What the U.S. – Canada Trade War Means for Small Businesses

This past Canada Day, our country did something some might argue was decidedly unCanadian. We got tough with our neighbours.

On July 1, 2018, the Canadian government instituted retaliatory tariffs on certain goods originating from the United States, a measure that responds to the U.S.’s imposition of tariffs on Canadian steel and aluminum. In May, the U.S. announced an end to exemptions for Canada and other trading partners, and implemented a 25 per cent tariff on Canadian steel and a 10 per cent on Canadian aluminum sold to the U.S.

And so began the dropping of the gauntlets.

Canada came back with countermeasures that roughly matched the value of Canadian goods affected by the U.S. tariffs on steel and aluminum – affecting some $16.6 billion worth of U.S. imports. But it’s not just steel and aluminum. Canada’s tariffs cover a wider range of goods, extending to a diverse range of items including “prepared meals of bovine”, herbicides, cucumbers and gherkins, coffee, lawn mowers and washing machines. The list includes about 120 items .

According to Foreign Affairs Minister Chrystia Freeland, the products were chosen because they could easily be sourced from a Canadian company or one that wasn’t a U.S. trade partner. Good on Canada for standing up to a bully, but …

What does this mean for your business?

The importer is the one who pays the tariffs. If you’re bringing in steel from the U.S., you will get a detailed adjustment certificate and will have to pay 25 per cent more for that item.

What can you do to ease the sting of tariffs?

Review your contracts with suppliers . Since it’s the importer who pays the tariff, see if you can make someone else the importer of record. For example, if you negotiate it into the contract, the U.S. supplier could be a non-resident importer (although it’s likely they would still pass the cost of the tax over to you anyway. But you might save some money on administrative costs since they are officially the importer.)

Be up front with your customers. If you sell products made from steel or aluminum, your prices will go up – but it could take a few months before the impact is truly felt. Communicate with your customers about the situation and, if you can, ease the price increases in gradually. While there’s not much you can do about raising your prices, you might be able to help your customers cope. And they’ll appreciate it. (And remember it).

Find alternative ways of financing. Even in the face of higher prices, people will still need the products they need. Collision repair shops will still need parts. Farmers still need machinery. You can help customers continue to buy what they need by partnering with lease companies, banks or other financial service providers. If you can afford to offer extended payment terms on your own, do so, or find out about specific lines of credit that might be available to you and your customers.

Provide other services. If prices become too high for your customers, they may put off buying new products. For example, if they’re going to rely on their existing machinery, you won’t be selling new items. But it could be an opportunity to expand into other areas of service, like maintenance and repairs. It may help you both get by until the trade war is over. And maybe open up a new line of business for you!

Expand your world. This could be the crisis that finally drives you to diversify your business or explore new markets. Or both. The tariffs aren’t affecting every country in the world, so why not explore new markets that aren’t being “attacked”? Maybe there’s a new industry you could investigate and enter into. And maybe it’s time to stop relying so much on that one, big client and start marketing to smaller but more new customers.

So, hunker down. Most believe this won’t be a short-term trade war, so look to the future. With cautious planning and a little innovation, you will emerge intact.





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