Navigating the tariff war: How businesses can prepare for uncertainty

Companies operating under the status quo in the hopes that the ongoing tariff dispute between Canada and the U.S. will go away could face a rude awakening if they don’t adjust their business models.

This was the message during a CITT webinar on navigating the current tariff landscape, a topic Ryan Hammett, director of market intelligence and insights for C.H. Robinson, said is not going away.

“Depending on the country and the product, we could likely see multiple rounds of tariffs issued by the U.S. stacking on top of each other,” said Hammett, advising companies not to base plans on public discussion but rather on official announcements.

“But also,” he added, “if I’m a business impacted by these tariffs, I’m realizing I need multiple types of plans. I want to walk away with an understanding of the practical options available to me to navigate trade policy changes in the Canadian market.”

One of those practical options is exploring alternative markets.

“It is in times of disruption when we are often forced to think of things differently.”

Ryan Hammett

Hammett outlined three areas companies should examine when considering other markets. The first is identifying any risks.

“Where do you have exposure to tariffs? What products are you selling or sourcing internationally? Are there other countries with demand or growing markets for your products?” said Hammett. “If you’re sourcing from the U.S. or other countries impacted by trade policy changes, are they the only places with vendors that have the tools, experience and capabilities you need?”

Next is understanding price, or, in other words, how likely it is that your product could change in cost.

“Do you have competitors that can easily steal demand from you if your prices increase?” asked Hammett. “Or can your competition be impacted by tariffs in the exact same way you are?”

Finally, another risk when looking at other markets is resource availability. Companies should ensure they have an experienced team in place to manage potential changes in price, logistics and the creation of a new network.

“If you plan to diversify where you sell your products internationally, do you have relationships or connections in those new countries?” said Hammett.

For companies that have spent a lot of time and money establishing networks and infrastructure, Hammett said that if they are flexible enough, they should examine their overall operational processes.

“My experience over many years is that shippers would rather put pressure on external parties to deliver cost savings than sometimes do the difficult internal work between departments to make operational or technology changes to unlock savings,” he said. “But in a time when there is high risk that external factors will not produce opportunities for cost savings, what risk are you incurring to your bottom line by not looking internally for every nickel and dime you’ve overlooked in the past?”

Canada-U.S. relations

Sixty-six per cent of Canada’s economy is trade-related, according to C.H. Robinson, and 78 per cent of exports go to the U.S.

“We’re keenly aware of the economic importance of cross-border trade to our broader economy,” said Brad Hogeterp, product development manager in Canada for C.H. Robinson, who affirmed that the current situation with the U.S. “sure looks and feels like a trade war at the moment.”

That “trade war” includes 25 per cent tariffs on all goods from Canada, as well as Mexico, after the U.S. declared a national emergency on Feb. 1 under the International Emergency Economic Powers Act. Canada must pay the duty on non-United States-Mexico-Canada Agreement (USMCA)-eligible goods, and a 10 per cent tariff on non-USMCA energy and potash.

The U.S. has also implemented a 25 per cent tariff on all steel and aluminum, including derivatives, globally, and a 20 per cent tariff on Chinese imports.

In response, Canada has placed its own 25 per cent tariff on $155 billion worth of imported U.S. products, with the first phase kicking in on March 4 and the second on April 2. An early rollout of steel and aluminum tariffs became effective March 13.

“Targeted items in phase one include an extensive range of goods, from orange juice and peanut butter to wine, appliances and cosmetics,” said Hogeterp. “Phase two’s early rollout primarily targets steel and aluminum, as well as tools, computers and servers, display monitors, water heaters, sports equipment and cast-iron products.”

Hogeterp said the intent of the reciprocal tariffs is to put pressure on U.S. industries and certain states, creating disruption and uncertainty much like the U.S. is attempting to do in Canada.

He added that Canadian industries such as automotive, agriculture and steel are already experiencing disrupted trade flows, and the tariff dispute has become a central issue in Canadian politics.

Brittney Lubinsky, business development manager with C.H. Robinson, said companies must review the parameters around the rules of origin to ensure that a particular product qualifies under USMCA to be exempt from tariffs.

“We really want to stress that if your company does not have dedicated trade compliance resources or people familiar with the regulations, we would suggest hiring a trained professional—a customs broker, trade attorney, or someone in the industry to help with this,” said Lubinsky. “Typically, compliance gets rolled into logistics or the finance department. But classification and origin determination are not as straightforward as one may think. With all the additional scrutiny around these claims, you will absolutely want to make sure that your claims are accurate.”

Hammett stressed the importance of being prepared, as change is inevitable.

“The trade policy landscape lately has been changing daily, which makes it really challenging to know how to proceed if you haven’t anticipated it,” he said. “Where will you be proactive versus reactive? Which risks that we talked about earlier require you to make a long-term change, versus the ones you can probably wait out? The more you can align criticality and priority, the faster you can move.”