President-elect Donald Trump’s announcement of a 25% tariff on all products imported from Canada is cause for concern and introspection as its are expected to be significant.
Economic and Supply Chain Impact on Businesses
The tariff will result in an increase in the cost of Canadian goods in the U.S. market, making them less competitive. Exports WILL reduce as U.S. buyers seek alternative suppliers or negotiate lower prices. It is estimated that a 10% tariff could reduce the Canadian economy by 0.9% to 1%, translating to approximately $30 billion per year which will significantly impact employment and business profitability. Canadian businesses that rely on cross-border supply chains to generate revenue will face significant disruptions. This could lead to higher prices for consumers and reduced production efficiencies.
Broader Economic Consequences
The broader economic consequences of the tariff could include a decrease in foreign investment and a potential slowdown in economic growth. Additionally, the Canadian dollar has already experienced a sharp decline in value, reflecting market concerns. It therefore makes sense for you to focus on your business stability.
Strategies for Mitigation
To prepare for the impact of the proposed tariff, Canadian businesses can adopt several strategies to mitigate risks and maintain operational efficiency:
- Cost Management and Productivity Improvement: Implement cost-cutting measures and consider strategic price adjustments.
- Optimize Inventory Management: Build up inventory of critical components and implement just-in-time practices.
- Communication and Collaboration: Transparently communicate with customers and collaborate with suppliers for better terms.
- Increase pricing to customers though I suspect this will not go down well.
- Evaluate your sales and marketing plan to build alternate revenue streams.
- Ensure compliance with trade agreements and regulations – Do you understand HS codes (Harmonized Standards)?
What is eventually implemented in terms of the trade agreements remains to be seen but it is a good time to proactively assess your business. You can then decide on the best strategy for your business to navigate any tariff changes and remain a sustainable business.
Let’s Take Your Business Further. Ask me how.
Dr Kenneth Moodley LinkedIn
