By MaRS Staff | February 03, 2025
With the U.S. tariff threat on Canadian goods now on pause, business leaders have a bit more time to prepare for what economists at RBC warn could be “the largest trade shock in nearly 100 years.” Under these new measures, Canadian imports could face a 25 percent levy, with the exception of energy products, which would be subject to a 10 percent tariff. If they go ahead, the prognosis isn’t pretty: Canada exports some $1.9-billion worth of daily goods and services to the United States, representing more than 20 percent of this country’s gross domestic product. The economic fallout from a trade war could be considerable, affecting growth, employment rates, investment and inflation. While certain sectors, such as automotive, construction, manufacturing, critical minerals and agriculture, could be particularly hard hit, companies that sell into those supply chains would also be affected and the ripple effects would be felt throughout the economy.
Tech founders, however, tend to be optimistic by nature, and there are calls to view this unfolding crisis as a rare opportunity — as a chance to forge creative solutions that could help businesses find new trading partners, fix long-standing hurdles and help with procurement. In other words, it’s time to plan rather than panic. Although it’s impossible to predict how the future will unfold, a proactive and strategic approach is the best way to remain levelheaded (and safeguard your business interests), especially at a time of so much geopolitical and economic uncertainty.
Here’s how the proposed tariffs could affect your business, how it could impact the investment landscape and how to plan for what could come next.
Tariffs could make your products more expensive in the U.S., making you less competitive. And if Canada retaliates by imposing counter-tariffs, imported goods may be affected. That will increase the cost of production — which has repercussions for profit margins and pricing. To ensure you’re prepared to weather these shifts, it’s crucial to get the lay of the land. For companies eager to determine just how long they can stretch their finances, BDC offers a cash flow calculator that can help leaders create a forecast and plan accordingly.
As evidenced by the sudden swerve in the rollout of these potential tariffs, we are currently in an era of volatility. Given that context, it can be helpful to think in terms of micro-timelines, says Shannon Lee Simmons, a Toronto-based financial planner and chartered investment manager. Don’t try to envision what things will look like over the next year — or even the next six months. “Figure out what you can control in the next three or four weeks,” says Simmons. “Anything beyond that is unpredictable.”
Map out the key challenges that might arise within that timeframe and determine how you might best tackle them in a way that will have the fewest negative consequences for both your customers and your company. Simmons advocates for running through your worst-case scenario. It’s not about taking action, she says. “It’s about gathering information and reassuring yourself that at any moment, you could implement this action plan if you need to.”
For companies who sell a lot of products in the U.S., it’s important to suss out which parts of your customer base might be most affected. Simmons, whose family owns a manufacturing business, says companies would be well advised to connect with existing clients to talk through potential hurdles and collaborate on creative strategies and workarounds. “If the exchange rate is low, maybe there’s a way to offset the price increase,” she says. “Or maybe terms could be changed to have clients pay 25 percent up front, so you can handle the tariff before it goes through the borders.” The key is identifying the problem and determining which variables are within your control.
If your company exports to the United States, you can find out if the tariffs would apply to your products through such tools as the Canada Tariff Finder and the Canadian-U.S. Trade Tracker. As well, check the Harmonized System (HS) classification for your products. The six-digit HS code can be used to determine customs tariffs and duties.
The importer of record typically pays the tariff. But, depending on your contract, you might need to cover these added costs — read the fine print of your agreement. As Export Development Canada notes, it may be difficult for your U.S. partner to charge for these tariffs without renegotiating the contract. If tariffs are imposed and your products are stopped at the border because a client has refused to pay them, EDC encourages business leaders to contact them directly.
Although Canadians currently have a brief reprieve from the immediate implementation of U.S. tariffs, that’s no excuse to brush off strategic planning. Instead, savvy business leaders should seize this opportunity to be proactive. Looking to past economic upheavals is often helpful, says Simmons, who points to COVID-era supply-chain disasters and the global financial crisis of 2008 as two moments in relatively recent memory that can provide guidance in navigating the current moment. Finding a balance between immediate action and big-picture perspective is key. To avert panic in the lead-up to a possible early-March tariff deadline, for instance, it might be prudent to pause on any big projects that require significant financial outlay. The idea isn’t to cancel things entirely, says Simmons, but “it may be one place where it could be prudent to pull back spending in the interest of conserving cash flow in the short term.”
Investors hate uncertainty. The lack of concrete details — including when and even if the tariffs will be rolled out — have made it challenging for funders to accurately assess opportunities. And it’s already affected how investors see Canada, says Danielle Goldfarb, an economics and trade researcher at the Munk School of Global Affairs and Public Policy. “A big part of the draw for companies that locate here is our lower labour costs and educated workforce as well as uninterrupted access to the American markets. And that is also true of Canada’s own economy and the standard of living we have been able to build here,” she recently told Toronto Life. “The opportunity and growth we have been able to foster are based in part on our proximity and unrestricted access to the world’s largest economy.”
The push to support Canadian companies is extending well beyond boycotts of bourbon, and industry players are calling for solutions that could improve inter-provincial trade and support homegrown companies. For instance, procurement could play an outsized role in helping startups scale here before expanding abroad, says MaRS CEO Grace Lee Reynolds. “While trade policies shift, Canada must focus on what it can control — modernizing procurement, removing barriers and leveraging public sector purchasing power,” she says. “We have world-class innovators, but without a strong domestic market, we risk losing them to countries with better commercialization pathways. Government and corporate procurement are powerful drivers for innovation, yet outdated policies continue to hold Canadian companies back from competing on equal footing.”
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