Tariffs

Potential Impacts of Trade Relations with the United States on the Financial Statements of Private Enterprises

The ongoing global trade turmoil has introduced a new wave of economic uncertainty for private enterprises. The tariffs imposed by the U.S. administration, has created a complex and challenging business environment. This non-authoritative guidance, based on an article originally drafted by the Accounting Standards for Private Enterprises (ASPE) technical working group and the professional practice team of the Ordre Des Comptables Professionnels Agréés Du Québec, provides CPAs with insight into the potential impacts of these changing trade conditions on the financial statements of private enterprises.

It explores how tariffs could affect sales, purchases, and profit margins, as well as the broader implications for financial reporting under Accounting Standards for Private Enterprises (ASPE).

In this period of uncertainty, businesses are looking to CPAs for professional judgment and technical expertise. Understanding how this unfolding trade conflict could impact businesses and capital markets is essential.

Read more: Potential Impacts of Trade Relations with the United States on the Financial Statements of Private Enterprises

Ongoing tariff directives are creating uncertainty for Canadian businesses, disrupting supply chains, pricing strategies, and international competitiveness.

As global trade policies shift—whether through new trade agreements, retaliatory measures, or adjustments in duties—companies must navigate, adapt, and evolve. Canadian businesses that engage in cross-border trade will need to prepare for the potential impacts of these tariffs and take action to minimize the impact. We can help you navigate these changes and mitigate risks to your business during these uncertain times.

Read more: Impact of tariffs on Canadian businesses

Tariffs and interest rates dominate CPA concerns

CPA Canada's exclusive Quarterly Economic Update with chief economist David-Alexandre Brassard featured some important questions from CPAs across the country.

David-Alexandre Brassard, CPA Canada Chief Economist, recently hosted our quarterly economic update with CPAs from across Canada. Here are some of the popular themes and questions that came up at the event.

Tariffs and trade: How would retaliatory tariffs help? How difficult is it to develop new trading partners or supply chains given our geographical position? Is it a good solution to ally with Europe to respond against US tariffs?

The trade landscape has certainly been complicated by the new U.S. administration. As I have addressed in the CPA Canada’s Tariffs: Roadmap for navigating trade uncertainty  our economic dependency on the United States put us at great risk, with 70 per cent of our exports and 60 per cent of our imports. Meanwhile, we account for less than 15 per cent of their international trade.  

Moving beyond the U.S. will incur significant transport costs making it harder to be competitive. Additionally, this move would require major investments and infrastructure, such as pipelines and container ports, which we have backtracked on in recent years. Improving the situation would require a move away from the “not in my backyard" approach to building infrastructure.

Read more: Tariffs and interest rates dominate CPA concerns

How tariffs and counter-tariffs are imposed
Need to know: Understanding the basics

When Richard Nixon slapped a 10 per cent tariff on almost all of America’s imports, he invoked the Trading with the Enemy Act, and used a pretext—national security—not unlike the one Donald Trump invoked in 2018 when he imposed levies on steel and aluminum. “The U.S. realized that it was a little ridiculous to use something called ‘Trading with the Enemy’ to go after France, Japan, Canada and other countries,” says Carlo Dade, director of trade and trade infrastructure at the Canada West Foundation. “So [the law] was renamed the International Emergency Economic Powers Act, and some more restrictions were put on when it could be used and how it could be used.”

Read more: How tariffs and counter-tariffs are imposed

When your neighbour starts a trade war
‘If you stand back, it’s basically a threat to wage economic war on Canada, and a departure from over 150 years of our shared history’

In a world filled with exquisitely complicated consumer electronics and digital networks that seem capable of performing miracles, few of us likely spend much time thinking about the lowly car seat and what, if anything, makes it special. Yet these outwardly pedestrian components of every vehicle tell a concise story about how things get made in the world today.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, effortlessly itemizes the ingredients: a metal or hardened plastic frame, highly regulated foam cores, exterior fabric, a rail and some power electronics, heating and cooling elements, and possibly even sensors capable of adjusting the seat under certain driving conditions.

Read more: When your neighbour starts a trade war

Navigating the uncertainty of trade moves made by the Trump administration.

As Canadian businesses brace for potential 25 per cent tariffs on most Canadian exports to the U.S., the looming threat has CPAs rapidly assessing financial impacts and developing contingency plans for their organizations.

In this Q&A, Claire Shawcross, CPA and founding partner at SM Accounting Group in Surrey, B.C., Dan Nordqvist, CPA, partner at Padgett Business Services in Halifax and Thomas Blonde, CPA and partner at Baker Tilly GWD LLP in Elora, Ont., share their perspectives and offer insights into how they're helping their clients prepare for more turbulent times ahead. 

Read more: CPAs offer their best advice on how to brace for U.S. tariffs

A historical look at Trump's penchant for tariffs

From the archives: The more things change, the more they stay the same, as this 2018 expose from CPA Canada on Trump's first foray with tariffs proves.

The latest south of the border tariff drama is nothing new, in fact, it echoes Trump's first term in office. Back in 2018 CPA Canada delved into how we can counter tariffs, and though the times have changed a lot of this advice remains valuable. Stay tuned for more from our chief economist on this current threat, and March's edition of Pivot where we dive even deeper.

Learn more: A historical look at Trump's penchant for tariffs

Evaluating the potential impacts of US tariffs

The new US administration is considering sweeping tariffs on imports. While many important elements are unknown, these measures could be highly disruptive to the Canadian and US economies.

US President Donald Trump has said his government would impose tariffs of 25% on goods from Canada and Mexico. He has also threatened tariffs on goods imported from other countries. This could lead to countermeasures by the United States’ trading partners, including retaliatory tariffs.

Tariffs are taxes on imports that increase the price consumers and businesses pay for goods and services.1 Tariffs affect spending, trade flows, government revenue, exchange rates, employment, gross domestic product (GDP) and inflation. They could substantially disrupt supply chains in Canada, the United States and elsewhere around the world.

Read more: Evaluating the potential impacts of US tariffs

Tariffs: Roadmap for navigating trade uncertainty

Understanding the context is imperative to secure Canada’s trade future.

With its threat to impose hefty tariffs across the board on Canada, and the recent move to tax steel and aluminum at 25 per cent, the U.S. has introduced a historic level of uncertainty in the trade landscape between our two countries. The proposed 25 per cent levy on goods and 10 per cent on energy products, and Canada’s retaliatory move to tax $155 billion worth of U.S. goods, has escalated tensions to levels not seen in decades.

As this story continues to unfold, Canadian businesses, industries and CPAs must prepare for potential disruptions and shifting trade dynamics.

Learn more: Tariffs: Roadmap for navigating trade uncertainty

How new tariffs could affect Canadian businesses

Despite the previous agreement to delay any tariffs for at least 30 days, President Donald Trump signed orders on February 10 imposing 25% tariffs on all steel and aluminum imports—including imports from Canada—to take effect on March 12, 2025. He will also impose a new North American requirement for steel to be “melted and poured” and aluminum “smelted and cast” within the region to limit imports of Chinese steel.

Similar to what was done in 2017 when Trump had imposed a 25% tariff on steel and a 10% tariff on aluminum, the current round of proposed tariffs will be imposed under Section 232 of the Trade Expansion Act of 1962, which gives the president the authority to restrict trade on the grounds of national security. In his first term, President Trump placed tariffs on Canadian steel and aluminum for a year under this Act.

Read more: How new tariffs could affect Canadian businesses

Tax Insights: Potential US tariffs and Canadian countermeasures ─ How will it affect Canadian businesses?

What happened? On February 1, 2025, United States (US) President Donald Trump signed three executive orders that impose tariffs on imported goods, effective February 4, 2025, from:

• Canada – a 25% tariff, except that energy products will be subject to a 10% tariff
• Mexico – a 25% tariff
• China – an additional 10% tariff on top of existing tariffs

However, on February 3, 2025, the US agreed to delay implementing these tariffs on Canadian and Mexican imports for 30 days to allow for further negotiations with Canada and Mexico on enhancing border security, among other issues. If Canada and the US cannot reach an agreement, the US could potentially start applying tariffs based on the executive order on Canadian-origin goods imported into the US in the near future. The executive order that applies to China remains in effect.

Read more: Tax Insights: Potential US tariffs and Canadian countermeasures ─ How will it affect Canadian businesses?

Trump’s Tariff Turmoil – Insights from CPAs

As the Trump administration's sweeping tariffs create waves in the economic landscape, the role of Chartered Professional Accountants (CPAs) is more pivotal than ever. CPAs are essential in helping businesses navigate the complex and rapidly changing trade environment. CPA Ontario will continue to bring strategic insights to members to help them navigate the challenges ahead.

What a whirlwind this past week has been. Let’s get caught up and then dive into the perspective of three expert CPAs on the evolving tariff threats.

What Happened and How We Got Here

 On February 1, 2025, the Trump administration shook the economic landscape by announcing a set of sweeping tariffs through an Executive Order set to take effect on February 4, 2025. The mandate included a hefty 25% tariff on most Canadian imports, a similar 25% on Mexican imports, and an additional 10% tariff on imports from China. Energy resources from Canada, including oil, gas, and electricity, were not spared, but faced a lower tariff rate of 10%. As motivation, Trump cited a national emergency related to illegal immigration and drug trafficking across borders.

Read more: Trump’s Tariff Turmoil – Insights from CPAs

What does the future hold for the Canadian economy?

Shifting US policy impacts Canadian businesses in all sectors. Leaders should monitor changes to stay agile and responsive. Stay current, gain insight, and watch the webcast in the link below.

Watch: What does the future hold for the Canadian economy?