We talk about trade between Canada and the United States in terms of large scale transactions. For many Canadians and Americans along the border, trade involves driving across a border to go shopping.
Canadians are more likely to cross the border to shop since goods are cheaper in the United States and the currencies are about even. Starting June 1, Canadians will a bit more leeway in what they can bring back into the country without duties or taxes.
Right now, Canadians who are gone more than 24 hours but less than 48 hours can bring in $50 worth of goods without penalty. Not a whole lot by any standard; that amount goes up to $200. If you're gone 48 hours, the total goes from $400 to $800.
If you are going just for the day, under the current and new budgets, you have to pay duties or taxes on everything you buy.
Hotels on the U.S. side benefit greatly from the hardcore Canadian shopper, and may get more business as a result. Finance Minister Jim Flaherty noted that the increases reflected what the United States allows Canadians and other visitors to bring into the country.
If you are on the American side, and think your prices are too high, imagine the Canadian who lives along the border getting in the car, driving, dealing with customs there and back, sleeping in a sort-of OK hotel, and spending another day driving back. Why do they do so?
Retail prices are higher in Canada because retailers have to pay duties on imported merchandise. Gas is significantly cheaper, food, too, though certain items (fruits, vegetables, uncooked meat) can't be brought back. Clothing, sports equipment, other retail items. Even after all that craziness, Canadians still save money.
Americans used to shop more in Canada when the currency exchange rate was much better. Still, the kinds of items Americans bought aren't the same as Canadians buy in the States because Americans aren't going to drive across a border to pay higher gas prices to get things that they could get cheaper at home, even with a good exchange rate.
Canadian retailers are concerned about the new rules, though unofficially (and Flaherty even acknowledged this) Canadians have been sneaking more into the country. With the higher totals, Canadians will be under less pressure to be honest in their reportings to customs.