How Canadian SMBs Can Prepare for U.S. Tariffs

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As Canadian SMB leaders, we’re no strangers to tackling uncertainty. Whether it’s fluctuating costs, constant supply chain disruptions, or shifting regulatory requirements. Small and medium-sized businesses often bear the brunt of external pressures. Now, with the looming possibility of a 25% U.S. tariff on Canadian imports, the stakes just got a whole lot higher. 

While tariffs may feel like yet another unexpected and potentially catastrophic risk, with the right strategy and planning, they don’t have to derail your business. You can soften the blow, maintain your competitive edge, and even uncover opportunities in the constant chaos. 

In this article, I’m going to dive into how U.S. tariffs might affect Canadian SMBs, the risks they pose for businesses buying from the U.S., and practical steps you can take to prepare. I’ll also share a real-world client case study to show you how we are helping one of our clients proactively prepare.  

The Context: What’s Happening with U.S. Tariffs? 

The proposed U.S. tariffs are being positioned as part of an effort to address perceived trade imbalances and protect US domestic manufacturing. We won’t explore the politics or debate the accuracy of such perceptions; we will focus on the implications for SMBs through the lens of procurement and supply chain. While this may be positioned as good news for some American industries, for Canadian SMBs, it’s a different story. These tariffs mean higher costs for goods exported to the U.S. and, for many of us, increased expenses for products, even services sourced from U.S. suppliers in part through retaliatory tariffs imposed by Canada. 

Industries like manufacturing, agriculture, and food & beverage are especially vulnerable. For businesses reliant on cross-border trade, these tariffs could lead to: 

  • Price hikes that make products less competitive.
  • Disruptions in supply chains due to shipping delays or added administrative hurdles.
  • Eroded profit margins that are already thin for many SMBs. 

What’s at Risk for Canadian SMBs? 

If you’re buying materials or products from the U.S., tariffs will have a trickle-down effect, and not in a good way. Here’s a closer look at how this could play out: 

  1. Increased Costs for Imports

A 25% tariff doesn’t just impact the price of goods—it affects freight, duties, and even the cost of doing business. If you’re importing raw materials, packaging, or finished products, these cost increases will hit your bottom line hard. 

  1. Supply Chain Uncertainty

Disruptions at the border mean unpredictable delivery times. If your business relies on just-in-time inventory, even a small delay can throw off production schedules and customer deliveries. 

  1. Currency Volatility 

Currency fluctuations can exacerbate the issue. A weakening Canadian dollar, combined with tariffs, compounds the financial strain on SMBs importing goods from the U.S.  Even if you don’t import any physical products from the US, the currency fluctuation will dramatically impact your costs even on such things as subscription software and services. Often paying in US currency, SMB businesses could be hit with unexpected currency fluctuations on things like software applications they use to run their business just from currency conversions from USD$ to CAD$.  

  1. Limited Bargaining Power

Many SMBs just don’t have the size and leverage to negotiate better terms with suppliers or pass costs on to customers. This leaves you 

absorbing the brunt of the tariff impact. 

How to Mitigate Risks When Sourcing from the U.S. 

The good news? You don’t have to sit back and take the hit. There are plenty of ways to protect your business and get ahead of the curve. Let’s break it down into actionable insights: 

  1. Diversify Your Supplier Base

If you’re overly reliant on U.S. suppliers, it’s time to spread the risk. Diversifying your supply chain can help you avoid being caught off guard by policy changes. 

Action Plan: 

  • Identify Canadian suppliers, distributors or manufacturers who can meet your needs. Leverage their scale, in the case of distributors or in the case of manufacturers, their local sourcing, labour and manufacturing, mitigating tariffs. 
  • Explore alternative regions outside of the US like Europe, Asia or South America for materials that match your quality standards. While the US is our closest and largest trading partner, it’s time to look for new partners and suppliers outside of the US who do not impose such damaging tariffs. 
  • Build redundancy in your supply chain by working with multiple suppliers for critical items. While avoiding fragmenting your suppliers, follow the 80/20 rule, and consolidate spend where possible to improve prices while sufficiently diversifying to avoid supply disruptions.  
  1. Negotiate Better Contracts

Don’t wait for tariffs to kick in before having tough conversations with your suppliers. Whether it’s cost-sharing or renegotiating terms, there’s power in being proactive. 

Action Plan: 

  • Add tariff adjustment clauses to contracts, so you’re not left holding the bag for price hikes. Negotiate sharing clauses to share the impact. Negotiate price increase caps that are reasonable and can be built into your own pricing model. Request longer term notifications on increases such as 90 to 120 day notifications so you can take advantage of bulk buys or stock pile inventory. 
  • Seek to negotiate longer-term contracts to lock in pricing now before tariffs are fully implemented.
  • Discuss alternative shipping or sourcing options with your suppliers. Consignment inventory on your premises with locked in prices, paying for and releasing inventory into production only when needed can smooth out price spikes.  
  1. Stockpile Critical Inventory

If tariffs are imminent, buying in bulk before prices rise can help stabilize costs in the short term. 

Action Plan: 

  • Identify high-risk items that are likely to be affected by tariffs. If long shelf life and low risk of obsolescence, buying in bulk can improve prices and avoid pricing increases. 
  • Invest in warehousing or collaborate with logistics providers to manage larger inventories. Leverage distributors and their warehouse and logistics partners to collaborate and build resiliency. 
  • Forecast demand to avoid overstocking items that could tie up cash flow. Using historical baseline spend, build forecasts with appropriate tolerance levels to forecast needs and monitor closely. 
  1. Optimize Freight and Logistics 

With tariffs increasing costs, reducing inefficiencies in shipping and logistics is a no-brainer. 

Action Plan: 

  • Consolidate shipments to save on freight costs. Minimize the frequency of shipments cross boarder where possible. 
  • Partner with a customs brokers to minimize delays and streamline border crossings.
  • Leverage technology to track shipments and identify inefficiencies. Many logistics companies have these tools available for free.  Take advantage of these tools to monitor delivery times and delays. 
  1. Explore Local Options

Canadian suppliers may cost more upfront, but they eliminate tariffs, reduce lead times, and mitigate currency risks. 

Action Plan: 

  • Evaluate local options for raw materials, manufacturing and distribution. As an SMB leveraging local supply just makes sense. 
  • Work with domestic suppliers to build strategic, long-term partnerships. Consolidate and create preferred supplier relationships that are focused on strategic and long-term partnerships.
  • Highlight “Made in Canada” branding as a selling point for customers, domestic and internationally. One Canada approach goes a long way in building brand loyalty in Canada and sets us apart from our American neighbours internationally.  

Case Study: How a Craft Brewery Is Preparing for Supply Chain Success  

Background 

We have had the pleasure of working with a new client, who I will call “Cool Brews,”  (not their real name), a craft beverage company based in Ontario, who has built its reputation on small-batch production, innovative flavours formulated with premium, quality ingredients. As they expanded into new product categories, their reliance on more and diverse suppliers grew, with a significant portion of materials sourced from U.S. based suppliers. 

Proactively wanting to stabilize costs, optimize and build strategic supplier relationships, Cool Brews partnered with ProcurePro Consulting to launch a Request for Proposal (RFP) aimed at securing long-term supplier relationships and joint innovation. The RFP is focused on reducing supply chain vulnerabilities, stabilizing costs, and ensuring access to high-quality ingredients for production.  More recently, a new risk was identified posed by potential U.S. tariffs.  The timing could not have been better.   

Approach 

  1. Strategic Supplier Partnership Program:

Cool Brews is focused on creating collaborative relationships with key suppliers, ensuring alignment on innovation, cost management, and reliability. 

  1. Supplier Diversity and Consolidation:

ProcurePro is working to identify and evaluate Canadian and international suppliers who can meet the company’s stringent quality standards. The goal is to establish a mix of primary, secondary, and tertiary suppliers to consolidate volumes and reduce reliance on any single source. 

  1. Joint Innovation:

The RFP emphasizes innovation, inviting suppliers to co-develop solutions that meet Cool Brews’ unique product needs while addressing potential supply chain risks. 

  1. Focus on Long-Term Relationships:

The RFP includes opportunities for suppliers to engage in multi-year contracts, fostering stability and predictability for both parties. 

Objectives of the RFP Process 

Reduce Dependency on U.S. Suppliers: 

By identifying Canadian and international options, Cool Brews aims to decrease exposure to cross-border tariffs. 

Secure Pricing Stability: 

Locking in long-term pricing agreements to mitigate fluctuations caused by tariffs or other external factors. 

Enhance Supply Chain Resilience: 

Building redundancy in their supplier base to ensure continued access to critical ingredients, even during disruptions. 

Outlook 

The RFP process is currently underway, with potential suppliers submitting proposals that highlight their ability to meet Cool Brews’ quality and pricing requirements. The company expects the process to result in improved supply chain stability and partnerships that align with their commitment to quality and innovation. 

Final Thoughts: Turning Challenges into Opportunities 

Yes, tariffs are a challenge, but they are also a chance to rethink your supply chain, strengthen your operations, and build resilience. By diversifying suppliers, renegotiating contracts, and investing in local partnerships, you’ll not only protect your bottom line but also position your business for long-term growth.  

Planning ahead and working with the right partners makes all the difference. Let’s turn uncertainty into a strategic advantage, together. 

Check out our step-by-step quick-reference checklist to protecting your business from rising costs and supply chain disruptions. The Tariff Survival Checklist.

If you’re looking for expert support to navigate procurement challenges or optimize your supply chain, ProcurePro Consulting is here to help. Setup time with me for an exploratory discussion and let’s craft a strategy that works for your business. 

Check out other great articles including Top 5 challenges Canadian SMB leaders face when trying to grow their business: 

For more information about ProcurePro Consulting visit www.ProcurePro.ca