When Susie Martinez loads her car each morning to deliver her handcrafted leather goods to shops across Windsor, Ontario, she’s facing a new reality this September. The American customers who once crossed the border to buy her artisanal wallets and bags at weekend markets might soon disappear.
“Those U.S. customers made up almost 30% of my holiday season income last year,” Martinez told me during a recent conversation at her workshop. “Now with the duty-free exemption gone, I’m not sure they’ll bother coming over anymore.”
Martinez isn’t alone. Thousands of Canadian small business owners along the border are bracing for significant revenue drops after the United States abruptly ended its long-standing duty-free exemption for Canadian shoppers last week.
The exemption, which had been in place since 1976, allowed Canadian visitors to bring back up to $800 USD of goods without paying duties after stays of 48 hours or more. For day trips, Canadians could return with up to $200 USD in goods duty-free. Both provisions have now been eliminated.
“This isn’t just about losing American shoppers coming north,” explains Diane Brisebois, President of the Retail Council of Canada. “It’s about Canadians who now have far less incentive to cross the border for shopping trips in either direction. The economic ecosystem around cross-border shopping affects businesses on both sides.”
According to Statistics Canada, Canadians made approximately 27.3 million trips to the U.S. in 2023, with retail spending exceeding $6.8 billion. Most of these trips occurred in border communities from British Columbia to New Brunswick.
For Jordan Wilson, who owns a specialty food shop in Niagara Falls, the timing couldn’t be worse.
“September to December is when we make nearly 70% of our annual revenue,” Wilson says, standing beside shelves of Canadian maple products and specialty preserves. “American tourists have always been reliable customers, especially those who came specifically for a shopping weekend. Now they’ll think twice about making that trip.”
The duty-free exemption rollback came as part of broader trade policy changes announced by the U.S. Trade Representative’s office, which cited “rebalancing measures” following disputes over Canada’s digital services tax implementation. The decision blindsided many Canadian business associations, which had little time to prepare their members for the change.
Economic analysis from TD Bank suggests border communities could see a 12-15% decrease in retail spending during the crucial fourth quarter. Their report noted that businesses in tourism-dependent regions like Niagara Falls, Victoria, and border towns across Quebec face the highest risk.
“The impact goes beyond retail,” says Martha Jefferson, an economist specializing in Canada-U.S. trade relations at Ryerson University. “Hotels, restaurants, entertainment venues – they all benefited from Americans who came for shopping weekends. That ecosystem is now under threat.”
The change creates a stark asymmetry in cross-border shopping rules. While Canadians lose their exemption privileges, Americans still enjoy duty-free allowances when returning from Canada ($800 USD for trips over 48 hours).
Michael Chang, who runs a chain of duty-free shops near the Quebec-Vermont border, is already seeing effects. “Our stores have seen foot traffic drop by almost 40% in the first weekend after the announcement. People aren’t just avoiding buying – they’re avoiding crossing altogether.”
Some businesses are getting creative. Martinez has quickly developed an e-commerce strategy targeting her American customers, offering to absorb shipping costs during the transition. Wilson is partnering with U.S. specialty food distributors to maintain his brand presence south of the border.
But for many small operations without such flexibility, the outlook remains grim. Approximately 42% of Canadian small businesses along the border rely on American tourism for at least 20% of their annual revenue, according to a snap survey by the Canadian Federation of Independent Business.
“We’re advising our members to diversify their customer base immediately,” says Jasmin Guénette, CFIB’s Vice President. “But realistically, replacing that income before the holiday season will be extremely challenging for most.”
The diplomatic channels remain active. Canada’s International Trade Minister Mary Ng has initiated discussions with U.S. counterparts, seeking a resolution before the critical holiday shopping season. However, trade experts are skeptical about a quick fix.
“These are typically slow-moving negotiations,” explains Jefferson. “By the time there’s any resolution, we’ll likely be well into 2026, meaning businesses need to adapt to this new reality rather than hope for a quick diplomatic victory.”
For consumers on both sides, confusion reigns. A poll conducted last weekend found that 68% of Canadians were unaware of the exemption’s elimination, suggesting potential chaos at border crossings as travelers face unexpected duties.
“We’re increasing staff at major crossings,” says a spokesperson for the Canada Border Services Agency. “But we recommend travelers familiarize themselves with the new rules before attempting to cross.”
As I left Martinez’s workshop, she was printing new price lists that account for shipping to U.S. customers – a stark reminder of how quickly businesses must adapt to survive this sudden change in a half-century tradition of cross-border commerce.
“My grandmother started this business in the 1970s, right when that exemption began,” she reflected. “We’ve never operated without it. But we’ll find a way forward – we always do.”
