Conversations about tariffs are breaking out everywhere with “experts” popping up in the most unlikely places. The proliferation of news articles, blogs, and social media posts is staggering. In the midst of the cacophony, it can be hard for a small business to separate the noise from useful and helpful information. So instead of merely adding to the word count, the purpose of this article is to share three concrete steps Suppliers can take to successfully chart their course in these turbulent tariff waters.
Practical Strategies for Coping with Tariffs
Canadian businesses must adapt their procurement strategies to mitigate the impact of tariffs by adopting a multifaceted approach, three of which are outlined below.
1. Leveraging Tariff Exclusions
Canadian companies have the ability to ask for tariff relief through a product exclusion request to the Canadian government. The request should be detailed and well-supported and should clearly lay out the circumstances to justify the request for relief (from tariff of U.S goods).
Before making such a request, make sure all your ducks are in a row:
- Understand Eligibility and Criteria - Priority is usually given to requests that best serve public interest.)
- Providing the Right Documents - Applicants must provide thorough documentation to substantiate their claims, including:
- A company overview
- Detailed description of the goods subject to tariffs, including volume and value
- Clear outline of the evidence for your inability to source substitute goods
- Information on contract barriers preventing alternative sourcing
- Cost breakdown of manufacturing the product, including costs of tariffed goods, other imports, Canadian materials, labor, overhead, and selling expenses.
- An impact analysis
- Any additional supportive evidence such as letters of support or market studies
Once a request has been made, be prepared for follow-up questions or to provide additional information. It’s also a good idea to engage early with trade advisors and legal counsel to increase the likelihood of a successful outcome. Don’t forget to make sure your request is clearly marked “U.S. Remission” in the subject line.
A word caution. A request for exclusion does include the risk of exposing confidential information and of publicizing proprietary information that can be shared with domestic competitors.
2. Leveraging Government Support
To help businesses through this difficult period, the Canadian Government has introduced additional support measures, including temporary relief for certain goods used in manufacturing and public health sectors, and a tariff loan facility for large enterprises. Be sure to stay up to date on ongoing news and information, and think about how these newly launched programs can complement your remission requests and broader procurement strategy.
3. Consider Vertical Integration
Vertical integration is when a business takes control of the stages of production or distribution of its products that may have previously outsourced. It can occur at the point of sourcing raw materials (upstream) or at the manufacturing or retail stage (downstream).
When tariffs are imposed—especially on imported goods or components—companies face higher costs and supply chain uncertainty. Vertical integration can help in the following ways:
- Cost Control: Owning more of the supply chain allows firms to reduce costs tied to middlemen or markup, which helps offset the impact of tariffs.
- Domestic Sourcing: Companies may vertically integrate by acquiring or establishing domestic production capabilities to avoid tariffs on imported goods.
- Improved Supply Chain Resilience: By internalizing key steps in the production process, firms reduce exposure to international trade disruptions and tariff volatility.
- Greater Negotiating Power: Vertically integrated suppliers can gain leverage over partners and competitors, especially in industries where tariffs create bottlenecks or raise prices.
Example:
Imagine a Canadian electronics supplier that imports key components from Asia, which are now subject to high tariffs. To cope, the supplier might:
- Acquire a local manufacturer to produce those components domestically.
- Start sourcing raw materials from a non-tariff country.
- Open its own distribution centers to control product flow and cut added costs.
By focusing on producing higher-value finished goods rather than raw materials, companies can better absorb transportation and tariff costs. Vertical integration—owning more stages of production and supply—can increase control over inputs and reduce exposure to third-party tariff risks.
Perhaps you have already implemented one of the strategies referenced in this article, in order to mitigate the impact of tariffs on your business. Or maybe you have chosen an entirely different approach. Whatever the case, the current tariff situation demands proactive and strategic procurement management from Canadian businesses. By taking advantage of the ones mentioned above, you will not only help navigate the immediate challenges but also build a more resilient and competitive business.
Disclaimer
The information provided in this blog is for general informational purposes only and should not be considered legal, financial, or trade advice. While we strive to ensure accuracy, trade policies and economic conditions are constantly evolving. Suppliers are encouraged to consult with trade experts, legal professionals, or financial advisors to assess how tariffs and other trade regulations specifically impact their business.