Canadian small businesses are bracing for a major financial hit as the United States officially ends the de minimis exemption, a decades-old policy that allowed goods valued at under $800 USD to enter the U.S. duty-free. The change, driven by a July executive order from President Donald Trump, means Canadian retailers must now pay duties of up to $200 USD per package, depending on origin, along with added administrative and brokerage costs.
For many small businesses, the loss of this exemption could be devastating. Vancouver-based clothing brand Free Label, which produces size-inclusive slow fashion, has already halted U.S. shipments entirely. Owner Jess Sternberg says the American market made up 45 percent of sales this year, making the change particularly painful. “With the amount of risk and lack of clarity right now, we just can’t justify it,” she said, adding that without the U.S. market, her company’s survival is uncertain.
Others, like Cheekbone Beauty, an Indigenous-owned cosmetics brand in St. Catharines, Ontario, are choosing to absorb the costs — at least temporarily. Founder Jenn Harper says U.S. sales account for about a third of revenue, and while Canadian support has surged in response to trade tensions, the company still relies heavily on its American customers. “We don’t want to scare our U.S. customers away,” she said, though she admits the 25 to 30 percent increase in shipping costs may not be sustainable long term.
Industry experts warn that the policy shift will disproportionately affect smaller companies that lack the resources to navigate complex trade rules or absorb additional expenses. John Boscariol, a trade lawyer with McCarthy Tetrault, notes that many mom-and-pop operations relied on the exemption “as part of their bread and butter for survival” and could be forced to close. Bob Kirke, head of the Canadian Apparel Federation, added that the loss will also stifle innovation and growth, limiting opportunities for emerging brands to expand into the lucrative U.S. market.
Shipping companies and e-commerce platforms are also adjusting. FedEx will continue to handle U.S. shipments, while Canada Post is partnering with a third party to manage duties. However, some platforms, including Etsy and eBay, have stopped offering U.S. shipping labels through Canada Post, complicating logistics further. Experts caution that unless businesses can adapt quickly, the end of duty-free shipping could mark a turning point for Canada’s small-scale e-commerce industry, forcing many to rethink or even retreat from the American market altogether.