With the looming threat of 25% tariffs by the United States on Canadian imports, businesses in affected sectors are eager to see how both the federal and provincial governments will provide liquidity assistance or other support beyond imposing retaliatory tariffs and reducing reliance on American products to promote buying Canadian. The uncertainty remains, but businesses can take note that government policies to finance and lend to those affected by the tariffs are beginning to take shape.

In the coming months, financing solutions will play a crucial role in a broader strategy to mitigate the economic fallout from these tariffs. Though plans are still evolving, initial measures from the federal government and major financial institutions in Quebec, such as the Caisse de dépôt et placement du Québec (CDPQ) and Investissement Québec (IQ), offer insight into how governments and institutional lenders may step in to support affected businesses.

First steps in Quebec to provide financial assistance

On the provincial front, the Government of Quebec has announced plans to implement measures similar to those used during the COVID-19 pandemic, focusing primarily on providing lending assistance to businesses impacted by the new tariffs. The goal of this support is to help companies address liquidity challenges arising from increased customs duties.

According to Premier Legault, the plan will be implemented in conjunction with IQ and includes:

  • Short-term liquidity support: Providing financial assistance for two to three months to exporting businesses directly affected by the tariffs.
  • Flexible project financing: Adopting a more adaptable approach to financing investment projects to ensure businesses have access to necessary funds.

This strategy aims to maximize financial support and could potentially be replicated or adapted by other provinces or other financial institutions in the near future. While more detailed than federal measures discussed so far, details on the specific amounts, terms, and scope of these initiatives are expected to be released soon. This support may include not only loans but also other financial assistance, such as government-backed guarantees or deferred tax payments, to help companies manage cash flow.

In addition, CDPQ has launched a program to encourage local businesses to undertake projects that enhance local productivity or pivot strategically to new markets. The program focuses on three key areas, including broader access to capital:

  • Capital: Offering flexible financing options that complement existing solutions from banks and financial markets, enabling companies to undertake investment projects without excessively increasing their debt or diluting equity.
  • Expertise: Providing support for technological transformation, including automation, digitization of business processes, and the integration of artificial intelligence solutions.
  • Market Access: Assisting companies in exploring and entering new markets to reduce their dependency on U.S. exports.

The Government of Canada prepares a remission process

While the federal government has not yet indicated if it will provide a financial assistance program such as may be available at the provincial level, one of the key measures announced by the Government of Canada is a so-called “remission process,” designed to provide relief for Canadian businesses impacted by tariffs.

Remission is a mechanism that allows businesses to receive partial or full exemption from paying fees imposed in response to U.S. trade measures. This relief is specifically available for tariffs Canada has implemented as retaliatory measures on certain U.S. imports. Rather than absorbing the entire burden of these duties, eligible businesses may apply for remission to have some or all of them waived. Importantly, remission differs from duty drawback because it is not limited to goods that are ultimately exported, whether as raw inputs or finished products. Unlike duty drawback, which applies only to goods that are later exported, remission also covers goods used within Canada, offering broader financial relief.

Additionally, the government may provide relief on a case-by-case basis in “exceptional circumstances that could have severe adverse impacts on the Canadian economy.” Canadian importers may also be able to request remission for tariffs on U.S.-origin goods targeted by Canada’s countermeasures.

Businesses that qualify for remission may be able to leverage this relief to access additional financing options, as the tariff burden on imports can be a key factor in securing loans or credit. Beyond tariff exemptions, remission can enhance borrowing capacity, as reduced tariff costs may improve a company’s financial standing. Lenders will likely factor tariff relief into their financing assessments of borrowers.

It is important to note that the Federal Department of Finance previously published a notice outlining the procedure for applying for remission of duties on U.S.-origin goods. While this notice was removed following the temporary halt of the tariffs, it is expected that remission will remain an avenue of relief for certain importers when the tariffs are re-imposed, providing both tariff and financial relief.

Conclusion – Financial assistance on the horizon

These measures mark the initial steps in what is anticipated to be a comprehensive suite of financial programs developed at both the federal and provincial levels. These initiatives are designed to provide tailored support for various industries and businesses impacted by the U.S. tariffs, addressing unique needs in terms of liquidity, project financing, and long-term recovery.

As the full scope of these programs unfolds, additional support mechanisms, including lending options and financial instruments, are expected to be introduced.

From a financing and lending perspective, businesses should stay informed as these programs evolve and offer new opportunities to improve liquidity and manage cash flow during economic uncertainty. Miller Thomson LLP’s Financial Services Group will continue to monitor these developments and provide timely updates as more details of the programs become available.