 Does your business have a high proportion of US customers? Has your industry already been directly affected by US tariffs? Or are tariffs looming? If you rely on US customers, and they have other options, they will likely consider shifting to suppliers in the US or other countries, especially if those tariffs are made “permanent”. There is however a great deal of uncertainty about what US tariffs will go ahead, and if they do, for how long and at what levels. It’s unknown whether a trade deal will be worked out between Canada and the US. If so, this could bring back an almost entirely free trade arrangement. Or it could result in lower tariff rates on Canadian products than previously announced. US companies or households who purchase Canadian products with high switching costs may take pause before deciding to go to a US provider. Switching early may not be worth it in the end, and may be detrimental to those customers, if tariffs end up being lower or eliminated. That said, deciding whether to “wait and see” may not be clear-cut for many buyers. If they do switch early, only to find that tariffs don’t last or are lower than expected, they may not be willing to switch back. It may not be worth it for them by then. Therefore, you may want to consider helping them put off the switching decision by covering all or part of the new tariff through a temporary discounted price, until there is some clarity on tariff outcomes. This could allow you to keep those customers while working on alternate plans to reduce or eliminate the impact of potential tariffs. Whether a longer-term tariff on your product is ambiguous or not, you may have an advantage if your product has unique highly valued attributes relative to options in the US. This could be a sufficient reason for your US customers to continue doing business with you. However, you will likely have to work hard to make that case. One shouldn’t assume a customer will make that choice on their own. If not reminded, customers can easily forget the unique value of a product they now take for granted. If losing US customers is unavoidable, the other obvious solution is to find other markets for your product(s). Even the option of offering new products in the US, that are not currently facing tariffs, may be risky. The scope of US tariffs could potentially change at any time. Those alternate markets may include looking abroad. But the quicker win may be looking to Canadian markets. As Canada places its own retaliatory tariffs on US products, certain Canadian companies and consumers will face much higher prices for American products. In that context, your product may be a more price-competitive and appealing alternative. Even under the simple threat of tariffs, Canadians are choosing more and more to buy Canadian. The opportunity for your currently US-focused business is to connect with those Canadian buyers. If your industry is facing a continued threat of tariffs, say after a tariff implementation has been delayed, or through trade talks, it may also be in your interest to pursue new geographic markets to protect against potential tariffs. Even if tariffs are ultimately not imposed on your industry, you may still want to explore new markets. There seems to be a growing trend of protectionist sentiment in the US. Therefore, the risk of US tariffs on Canadian products by future US administrations may not go away, even if US tariffs are not ultimately imposed by this administration. Businesses in industries that have not been ear-marked for upcoming tariffs may also want to consider new markets. This could also help reduce the risk of future tariffs and increase their confidence in the growth potential for their business. Yet another option for Canadian companies reliant on US customers is to move their operations to the US. However, most small to mid-size companies in the prairies are privately-owned. These owners are often highly committed to their communities. Therefore, moving to the US may not be an option from a values perspective. If no other options are available, a wholescale business model shift may be required. If your product is facing US tariffs, and parts or materials you source from the US face retaliatory tariffs by Canada, the problem is even larger. US customers will be hard to keep AND you’ll face squeezing margins. More next week on managing supply cost increases due to Canadian retaliatory tariffs. For other ways to navigate these challenging times with confidence, get the free complete Trade-War Success Guide for Small to Mid-Size Companies below. Comments are closed.
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