Loss of de minimis exemption the latest tariff blow for small businesses

Recent changes to U.S. trade policies are affecting small businesses that use online platforms like Etsy. CTV’s Kimberley Johnson reports.

Many small businesses are taking the brunt of the ongoing trade war with the United States.

Earlier this month, U.S. President Donald Trump ended a long-standing agreement exempting low-value parcels from tariffs, and the move is having an impact on businesses in eastern Ontario.

The de minimis threshold exempted duties, taxes and tariffs on goods shipped to the States that were valued under $800.

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At The Vintage Crate, owner Dave Pelkey says items like old telephones and typewriters are all things that get sold into the United States through his online stores.

He says those sales are significant – accounting for 60 per cent of his sale of antiques and the removal of the exemption is hard to take.

“American and users are going to feel it, and I think small businesses in Canada are going to feel it,” he explains.

Now, Etsy has announced it won’t print Canada Post shipping labels for orders to the U.S. because the carrier can’t process tariffs. Sellers will need to ship through other companies and will either need to raise prices or absorb the cost of the tariffs.

“To have to use the bigger carriers, they cost more to ship, they’re going to charge us brokerage fees, and then they’re going to charge us the tariffs. So, absorbing all of that is financially undoable.”

It’s the latest trade blow for small businesses in the ongoing trade war.

The Canadian Federation of Independent Business has put out new numbers showing that 40 per cent of small businesses could close within a year.

• Trump trade war: CFIB estimates small businesses won’t last

Michelle Auger is a senior policy analyst with the CFIB and says the scrapped de minimis exemption is felt by small businesses. It’s just one reason the CFIB says money collected from counter-tariffs should go towards supporting small businesses.

“We know that one third of small businesses will be affected by the loss of the U.S. de minimis,” says Auger.

Products covered under CUSMA are unaffected, explains Auger, and Pelkey says he’s already going through the process of organizing his inventory.

Pelkey says he has spent about $60,000 to get his online shop running with 3,000 products. He says he fears what raising prices for U.S. customers could mean for businesses like his.

“You raise your prices high enough, customers stop buying,” he says.

CTV News Ottawa reached out to Etsy but did not heard back by deadline.

Canada Post says it has been working to secure the “necessary solutions to maintain business continuity” for its customers since the U.S. announced all U.S.-bound shipments will be subject to its tariff policy.

“We are letting our customers know that we are currently onboarding Zonos, a third-party technology provider that will help ensure their shipments to the U.S. can continue moving smoothly across the border. Zonos, which specializes in cross-border technology solutions, will collect duties and remit them directly to U.S. Customs and Border Protection,” Canada Post said in a statement to CTV News Ottawa.

“Prior to this policy change, goods valued under US$800 entered the U.S. without any duties or taxes. This was known as the de minimis exemption, which the U.S. has now suspended.

“The new policy means these goods will be subject to an ad valorem duty. This duty will be equal to the tariff rate that applies to a product’s country of origin under the International Emergency Economic Powers Act. For Canada, this current rate is 35 per cent for most goods. Documents and gifts under US$100 sent from Canadians – not businesses – will be exempt.”

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