Tariffs 101: What founders need to know

If you’re a founder trying to keep up with the latest on tariffs, we get it—it’s a lot. Between trade tensions, shifting policies and the looming threat of retaliatory measures, it’s tough to know what’s noise and what actually impacts your business.

That’s why we sat down with our very own Government Relations Manager Dove Parmar to break it all down. From what’s happening with Trump’s proposed tariffs to how Canadian startups should prepare, here’s everything you need to know minus the political jargon.

Trump’s proposed tariffs. 

• President Trump has proposed a broad set of tariffs. These measures are designed to incentivize domestic production but risk triggering retaliatory actions from key trade partners, including Canada.
• On February 3, he paused the tariffs on Canada for 30 days after speaking with Prime Minister Trudeau to discuss enhancing border security and address concerns regarding the flow of fentanyl into the United States. 
• President Trump has said tariffs are needed to help the American economy and to protect the country from the “threat of illegal aliens and deadly drugs.” To note, only 0.2% of US border fentanyl seizures come from Canada.

So, what are tariffs? 

• Tariffs are taxes imposed on imported goods, making them more expensive for domestic buyers. Governments use tariffs to protect local industries, retaliate in trade disputes or generate revenue. However, they can also increase costs for businesses reliant on global supply chains.

How this will impact founders. 

Increased costs. 

• Canadian tech companies that rely on U.S. components, such as semiconductors and hardware, may face higher costs due to tariffs on goods imported into the U.S. from global suppliers.
• Increased costs could lead to higher prices for end consumers or force firms to absorb costs, impacting margins.

Disruptions to cross-border trade. 

• Tariffs could disrupt established supply chains.
• Canadian tech firms exporting to the U.S. may find their products subject to retaliatory tariffs, reducing competitiveness.

Investor jitters. 

• Tariff uncertainty can deter investment in Canadian tech startups, especially those reliant on U.S. partnerships or expansion.
• Companies may delay expansion plans or rethink cross-border strategies in response to trade instability.

Shifting the trade playbook. 

• The Canadian government may explore new trade agreements or incentives to offset potential losses and diversify supply chains away from the U.S.

The Bank of Canada’s response. 

• Interest rate adjustments: The Bank may lower interest rates to stimulate economic growth and offset trade-related slowdowns. Lower rates can encourage borrowing and investment in the tech sector.
• Inflation considerations: Higher import costs due to tariffs may drive inflation, potentially forcing the Bank to balance rate cuts with inflation control measures.
• Exchange rate policy: A weakening Canadian dollar in response to tariffs could help exports remain competitive but may increase costs for companies importing U.S. tech components.

What founders should be thinking about. 

• Supply chain diversification: Companies should assess alternative suppliers to mitigate risk from tariff fluctuations.
• Government advocacy: Exploring alternative export markets beyond the U.S. to reduce dependence on a single trade partner.
• Market expansion: Evaluating pricing strategies and operational efficiencies to absorb potential tariff impacts.

Tariffs might be meant to protect local industries, but they can shake up entire economies and make life harder for businesses that depend on cross-border trade. The best move? Stay ahead by planning strategically, keeping an eye on policy changes and finding ways to stay competitive in an unpredictable trade landscape.

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