Border crisis as duty free shops face uncertain future
Tania Lee, VP Sales at Blue Water Bridge Duty Free Inc and President of the Frontier
Duty Free Association (FDFA)
The Canada-US border is witnessing unprecedented disruption as trade tensions and political rhetoric escalate, with duty free retailers bearing the brunt of declining cross-border traffic.
Following President Donald Trump’s 25% tariff on Canadian imports in early March, combined with his controversial statements suggesting Canada should become the 51st state, Canadian consumer sentiment has shifted dramatically.
National sentiment affects travel patterns
“Canadians feel personally attacked by a close neighbor. This has led to a pervasive feeling of patriotism and nationalism across Canada,” explains Tania Lee, VP Sales at Blue Water Bridge Duty Free Inc and President of the Frontier Duty Free Association (FDFA). “Calls to boycott travel to the US and to boycott buying US products has led to a disruption in travel patterns and buying patterns that were not seen [even] during COVID.”
According to current data, from 50% to 70% of Canadians have either canceled or are reconsidering US travel plans, leading to significant declines in border crossings. This nationalist response has manifested widely throughout the country. “Team Canada approach is everywhere. Buy local, buy Canadian is widely present,” Lee notes.
Industry under significant pressure
The FDFA recently conducted a survey revealing alarming statistics about the industry’s future, showing that if current trends continue, one-third of Canada’s border duty free shops may close by summer. Lee’s business is down over 30%.
Some retailers are already experiencing severe hardship. The Peace Arch Duty Free Shop near Vancouver reports an 80% drop in business, forcing staff reductions and shorter operating hours. Other duty free retailers face similar struggles, with sales declines comparable to those during the pandemic.
“The uncertainty of tariffs and implications at the border is 100%, which leads to difficulty in planning and forecasting. This is further complicated by consumer confusion and fears of crossing the border,” says Lee.
For duty free retailers and their employees, the current border situation has created significant stress, though previous challenges have helped build resilience.
“There is a great sense of disappointment, mixed with a familiar anxiety but firmly grounded in a strong feeling of resolve,” says Lee. “Going through COVID and surviving the closure of the border for two years has really helped my team to deal with the uncertainty and daily changes at the border.”
Border communities feel the impact
The effects extend far beyond individual stores to entire communities dependent on cross-border commerce.
“Duty free shops contribute to the economic health of border towns in terms of jobs and investment,” Lee says. “Duty free shops are hurting and so are the towns we are located in, as many businesses depend on cross-border traffic.”
She adds: “Border towns, on both sides of the border, were so integrated in traditions and events with people crossing on a daily basis or frequently throughout the year; this has severely disrupted border businesses on both sides.”
Call for policy intervention
These figures highlight the urgent need for policy intervention. “Tariff wars have real implications on small businesses. Remove harmful policy now and help stabilize the industry,” urges Lee, who emphasizes that duty free shops are often misunderstood by policymakers as “an export market.”
“One of the biggest challenges this industry has, is the misunderstanding of how duty free shops were created, designed and regulated as an export market. This has led to the misapplication of government policies upon our industry which have eroded the business model and removed sales and benefits from Canada,” she explains.
Border retailers are drawing on lessons from previous challenges, focusing on collaboration and advocacy. “Collaborate, advocate and share with other duty free shops and with our partners in our border communities. We are stronger as a team,” says Lee, reflecting the industry’s cooperative approach to weathering the crisis.
Long-term implications
The current situation may reshape North American travel patterns for years to come. “This may a pivotal moment in our collective history. Once travel patterns are drastically changed and negative narratives formed, this may affect our businesses for years to come as consumers look elsewhere for vacations outside of the US,” Lee predicts.
While the immediate outlook remains challenging, duty free operators maintain that land border duty free shops are integral to cross-border travel culture. As Lee states: “Land border duty free shops are part of many road trip traditions for Americans and Canadians.” The industry is determined to navigate through this difficult period of bilateral relations.
