Insights

Tariff Costs and Tax Deductibility: What Canadian Businesses Need to Know

Editorial Team 09 May 2025

An analysis by Borden Ladner Gervais, Taxand Canada

With tariffs continuing to disrupt global trade, Canadian businesses must reassess supply chains and financial strategies. Even when dealing with unrelated parties, companies should evaluate risk, consider tariff-free alternatives, and plan long-term restructuring.

From a tax perspective, U.S. tariffs aren’t deductible by Canadian exporters, as they aren’t directly liable. However, lowering prices to offset tariffs for U.S. buyers may indirectly reduce taxable income. For tariffs imposed by Canada on imports, deductibility depends on specific circumstances:

• Business expenses: They may be included in the cost of goods sold or operating expenses, subject to legal analysis.
• Capital cost: They might be added to a capital asset’s undepreciated cost if they form part of its acquisition cost.
• Non-deductible outlays: If neither applies, tariffs may be non-deductible unless specifically allowed.

Siwei Chen from our Canadian firm Borden Ladner Gervais has published a more detailed analysis of the impactions of tariffs for tax which can be read here. You can also find more information on BLG’s Tariff and trade resource centre.

Article tags

Canada | Cross border | International Tax