UPDATED March 5, 2025 – As of midnight Tuesday, the U.S. has imposed a 25% tariff on all Canadian and Mexican imports, along with a 10% duty on energy products, triggering a trade war across North America.
In response, Canada has introduced counter-tariffs on American goods, further increasing costs for businesses. This shift is expected to make many products more expensive, forcing businesses to either absorb the added costs or pass them on to consumers. Sectors heavily involved in U.S. trade, such as retail, manufacturing, and agriculture, are likely to be hit the hardest.
With these tariffs now in place, small business owners must act fast to minimize the negative impacts. Here are five ways small businesses in Canada can navigate these new tariffs.
Assess the financial impact
Understanding the financial impact of tariffs on your business is crucial. Start by identifying which products or materials are subject to tariffs and how these costs will affect your pricing, profit margins, and customer demand.
By evaluating cost implications early, you can adjust your pricing strategies or explore cost-saving measures to maintain profitability. Consulting with trade experts, industry associations, and legal advisors can help you stay informed about tariff regulations and ensure compliance.
Review your supply chain
Diversifying your supply chain is an effective way to minimize tariff exposure. If your business relies heavily on U.S. suppliers, consider exploring alternatives in other countries or sourcing locally to reduce dependence on American imports.
This approach not only shields your business from tariff-related cost increases but also minimizes risks associated with currency exchange fluctuations. Additionally, consider stockpiling essential inventory before tariffs take effect, but ensure your insurance coverage is sufficient to protect higher inventory levels.
Explore export markets
Reducing dependency on U.S. markets by exploring new international opportunities can help stabilize your business. Canada’s Trade Commissioner Service offers valuable resources to assist small businesses in entering markets in Europe, Asia, Mexico, and South America. Expanding into diverse markets reduces your exposure to U.S. tariffs and opens new revenue streams, making your business more resilient to economic fluctuations.
Partner with U.S. buyers
Maintaining open communication with American customers and suppliers is essential. By working together, you may find opportunities to share the cost burden of tariffs or renegotiate pricing agreements.
Highlighting your product’s value, quality, and unique features can help justify price adjustments and strengthen customer loyalty. Transparent communication fosters trust and keeps your business relationships strong, even amidst economic challenges.
Streamline operations
Improving operational efficiency can help offset the financial impact of tariffs. By reviewing your current processes, you can identify areas to reduce costs and improve productivity. Streamlining operations might involve automating administrative tasks, renegotiating supplier contracts, or optimizing inventory management to minimize waste.
Investing in technology to enhance workflow efficiency can also help your business maintain profitability despite increased costs. By operating more efficiently, your business can better absorb the effects of tariffs while staying competitive.
How Journey Capital can help
Navigating the challenges of raised tariffs requires strategic planning and financial flexibility. At Journey Capital, we understand the unique obstacles Canadian small businesses face because we are proudly Canadian owned and operated. We’ve always been dedicated to supporting small businesses, and that commitment remains strong as economic uncertainties loom.
Our flexible financing solutions, including Business Lines of Credit and Business Term Loans, can provide the working capital needed to manage increased costs or explore new supply chains. Whether you need to adjust your supply chain, innovate your product offerings, or explore new markets, Journey Capital is here to help you adapt and reach your goals.