Tariff impacts could go beyond your costs
Tariff impacts could go beyond your costs
For Canadian businesses, adjusting to the new reality of tariffs on exports to the U.S. means more than simply preparing for increased costs — it could mean significant changes to workforce planning, how you structure contracts, and where you do business.
In this article, we explore some key conversations to have with your leadership team and business advisor as you build a long-term strategy.
The impact of tariffs goes beyond increased costs. As a business leader, you may be curious about how tariffs could affect your operations. This guide will help you identify potential issues and what you can do about them.
Key questions to consider:
- Have you considered any changes to your workforce due to the current economic environment?
- What impact do the tariffs have on your existing contracts?
- Are you considering selling or transitioning your business because of the uncertainty?
- Does this situation create opportunities for your organization? Are you considering expanding to new markets?
- Do you have access to the funding you need to keep running your business
- How comfortable are you with your overall risk mitigation strategy?
- Are you concerned with cash flow impacts due to tariffs?
Workforce changes
Tariffs can increase costs for imported materials, prompting businesses to cut costs elsewhere — potentially including layoffs or reduced hiring. You may also need to relocate employees or adjust workforce strategies to manage these financial pressures.
Alternatively, this situation could create opportunities for your organization which you’ll want to scale up quickly.
What you could be thinking about:
- Considering downsizing due to increased costs
- Looking to outsource some functions of your organization
- Need to relocate staff
Contract changes and disputes
What you could be thinking about
- What are the implications of changing my contracts?
- How to navigate current contract negotiations with looming tariff threats
- Hidden contract risks that you could be missing
Selling or transitioning your business
Tariffs can impact the valuation of your business by increasing operational costs and reducing profitability. You may consider selling or transitioning your business to mitigate these risks, requiring careful planning to maximize value and ensure a smooth transition.
What you could be thinking about
- Considering selling due to the tariff uncertainty
- Thinking about retiring and passing the business to the next generation
- Exploring exit strategies because of the stress and financial strain
Expanding to new markets
Tariffs can make existing markets less profitable, prompting you to explore new markets with lower tariffs. This involves understanding new regulatory environments, consumer preferences, and competitive landscapes to successfully enter and grow in these markets.
What you could be thinking about
- How to identify and reach new buyers
- Who will need Canadian-made products, and what gaps can your organization fill
- Are you equipped to pivot your organization to meet new demands?
Tariff Risk Exposure Assessment
Access to capital
Tariffs can impact your access to capital by increasing costs and reducing profitability, making it harder to secure loans or attract investors. Higher operational costs due to tariffs can strain cash flow, affecting your credit, and investment appeal.
What you could be thinking about
- Difficulty securing funding due to increased costs
- Investor hesitation if profitability declines
- Need to improve cash flow to attract more capital
Risk management
Tariffs introduce significant uncertainty and risk. You need to implement robust risk management strategies, including diversifying supply chains, renegotiating contracts, and staying informed about regulatory changes to mitigate these risks.
What you could be thinking about
- Heavy reliance on U.S.-based suppliers or buyers
- Unsure if your contracts allow you to pass along tariff costs
- Curious about the unknown risks of new markets
Financial challenges and corporate restructuring
Increased costs from tariffs can strain your finances, potentially leading to insolvency. Develop strategies to manage cash flow, restructure debt, and explore refinancing options to stay afloat.
What you could be thinking about
- Struggling with cash flow due to tariffs
- Considering debt restructuring to manage tariff impacts
- What are the consequences of different refinancing options
Your advisors are here to help
To learn more, contact your local advisor.
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