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ORD to Pearson to Reykjavik with Airline switch: How much time for Customs?

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Flying Chicago to Toronto to Reykjavik at the end of April. We are flying Air Canada from ORD (arr Toronto at 7 pm) and catching an IcelandAir flight to Reykjavik at 9:20 pm.. We will need to get through Customs in Canada, correct? I am assuming we will have to retrieve our luggage and check it again for the flight to Iceland. (Does your luggage go through Customs with you or since it's screened in the US is it good to go internationally?) Is 2 hrs 20 minutes enough time? If it is close, I will try to coerce my family to carry on only. Thanks for any information.

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