian companies specifically for the Canadian company, what legal recourse do they have? If if the vendors or partners can’t fulfill their obligations because of the tariffs. I’m going to give you the favorite lawyer answer. Is. It depends. But I. Earlier that the legal liability for tariffs rests with the importer of a good. This legal obligation to remit duties to the authorities at the border is different from the question of the ultimate liability for customs tariffs, as between contracting parties, contracting parties can determine ultimate liability for customs tariffs as between themselves. Via contractual provisions. So, for example, the ultimate purchaser of the goods in the destination country. Could agree with the importer that it will reimburse the importer for the import duties as part of the total purchase price of the goods, so businesses should be considering tariff liability based on the wording of their current contracts. Many contracts in place or contracting templates for service and supply agreements will likely create it when trade between Canada and the US was much more certain and most goods were tariff free or the tariff. Very low. Companies should review existing contracts to see who bears the risk of increased tariffs, if that’s even addressed, and identify contractual carve outs for significant changes like the imposition of tariffs, including by reviewing what we call change of law. Provisions or force, measure or clause. Listeners may remember the term force majeure from the COVID times. A force majeure clause is a contract in a contract excuses a party from liability or obligation where an extraordinary event beyond their control, like a natural disaster. War pandemic prevents them from fulfilling their obligations. If a contract has a force majeure clause, depending on how the provision is drafted, turmoil resulting from the tariff situation may be addressed again. Absent a contractual agreement to do otherwise, the legal liability for tariffs will rest with the importer of a good.
Hessie Jones
Got it. Yeah. And in terms of? Legal recourse if a party can no longer fulfill its obligations, how that will play out will again be highly dependent on the contract in question.
Brigitte LeBlanc-Lapointe
So businesses should examine their termination rights and determination rights of their counterparts. Party under their material contracts to determine when, how and why a contract can be terminated before its stated term. OK. So that kind of bleeds into the next question about. If companies have to review all, renegotiate the supply contracts, what do they have to keep in mind? To even just reduce liability to themselves. Because I would assume that especially. If the contract is not set to terminate for let’s say another year, what can they do to insert, let’s say, new clauses into the contract to actually keep them? Safer. Yeah. So parties entering into contracts for the supplier delivery of goods or even businesses reviewing their existing contracts should. Particular attention to contractual clauses regarding. Import taxes, duties and fees, including any references to whether the delivery price is inclusive of all taxes, duties, tariffs or fees. This includes terms like delivery duty, paid DDP terms, for example. Businesses may want to consider whether and how supply chains can be diversified. So this will once again depend on their existing supply arrangements and the availability of alternate sources of supply, both either domestically or in countries with which Canada has a free trade agreement. And finally, I’ll observe that the ability to renegotiate. A supply contract will depend on many factors. Which will include how much leverage the renegotiating party has as a pedantic and and loyally point. I’m glad you asked the question. I will remind listeners that amendments to existing contracts should be formalized in the manner set out in the original contract. And be drafted in a way that gives parties certainty as to the new bargain.
Hessie jones
- For businesses right now that that have to. To absorb. Some of the the tariff impacts, do you know of any kind of government support programs or remission programs that are available to help them cope with these costs? In response.
Brigitte LeBlanc-Lapointe
The ongoing trade tensions and shifting political dynamics Canada’s federal and provincial governments are rolling out or expanding various support programs and initiatives. Lives these efforts aim to offset the impacts of tariffs and assist businesses and workers in navigating economic. So these programs include the government has indicated that it will consider various duties, relief and requests for remission, which allows for the relief from the payment of tariffs or. Fund of Tariffs already paid in certain circumstances. If there are exceptional and compelling circumstances. Ed. Cs Trade impact program which will deploy 5 billion / 2 years to help exporters reach new markets and navigate economic challenges such as non payment currency fluctuations, cash flow issues and expansion barriers. BD CS pivot to global, which will offer 500 million in financial support, advice and loan deferrals to small and medium sized businesses with concrete impacts to their financials as a direct of. The results of the tariffs. From credit Canadas trade disruption customer support program, which offers 1 billion in new financing to support the Canadian agriculture and food industry by addressing cash flow challenges. And finally, we’ve seen an expanded employment insurance work sharing program which. Assists employers in avoiding layoffs when they face temporary decreases in business activities for reasons beyond their control. If the program requirements are met to an employer, employees and service Canada enter into a mult. Party work sharing agreement under which available work is shared equally among employees and EI benefits are provided by the federal government as income support to employees. Quote working reduced. Which mitigates their income loss.
Hessie Jones
Brigitte, can you provide like a list? That same list to me. And then we can include it in our show notes for our, for our viewers,
Brigitte LeBlanc-Lapointe
absolutely.
Hessie Jones
From your perspective, are some of the concrete actions that that companies can take right now in the face of. Risks.
Brigitte LeBlanc-Lapointe
So we’ve already touched on a lot of these these concrete actions, reviewing contractual clauses and considering allocation of of tariff liability. In future contracts, reevaluating the origin of the goods being exported or imported. Considering supply chain, diversification and finally, as I mentioned earlier, businesses should draw on the domestic market and free trade agreements with other regions like the Canada European Union, Comprehensive Economic and Trade Agreement. And the comprehensive and progressive Agreement for Trans Pacific Partnership in considering alternate markets for their products and supply sources. And I I. I would say look to Canadians. Interprovincial. To to actually reduce reliance on uneven outside markets, because we do have a thriving market in Canada and it really surprised me if it weren’t for the tariff. Events that I had, I didn’t realize the extent to which the inter provincial trade was actually a big barrier, even in Canada, so. Those need to come down and I think that is going to be a huge GDP opportunity for the country from what I’ve read. Yeah, it’s read OK.
Hessie Jones
So you have like a strong background in venture capital and I think for our audience a lot of them are startup ventures. And I’d like to ask, I guess you based based on your expertise that your opinion? On the state of venture capital in Canada right now and what your advice would be for startup companies who are living in these uncertain times.
Brigitte LeBlanc-Lapointe
So you. On the fact that businesses are considering postponing key investments and and this might include mergers and acquisitions. First, let me deliver a glimmer of hope. So rest assured, both VC financings and M and a deals are still happening. As I’ve discussed, not all businesses are directly impacted by tariffs. So, for example, businesses that are services based. Deliver software digitally. Have low US exposure or have pricing power. Should be. Should really have less direct exposure to tariffs and remain attractive targets for investment or acquisition. That being said, at a macro level, economic turbulence makes business valuation deal uncertainty, and in the case of M and a deal financing trickier and this generally leaves acquirers. And investors with two alternatives to manage the risk. Either introduce deal structure and related protections, or simply wait to see how things play out. Of course, as deal makers have been excited for a robust deal flow in 2025 after seeing a lot of potential sellers sitting on the sidelines. So it you know this is this is disappointing for for everyone. Maybe I’ll unpack the risk mitigation tools so in M and a, sellers can expect different deal structures as I mentioned and and this can include things like earn outs, rollover equity and deferred payments. This is because buyers are looking to reduce financial risk in uncertain economic times. In certain circumstances, deals may also be structured as asset sales, where buyers can pick and choose. But they’re buying rather than share sales, where a whole company is bought. Sellers can also expect there will be more emphasis and and this is also startups taking an investment. But there’s. To. More emphasis on due diligence as as buyers or investors seek to mitigate any impact on investment returns. Buyers and investors will be seeking more financial and operational certainty, so deals will take longer to close as buyers and investors balance the need for some degree of certainty. Against losing a. Remember that in times of uncertainty, deals still happen. There’s a buyer’s market and an opportunity for sellers as well, so valuations may become more attractive for acquirers. A lower Canadian dollar against the US dollar means that Canadian companies may be more attractive targets. Sellers may consider divesting themselves of non core assets or those that are most affected by US tariffs and some Canadian companies may look to establish manufacturing facilities in the US and vice versa, which may happen by way of strategic acquisition. Maybe I’ll add a word of caution for businesses looking to foreign investors or acquirers on March 5th, then Minister of Innovation, Science and Industry announced in a statement posted on X that Canada’s economic security. Is national security the Investment Canada Act guidelines relating to National Security review have also been updated to expressly include the potential of an investment to undermine Canada’s economic security. By enhancing interrogation of or sorry enhancing integration of the target Canadian business with a foreign. So that statement and change to the guidelines give an indication that foreign investments may draw heightened scrutiny under the Investment Canada Act by addressing whether they ’cause injury to Canada’s economic security. Finally I. You know, just just say that. These are turbulent times, but sometimes turbulent times have unexpected. So we we all saw the, the, the tech sector investment boom M and a activity in 2021 which. At the outset of COVID, I don’t know that anyone would have predicted that, and so businesses can really think about the strength of their numbers. About their strengths. For. Prepare for due diligence. Get ahead of of some of these issues. Is that’s great.
Hessie Jones
Thank you so much. I I think that is great advice for a lot of startup companies who are already feeling a little bit of a pinch this year and and realizing that you know, they they can’t even move their businesses ahead, even incrementally because. Because of all the the issues surrounding the tariff. OK, so one last question. Do you hear some main concerns from the business community that that you and I have yet haven’t yet discussed? Is there is this uncertainty actually causing a lot more anxiety than than we thought? Yeah.
Brigitte LeBlanc-Lapointe
So we’ve, we’ve, we’ve covered a lot of ground and I I am hearing a lot of anxiety and and general concern from like I said, Founders, investors, acquirers, targets. Maybe I’ll touch on one last. So we’ve been fielding a lot of questions about the interplay between various tariffs and if those tariffs will be calculated in addition to the general 25% tariff. Earth in early February, President Trump announced his intent to impose and directed the various executive agencies to investigate broad based reciprocal tariffs that would match either the value or the impact. Of any tariffs or trade measures put in place by other countries on US products. These reciprocal tariffs would apply to all US trading partners, which would include. Canada. These tariffs are still under investigation, though the Trump administration has repeatedly stated that such tariffs could be imposed as soon as April 2nd. So we’re going to need to wait to see what is proposed on that front and how these additional tariffs may interact. With the impending general 25% tariff.
Hessie Jones
Thank you so much. There’s so much more I want to ask you, but I think I think at this point April 2nd is around the corner and we’re we’re going to just wait and see what’s going to happen and. I’m sure our government will be ready with full force. You so much, Brigitte, for joining us today. And maybe I’ll be impacting you. Ahead, yeah.
Brigitte LeBlanc-Lapointe
End with a shout out to my trade law colleagues who have been publishing insightful and timely thought leadership on all things tariffs which can be found on my firm’s international trade hub. But beyond that, it has been such a pleasure discussing these complex matters with you.
Hessie Jones
Thanks so much for for making. Time. What we’ll probably do. Is I will gather some of those links from you from your website and provide it as extra resources for audience. Alright, fantastic. Thank you. And so for our audience, if you have topics you want us to explore, please e-mail us at communications at altitudeaccelerator.ca. Just so you know tech and sensor, we’ve been around for a while and you know I think we’re this is I think. Our 80th episode, which is kind of cool, but just so you know, we have a lot more ways to go so. We are powered and produced by altitude. Accelerator were hosted on Spotify. Can find us wherever you get your. Until next time I’m Hessie Jones and this is tech uncensored. Please stay curious. And be inspired.
Host Information
Hessie Jones is an Author, Strategist, Investor and Data Privacy Practitioner, advocating for human-centred AI, education and the ethical distribution of AI in this era of transformation.
She currently serves as the Innovations Manager at Altitude Accelerator. She provides the necessary support for Altitude Accelerator’s programs including Incubator and Investor Readiness. She will be the liaison among key stakeholders to provide operational support and ultimately drive founder success.
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