The Impact of Tariff Uncertainty on Canadian Businesses
Canadian businesses, from small local shops to large multinational corporations, are navigating a challenging landscape due to constant changes in tariff policies. This uncertainty is causing significant disruptions in financial decisions and strategic planning.
The Plight of Small Businesses
Small businesses, often without the resources to pivot quickly, are feeling the brunt of tariff instability. Take, for instance, Kun Shoulder Rest, a globally recognized manufacturer of violin and viola ergonomic accessories based in Ottawa.
Case Study: Kun Shoulder Rest
Kun Shoulder Rest relies heavily on the U.S. market, which accounts for 35 to 40 percent of its global sales. The company’s director, Juliana Farha, notes the challenges they face due to fluctuating tariffs. "If you don’t play the violin, you will never have heard of a shoulder rest. If you do play the violin, you will know our brand,"** she said.
However, the company cannot pivot to new markets easily. The niche market for violin accessories and the high competition, as well as their limited resources, leave them stuck.
Strategies for Mitigating Tariff Uncertainty
Business and economic experts suggest a few strategies for companies to survive this period of uncertainty.
Absorb the Cost or Pass It On
Companies may either absorb the additional costs or pass them on to their customers. This decision is pivotal and can significantly impact a company’s profitability.
Pro Tip: Engage with your customers for better rate negotiation but don’t lose profit margin
Propose Tariff Issues
If Canadian companies want to do business in the United States without facing tariffs, they may need to establish facilities there. However, this option is viable only for larger companies with the financial muscle to relocate.
Real-Life Example
Kruger, Canada’s largest toilet paper and tissue manufacturer launched a new plant in December which they are planning to invest. However, due to tariff uncertainty in both Canada and the U.S., they’ve postponed the project, leaving thousands of jobs in limbo for now. The job situation doesn’t look different for The Algoma Steel company which faces the problem of relocating or merging and have recently announced to avoid spending in order to cope with the situation.
Big Corporations Also Face Disruptions
Larger corporations are not immune to the effects of tariff changes. Constant policy shifts make long-term investments risky. This uncertainty leads to delayed projects and stagnant investments, affecting job security and overall economic growth.
Algoma Steel: A Real Example.^test Michael Garcia, CEO of Algoma Steel, highlights the ever-present uncertainty. Every new tariff announcement or cancellation upheavals their strategic decisions.
Economic Outlook: poorly Defined. Simon Gaudreault, chief economist of the Canadian Federation of Independent Business, notes a palpable sense of "fog" among businesses. This uncertainty paralyzes investment and hiring decisions, creating a cycle of economic stagnation.
What Does the Future Hold?
The future of Canadian businesses will likely continue to be shaped by tariff policies, both domestic and international. Companies must remain agile, making strategic decisions while considering potential tariff changes and their knock-on effects.
Table: Key Information on Canadian Business Impact
| Aspects of Impact | Small Businesses | Large Corporations |
|---|---|---|
| Barrier in Market Shifts | Pivoting to new markets | Delayed investments, deferred milestones, etc. |
| Main Market | Could lose up to 40% sales | Moderate loss but diversified market share |
| Number of Affected Employees | less than a dozen employees | Able to sustain larger job pool |
Pro Tip: Small businesses can form coalitions to advocate for policy changes and seek government support for navigating through this rough weather
FAQ Section
Q: How do tariffs affect Canadian businesses?
Tariffs influence both large and small businesses by causing uncertainty in financial decisions. Smaller companies may freeze operations, while larger ones delay investments.
Q: What strategies can businesses adopt to mitigate tariff impacts?
Businesses can either absorb the additional costs or pass them on to customers. Larger companies might consider establishing facilities in the countries they export to, thereby avoiding tariffs.
Q: What are some real examples of businesses impacted by tariff changes?
KG Tissues have delayed a construction project on a new plant, while Algoma Steel CEO Michael Garcia mentions constant vigilance on tariff announcements.
Dear reader, take a moment to let your voice be heard. If you run a small business, share your experiences in the comments. If you work in policy, let us know your thoughts on tariff decisions. Let’s get some conversation going!