Trump's Trade War Just Got Real--And Shopify's CEO Says Canada Made a Huge Mistake

As President Donald Trump's trade war escalates, the impact on Canada and its businesses is becoming increasingly apparent. The U.S. President has imposed a 25% tariff on most Canadian goods, with a lower 10% duty on energy, effective Tuesday, February 4, 2025. Canada has retaliated with $30 billion worth of tariffs on American products, with another $125 billion set to follow in 21 days if the U.S. doesn't back off. The question on everyone's mind is: how will these tariffs affect the Canadian economy, particularly the retail and e-commerce sectors, and what measures can Canadian businesses like Shopify take to mitigate these effects?

Shopify's CEO, Tobi Lütke, has been outspoken about the potential consequences of Trump's trade war on Canada. In a recent tweet, Lütke acknowledged the harsh reality of the tariffs, stating, "Yes this is harsh, but the US is well within its rights to demand this. They want the border to be a border." He also criticized Canada's response to the U.S. tariffs, suggesting that Canada made a huge mistake in its approach to the trade war.

Lütke's concerns are well-founded. The new tariffs will have significant impacts on the Canadian economy, particularly the retail and e-commerce sectors. Here's how these tariffs may affect the Canadian economy and what measures Canadian businesses like Shopify can take to mitigate these effects:

1. Increased costs for consumers and businesses: The tariffs will lead to higher prices for Canadian consumers, as goods imported from the U.S. will become more expensive. This will also increase costs for Canadian businesses that rely on U.S. imports for their operations. For example, Loblaw Companies Ltd., a major Canadian grocery chain, has committed to securing more food grown and made in Canada to mitigate the impact of higher costs.
2. Disruption in supply chains: The tariffs may disrupt supply chains, as businesses may need to find alternative suppliers or adjust their operations to accommodate the higher costs. This could lead to temporary shortages or delays in the availability of certain goods.
3. Impact on e-commerce: The tariffs may also affect the e-commerce sector, as Canadian businesses that rely on U.S. suppliers for their products may face higher costs or difficulties in sourcing goods. Shopify, a Canadian e-commerce platform, has taken measures to encourage people to buy local in Canada, the U.S., and Mexico by bringing features to its Shop app that promote domestic purchases.
4. Potential job losses: Higher costs and disruptions in supply chains may lead to job losses in the retail and e-commerce sectors, as businesses may need to reduce their workforce to cope with the increased expenses.
5. Reduced trade between Canada and the U.S.: The tariffs may lead to a reduction in trade between Canada and the U.S., as businesses may seek alternative markets or suppliers to avoid the higher costs. This could have a negative impact on the Canadian economy, as the U.S. is Canada's largest trading partner.

To mitigate these effects, Canadian businesses like Shopify can take the following measures:

1. Encourage domestic purchasing: Businesses can promote the "buy Canadian" sentiment by offering discounts or incentives for customers who purchase domestically produced goods. This can help support local businesses and reduce the impact of higher costs on consumers.
2. Diversify supply chains: Businesses can explore alternative suppliers or sources of goods to reduce their reliance on U.S. imports. This can help mitigate the impact of higher costs and supply chain disruptions.
3. Invest in technology and automation: Businesses can invest in technology and automation to improve efficiency and reduce costs. This can help offset the higher expenses associated with the tariffs and maintain competitiveness in the market.
4. Lobby for government support: Businesses can work with the Canadian government to advocate for measures that support the retail and e-commerce sectors, such as tax incentives or subsidies to help offset the impact of the tariffs.
5. Adapt business models: Businesses may need to adapt their business models to accommodate the higher costs and disruptions in supply chains. This could involve adjusting pricing strategies, product offerings, or distribution channels to maintain profitability and competitiveness.

In conclusion, the new tariffs imposed by President Trump will have significant impacts on the Canadian economy, particularly the retail and e-commerce sectors. Canadian businesses like Shopify can take various measures to mitigate these effects, such as encouraging domestic purchasing, diversifying supply chains, investing in technology and automation, lobbying for government support, and adapting business models. By taking these steps, Canadian businesses can help to minimize the negative impacts of the tariffs and maintain their competitiveness in the market. However, as Shopify's CEO, Tobi Lütke, has pointed out, Canada made a huge mistake in its approach to the trade war, and businesses must be prepared to face the challenges ahead.