How Could Trump's Policies Affect My Taxes in Kitchener-Waterloo?
Recent policies proposed by the Trump Administration have caused concern across Canada – including in Kitchener Waterloo – especially when it comes to taxes. The United States and Canada have a history of partnership and collaboration, resulting in an economy that’s deeply entangled with one another. This leaves many Kitchener-Waterloo Canadians wondering how Trump’s economic politics will impact their finances and taxes.
In this article, we’ll cover some of the ways Trump’s new policies will impact Canadians living in Kitchener-Waterloo, their taxes, and their personal finances, starting with Trump’s tariffs. Keep reading and prepare yourself for what’s to come!
Key Ways Trump’s Tax Policies Could Impact Kitchener-Waterloo
Tariffs and their Impact on Canadian Taxes Paid
For context, tariffs are defined as taxes put on imported goods by the government. While tariffs are first paid by the importer, the cost will eventually be recouped by raising the price of the product for the consumer.
Early this year, U.S. President Donald Trump announced a 25 per cent tariff on all Canadian goods. Only goods under the North American free trade agreement are exempt from the tariff. Since then, Canada has followed through with its own retaliatory tariffs.
One way imposing tariffs could affect everyday Canadians is through the inflation of imported American goods. The increase in price will be permanent, assuming the tariffs continue to be in place.
American-made products have always had a spot on Canada’s store shelves, but that could no longer be the case moving forward. Retailers and consumers alike will likely need to opt for non-American alternatives. This is difficult for local Canadian businesses who depend on imported American goods to run their business.
While Kitchener-Waterloo businesses selling American-imported goods can apply the additional costs to their consumer pricing, some businesses could end up absorbing some or all of the costs. Considering many Canadians have made the move to boycott American products, businesses may have trouble selling their imported goods at all.
Corporate Tax Rates
In addition to tariffs, Trump has cut the corporate tax rates on U.S. domestic manufacturing by 6 per cent. What was originally a 21 per cent tax rate is now a 15 per cent tax rate on U.S.-based manufacturers. In contrast, Canada’s corporate tax rate currently sits at 26.50 per cent.
It’s predicted that this decrease could lead many Canadian companies to move their manufacturing facilities from Canada to the U.S., since it will be less costly to produce goods.
Combining this legislation with the tariffs, it’s easy to see how this will impact the price of goods for Canadians. What were once Canadian-made products could soon become American-made products with Trump’s 25% tariffs attached to them.
Canada could follow through with their own corporate tax reduction for domestic manufacturers, but this has yet to be announced by the federal government.
Digital Services Taxes
In 2024, Canada announced that they would be implementing a Digital Services Tax (DST) of 3% on digital services provided and the income generated by it in Canada.
Whether the DST charge applies will depend on the company’s income threshold.
Digital services companies with over €750 million in global revenue during the fiscal year are subject to the DST charge. This includes all companies within the corporate family, even if they aren’t based in Canada.
Companies with more than $20 million CAD in digital services revenue are also subject to the tax.
Canada’s Digital Services Tax (DST) was enacted in June 2024 and is viewed to target large US-headquartered technology companies. The US is already challenging this measure under the Canada-United States-Mexico Agreement (CUSMA) and could impose further tariffs against Canadian companies. The possibility of US tariffs may, therefore, impact the Canadian government’s commitment to the DST.
6-Month Tax Deferral Announced for Ontario Businesses
At the start of April, it was announced that Ontario would be granting a six-month tax deferral on applicable taxes for local businesses, including businesses in Kitchener-Waterloo. They will be deferred from April 1st until October 1st, 2025, interest and penalty-free. Applicable taxes include provincial taxes such as:
The Gasoline Tax, Fuel Tax, Mining Tax, Employer Health Tax, Insurance Premium Tax, Beer, Wine & Spirits Tax, Tobacco Tax, Race Tracks Tax, and taxes related to the International Fuel Tax Agreement.
The provincial government states that they’re implementing this tax deferring period in the hopes it will lessen the financial impact of the current economic climate on local Ontario business. In the process, Ontario businesses should be able to maintain the cashflow needed to keep their workers employed, quelling concerns surrounding employment rates in the wake of the Trump Administration’s new economic policies.
How to Survive the Impact of Trump’s Economic Policies in Kitchener-Waterloo in 2025
In Canada’s current economic climate, having a seasoned financial planner and advisor by your side is more important than ever. Whether you’re a local Kitchener-Waterloo business owner or just a resident of our city looking to protect your personal finances, a financial planner may be exactly what you need to help navigate these difficult times.
As financial planners in Kitchener-Waterloo, our team at GRFS can help you prepare for the unexpected, including changes in tariffs and tax rates.
It’s hard to keep up — which is why having a professional financial planner like GRFS at your disposal makes maintaining your financial health so much easier. We’ll keep track of relevant economic changes and advise you on how to respond accordingly so you don’t have to!
Let us grant you peace of mind. Learn how a GRFS financial planner can help you respond to Canada’s troubling economic climate.