The new U.S. tariffs currently in effect are raising significant concerns among Canadian businesses. While they primarily target trade, their effects could quickly extend well beyond duties themselves.
Higher costs, pressure on profit margins, disrupted supply chains, investment uncertainty and a slowdown in certain activities: many businesses will need to assess the potential impact on their operations.
Businesses that don’t export directly to the United States aren’t immune to the effects of these new tariffs either. A company can also be affected indirectly if its suppliers, distributors, customers or business partners are exposed to the U.S. market.
The new tariffs announced by the United States target several categories of Canadian products, including:
Certain measures also remain in effect on key materials such as steel and aluminum. For businesses, this means looking at the entire supply chain.
An organization that imports components, purchases materials tied to the U.S. market, or depends on a supplier exposed to tariffs could see its costs rise, even if it doesn’t export directly itself.
The manufacturing sector is among the industries most exposed to the new U.S. tariffs.
Many Canadian manufacturers export processed goods to the United States or use components sourced from the U.S. market. A tariff increase can therefore have a direct impact on production costs, selling prices, competitiveness and investment decisions.
For some businesses, the situation could also lead to a review of suppliers, market diversification or a reassessment of existing contracts. The greater a company’s dependence on the U.S. market, the greater the potential impact.
In such an uncertain environment, it’s also important to properly assess the risks a business is exposed to and ensure its insurance coverage remains suited to its reality.
Construction is another sector that is particularly sensitive to fluctuations in the cost of materials.
Steel, aluminum and certain specialized components play an important role in many projects. If these materials become more expensive or harder to obtain, the effects can be felt quickly on job sites.
Businesses in the sector may have to deal with higher project costs, budget adjustments, supply delays or added pressure on profitability. In particular, a contractor who has already signed a fixed-price contract could have to absorb an unforeseen increase in the cost of materials if prices rise before the project is completed. This can significantly reduce the expected profit margin and complicate the project’s financial management.
In some cases, these changes can also affect bonding requirements, particularly when rising material costs put pressure on a company’s profitability or its financial capacity to meet its contractual obligations.
Agricultural products, dairy products and certain food categories are listed among those affected. For businesses that export to the United States, these measures can create added pressure on prices and reduce certain commercial opportunities.
Agricultural and agri-food businesses may also need to revisit their long-term planning, explore new markets or adjust their production strategy. In a context where operating costs are already high, any new trade pressure can have a significant impact.
When trade becomes more complex, transportation and logistics are often among the first to feel the effects.
Transportation companies may need to adapt to changes in volume, new routes, added delays or more unpredictable demand. For those that rely heavily on cross-border trade, the ability to adapt becomes essential.
Disruptions can also have cascading effects. A delay at one supplier can lead to delivery delays, higher storage costs or a complete reorganization of certain logistics routes.
Distributors and wholesalers occupy a central position in the supply chain. When a product becomes more costly to import or export, these businesses can feel the effects very quickly.
Higher costs can affect purchase prices, inventory management, supplier contracts and profit margins. Even when a business isn’t directly targeted by a tariff, it can still feel the impact if its business partners are affected.
In this context, distributors and wholesalers will need to pay close attention to their volumes, storage costs and their ability to pass price increases on to their customers.
For retailers, the main challenge will be maintaining a balance between rising costs and customers’ sensitivity to price. Absorbing the increases can reduce margins, but passing them entirely on to consumers can hurt competitiveness.
Retail businesses will therefore need to keep a close eye on their inventory, suppliers and selling prices in order to maintain a viable strategy in an increasingly unstable market.
Beyond the tariffs themselves, businesses should pay particular attention to the indirect effects on their operations.
Rising procurement costs are often the most immediate impact. An increase in the cost of raw materials, components or finished goods can quickly erode profit margins.
Supply chains can also become more vulnerable. Some businesses may need to find new suppliers, revisit delivery timelines or adjust contracts, while others may postpone growth projects or investments due to economic uncertainty.
How Can Businesses Prepare?
While businesses can’t control how trade policy evolves, there are steps they can take to better protect themselves.
The first step is to analyze the company’s dependencies on the U.S. market. This means identifying the products, materials, suppliers, customers or contracts that could be directly or indirectly affected by the tariffs.
Businesses also benefit from updating their risk analysis. Higher costs, a change of supplier, increased inventory or modified transportation routes can all change an organization’s risk profile. In particular, rising costs for raw materials, goods, equipment, tools or buildings can affect replacement costs in the event of a loss. It may therefore be worthwhile to reassess insured values to avoid the risk of underinsurance. Similarly, it may be worth reassessing certain coverages, particularly those related to loss of income, to ensure that insurance limits and indemnity periods remain suited to the business’s current reality.
Adding new strategic suppliers or customers can also change a company’s exposure to contingent business interruption losses in the event of a loss at one of these business partners. In a context where many businesses may be revisiting their supply chain or developing new business relationships, this is an aspect that deserves particular attention.
A business that develops new markets, creates a new subsidiary or changes its business structure to adapt to the evolving economic context should also make sure its insurance coverage continues to reflect its reality. For example, the territorial scope of policies may need to be reviewed if the business now sells into markets it didn’t previously serve. Similarly, the creation of new legal entities or subsidiaries may require adjustments to ensure they are properly accounted for in the insurance program.
In a period of economic uncertainty, better understanding your vulnerabilities allows for more informed decisions and helps protect business continuity. The many strategic decisions that leaders may need to make in the coming months are also a reminder of the importance of assessing the risks facing the business and its leadership, particularly with respect to directors’ and officers’ liability. If your business is affected by these changes, or could be in the coming months, contact your broker to discuss your situation and confirm whether your coverage remains well suited to your reality.
