How Canadian small businesses can prepare for raised tariffs
Tariffs are taxes imposed on imported goods, often designed to protect domestic industries or generate revenue. For small businesses, however, they can lead to higher costs, supply chain disruptions, and strained profit margins, especially if their operations rely on international trade. In 2025, Canadian small businesses may face the prospect of a 25% tariff on U.S. imports, following a proposal from President Donald Trump.
If the U.S. moves forward with these tariffs, Canada is likely to retaliate with counter-tariffs on U.S. exports, which could raise costs for Canadian businesses. This may result in increased prices for goods, which will likely be passed down to consumers. Businesses across industries that import or export goods with the U.S. could be affected, such as retail, manufacturing, and agriculture. To navigate these potential economic shifts, small business owners need to take proactive steps. Here are a few ways Canadian small businesses can prepare for the impact of raised tariffs.
Assess cost implications
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.
Enhance 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.
Diversify 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.
Collaborate 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 you need. Whether you want 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.