Source: The Logic 
Date: 6th May 2025

Products made in China are already piling up at warehouses in Canada, and some companies want to keep it that way.

Some U.S. companies selling Chinese goods have been diverting their wares to Canadian warehouses, hoping to avoid the sky-high tariffs imposed by the U.S. President.

Importing a product from China to the U.S. to pay tariffs, to then shipping it to Canada, doesn’t make any sense. It makes sense to import inventory to Canada and sell to the Canadian market, where that product has no U.S. tariffs on it.

Many U.S. online retailers import goods from China and then store them in U.S. warehouses known as fulfillment centres until they are bought and delivered to consumers. This includes Seattle-based Amazon, where third-party vendors account for more than 60 per cent of sales.

Many have Canadian customers too, but the smaller market scale here made it more efficient to import goods to the U.S., then ship a limited number to a Canadian warehouse, or even use a courier to deliver it straight to doorsteps. Then, when the U.S. President imposed 145 per cent tariffs on all Chinese goods, including 20 per cent duties linked to fentanyl. That changed the math.

A reliable source speaks to several companies every day that are interested in importing goods from China into Canada instead of into the U.S. Some plan to move that inventory back to the U.S. if and when the U.S. President lifts or lowers his tariffs on China; others are looking to fulfill online orders in the Canadian market from that new location over the long term.

They are also looking to grow.

Most of these companies, for a wide variety of reasons, are not actively selling in Canada at any scale, noting that many rely on search engines to push Canadian consumers to their main websites instead of setting up a separate one for this market. Many businesses are also bracing for a decline in sales this year due to the trade war, which can be offset by opening up a new market. Some are wondering why they have not been selling in Canada for years.

Setting up shop in Canada is not a way to avoid the U.S. tariffs on China and pay the lower 25% rate for Canadian goods, since duties are determined by country of origin. This also applies to the “de minimis” exemption that lets goods worth under US$800 enter the U.S. duty-free, which was eliminated for China.

Still, companies selling goods from China could send those products to Canada, then ship smaller amounts to the U.S., as needed, until the tariffs are reduced or lifted. Even if those modest shipments face the 145 per cent tariff, that’s preferable to paying it on a large shipment that arrives in the U.S. one day, only to have the U.S. President lift the tariffs the next.

It is too early to tell how significant or lasting this movement of goods to Canadian warehouses could be, but there are signs of a shift. A reliable source shared that there is a sign of a 50 per cent increase in planned shipments headed to Canada in the weeks after the tariffs took effect, at the same time as cancellations from Asia.

Existing warehousing and distribution networks make Canada a popular choice, although it could end up being a costly bet. The companies are paying for that storage space in Canada without knowing how long they will need it. If the U.S. President does not lift or reduce the duties on China, then the plan would increase their expenses over the long term.

Some do not have a choice. They simply don’t have either the cash flow or the ability to sell the goods at the current tariff level. They’re going to try and wait it out as best they can.

Some clients are shifting their sales strategies to capture a greater share of Canada’s market, or those of other countries where consumers have similar buying habits to the U.S., such as Australia. It is more likely to happen if they already have a foothold in those places.

New markets can require the added costs of new product lines, advertising campaigns, regulations, and, especially now, competing with popular homegrown brands. Will an American brand be well-received right now in Canada is another question.