The US tariffs hit Canada at the start of 2025 and reversed the Bank of Canada’s forecast of robust economic growth. Since then, there have been multiple changes in the global tariff scenario. The ongoing shift in global trade policies is disrupting supply chains, pricing strategies, and international competitiveness as businesses navigate, adjust, and adapt to the changing tariffs.
Everyone, from big businesses to exporters and importers to small business owners to an average Canadian household, is feeling the impact of tariffs as businesses are absorbing some cost and passing on some to consumers. The tariff war is even threatening the free trade of goods that are compliant with the US-Mexico-Canada Agreement (USMCA).
How Can Canadian Retailers Navigate Tariff Surprises?
Many Canadian retailers that import goods faced higher operating costs, which hurt their profit margins and reduced cash flows. They also observed a decline in sales and a shift in consumer spending habits from discretionary to essential. Given that the tariff situation will persist for a longer time, it is time to stop stalling business due to tariff uncertainties and navigate, adapt, and evolve to thrive in this uncertainty. You can begin with the following steps.
Quantify the Impact of Tariffs on Your Business
You have already experienced the first wave of the tariffs and their impact in the last few months. The company’s quarterly financial statements can help you arrive at a concrete figure to understand the actual impact of the tariffs on your business. An informed decision can be taken regarding any products you think are more likely to be affected by the tariff increase. If your company is susceptible to the tariffs, you can employ cost-saving measures right away.
While the Canadian government is working hard to frame retaliatory measures to counter the threat posed by the US tariffs, it must be remembered that USMCA terms are slated for negotiations in 2026. So, the scenario and numbers may change yet again. More jobs might face the axe, the GDP could drop further, and the inflation could spike, adversely impacting consumer buying of essential goods instead of discretionary spending.
One way to cushion the blow is to run financial scenarios using numbers from the past few months to gauge the short- and long-term impact of the tariffs on business profitability. Based on this, you can forecast and design three-month, six-month, and year-long game plans.
Why short-term? Given the constant changes in trade policies, tying up your money in long-term plans could be risky. Focusing on the present and near future would be a better idea. Even these plans will have to be reviewed and revised regularly, keeping up with the fast-changing tariff terms.
Develop a Targeted Response Strategy to Mitigate Tariff Impact
Prioritize targeted operating outcomes to develop a response strategy model and scenario evaluation:
- Diversify supply chains: Sourcing resources, including labour, parts, and services, from other countries with lower tariffs could improve resilience to sudden tariff changes and avoid disruption of supply chains. Check for products or parts that have been excluded from the tariff purview to lower operating costs. Try out local or interprovincial suppliers for resources and finished goods.
- Renegotiate supply contracts: The tariff wars have hit all businesses to some extent at least, and everyone’s looking for a better, safer deal. Revisit all your supply and sale contracts, and look for any clauses regarding potential price exemptions or discounts. Try renegotiating with vendors and suppliers for more mutually beneficial deals.
- Push for Canadian-made goods: Using the advantage of having direct access to your customers, sensitize and appeal to them to “buy Canadian” rather than imported products. The more local or national you are, the less the impact of the tariffs on your trade will be. You might want to rethink your pricing and positioning strategies to give national and local product sales a push.
Keep an Eye on Government Measures
- Canadian tariff relief measures
In light of tariff wars, the Canadian government has introduced measures to help Canadian businesses affected by the constantly changing tariffs. Check out the terms for the same, see if your business qualifies, and apply for the relief. A professional accountant is updated with these measures and can help you secure the necessary reliefs, bringing in the financial aid needed to absorb the tariff shocks.
- Other regulatory changes
Apart from tariffs, businesses should monitor other regulatory changes, such as changes in taxes, interest rates, or foreign trade policies. You can subscribe to insightful trade intelligence and regulatory newsletters to stay updated. A professional accountant is well-updated and can help your business prepare for any regulatory changes.
Example of a Retail Business Navigating Tariff Costs
U.S. tariffs on clothing imports led to a sudden spike in costs, affecting the competitive pricing of a Canadian retail clothing business. The retailer’s accounting team countered the threat by sourcing their materials from non-tariffed countries and shifted to a dynamic pricing strategy that adjusted as per the fluctuating tariffs without majorly affecting profit margins. This helped them retain customer loyalty while also passing on a part of the tariff impact to them.
Optimizing Strategies to Build Business Resilience
Major crises and challenges test the stability of a business. Only those businesses that adapt to the changing reality and innovate evolve to be much stronger and more resilient. The pandemic accelerated digital adoption and opened a whole new chapter of efficiency and flexibility. The shift in global trade policies could accelerate the adoption of real-time tracking, reporting, and forecasting.
The crisis highlights business vulnerabilities and can pave the way for addressing them in long-term planning and risk management. You can build a diversified market, a robust supply chain, and a proactive approach to handling anticipated changes even after the trade war eases. You can incorporate regulatory monitoring and scenario planning as a standard practice. Technology can help track real-time numbers and provide insights into trends and impacts.
Contact Black and Gill LLP in Etobicoke, Toronto to Help You Navigate Tariff Challenges
A skilled business consultant and accountant can help you crunch the numbers, identify financial trends and tariff impacts, and suggest areas of improvement. At Black and Gill LLP, our accountants and business consultants can also automate routine accounting tasks and real-time monitoring, assisting in informed decision-making and swiftly adapting to changing policies.To learn more about how Black and Gill LLP can provide you with the best accounting and business consulting expertise, contact us online or call us at 416-477-7681 to learn more about how we can help you and your business.