What Are U.S. Tariffs for?
On paper, tariffs’ function sounds straightforward: to protect domestic industries and encourage local production. But in practice, the U.S. tariffs are also a political tool, often used as bargaining chips during negotiations or to push agendas. The new U.S. administration has recently threatened to impose tariffs on Canadian goods. They persistently suggest that Canada could sidestep the presumably coming tariffs by becoming the 51st State (it’s no joke). Whatever the intent, these tariffs would create significant ripples across industries and the Canadian economy. Understanding what’s at risk here is crucial, especially for decision-makers in the Canadian business arena.
U.S. Tariffs Already in Place
In recent years, the U.S. has imposed tariffs on key Canadian exports. Softwood lumber has faced extra duties for years due to ongoing disputes over subsidies. Aluminum and steel? They’ve been targets too, in an effort to block Chinese subsidized goods entering the U.S. through Canada and competing with U.S. domestic products.
Agricultural products, like dairy, have also seen restrictions under trade agreements that heavily favour U.S. farmers. These tariffs were placed as a way to pressure the Canadian government to open the Canadian market for American products. As part of that, the American administration would like to eliminate Canada’s supply management, which controls the supply of dairy, poultry, and eggs through production and import controls and pricing mechanisms.
These existing measures have already forced many businesses to adapt—and now, the stakes could escalate further. If you are not sure whether your industry is subject to tariffs or not, check out the Canada Tariff Finder.
Main Industries in the Crossfire
So, which industries are likely to bear the brunt of these proposed tariffs? Manufacturing, particularly automotive parts and machinery, sits at the front line—goods heavily integrated into North American supply chains. The construction industry is also highly dependent on a steady cross-border supply of materials. Critical minerals like cobalt, lithium, nickel, and uranium are essential for clean energy production. The tariffs will make Canadian exports less competitive, potentially leading to supply shortages. Agriculture could take another hit, especially dairy and meat products. Even technology and services might not escape unscathed if cross-border operations face new hurdles.
If your business operates in one of these sectors, the time to prepare is NOW.
Five Practical Strategies to Soften the Blow
The question isn’t just how U.S. tariffs will impact your business but what you can do about it. Here are five actionable steps to safeguard your operations and relationships:
1. Strengthen Bonds with Your U.S. Partners
Your U.S. clients or partners didn’t choose to work with you on a whim. They did so because it made sense – financially and operationally. While tariffs might force them to re-evaluate, they’ll be just as impacted by the fallout as you are. This is your chance to work together on creative solutions.
For example, consider negotiating extended contracts or larger commitments while adjusting margins. These arrangements can help both sides weather price increases and maintain the relationship. The key is collaboration – showing your partners you’re invested in finding solutions that work for everyone.
2. Protect Your Intellectual Property
Trade conflicts can spark imitation. If tariffs make your goods too costly, your U.S. partners might consider replicating your offerings. Don’t let that happen. Ensure your patents, trademarks, and other intellectual properties are fully protected south of the border. It’s an investment in your future. Losing ground to knock-offs or copycats could be far more damaging than the tariffs themselves.
3. Differentiate What You Offer
Price wars are a losing game. Instead, double down on what sets you apart and make your competitive advantages crystal clear: we call it a positioning message. Why do your U.S. partners rely on you? What makes your product or service irreplaceable? Whether it’s superior quality, faster delivery, specialized expertise, innovative solutions, or better customer service, make sure these strengths are front and center. The clearer your value, the harder it will be for anyone to replace you.
4. Expand Beyond the U.S. Market
Canadian businesses often lean heavily on the U.S. market for obvious reasons. But now might be the time to look beyond that. Consider expanding your business domestically (if regulations do not prevent you) into other Canadian provinces. Beyond that, you have the option to tap into international markets. Exchange rates, trade agreements, and demand vary widely around the globe. Finding the right market could offset losses from potential U.S. tariffs.
The European Union-Canada Comprehensive Economic and Trade Agreement (CETA), for example, offers promising opportunities. Another important agreement is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Need help identifying where to focus? That’s where expert advice comes in handy.
5. Seek Government Support
Tariffs don’t just hurt businesses; they can impact entire industries and local economies. Governments understand this and often step in with subsidies, grants, or aid programs. Do not hesitate to reach out to federal, provincial, or municipal agencies to explore what support might be available. It’s not just about financial help but also accessing resources and expertise that can ease the transition. The Trade Commissioner Service, for instance, usually provides valuable resources and connections for market diversification. Export Development Canada (EDC) is another great resource to receive export program support, working capital loans, and credit insurance.
Final Thoughts: Don’t Wait to Act
While U.S. tariffs may feel like a looming threat, they also create opportunities to strengthen your business fundamentals. Solidify your partnerships, secure your assets, and explore new opportunities. These steps aren’t just about surviving; they’re about setting your business up for long-term resilience.
If you need help making these changes or just want a sounding board for your ideas, our team at Direct Objective Consulting is here to help. Together, we can find solutions that protect your business and position you for success.