Tariffs have now been in effect for nearly two weeks, and many Canadian businesses are asking the same question: are these measures temporary, or the beginning of a longer-term shift in U.S. trade policy?
In conversations with our clients, we’ve found that while most management teams have taken initial defensive steps, many remain in a holding pattern, uncertain about how aggressive or sustained the current trade actions will be.
The most immediate responses have included a renewed focus on Canadian-made products to tap into local sentiment, adjustments to advertising and messaging aimed at domestic customers, and increased scrutiny on budgeting and cash flow discipline.
For companies dependent on U.S. vendors, replacing suppliers has proven difficult due to differences in quality, pricing, and longer lead times—especially when pivoting to Asian markets. Meanwhile, some U.S. buyers who rely on Canadian raw materials are pausing purchases as they attempt to reset pricing models and forecast demand.
The impact is likely to be felt on both sides of the border. Still, Canada faces a structural disadvantage: in 2023, exports to the U.S. made up 28% of Canada’s GDP, while exports to Canada accounted for only 2% of U.S. national income. This imbalance suggests the U.S. has more room to maneuver—and may use tariffs as ongoing leverage.
While the duration and direction of tariffs remain uncertain, we believe Canadian businesses should begin pricing in the possibility of a prolonged trade conflict, and take measured steps to protect against rising costs and weaker demand. Here are five strategies to consider:
1. Scrutinize Costs
Finance leaders should take a detailed look at their cost structure, particularly in the context of revenue volatility and tightening margins. This includes assessing fixed costs, contribution margins, and operating leverage, and understanding how these variables will behave under different volume scenarios.
We often see immediate liquidity improvements through tighter management of working capital. Revisiting inventory turns, receivables policies, and vendor payment terms can free up meaningful cash—especially important for businesses facing longer sales cycles or margin compression.
2. Reassess Pricing
With input costs rising, businesses need to evaluate their pricing models carefully. This includes analyzing the price elasticity of different SKUs, benchmarking against competitors, and reviewing unit economics at a granular level.
Some of our clients have seen strong returns from dynamic pricing strategies. For example, one retailer used digital shelf labels and live inventory data to adjust prices based on margins and stock levels—helping to reduce markdowns, minimize excess inventory, and maintain customer retention during price fluctuations.
3. Recapitalize or Deleverage
With the Bank of Canada having cut interest rates seven times in succession, there’s an opportunity for businesses to review their capital structure. Depending on the situation, it may make sense to refinance existing debt, lock in fixed-rate terms, or expand access to credit while conditions are favourable.
For businesses facing uncertain cash flows, deleveraging or renegotiating credit terms can provide added stability. A stronger balance sheet can also enable strategic flexibility, whether for internal investment or for seizing acquisition opportunities as peers face financial pressure.
4. Model for Downside Scenarios
In a higher-cost, lower-demand environment, businesses should take the time to model downside cases, stress-test their cash position, and develop contingency plans.
Finance leaders should have clear visibility into how the company would perform if revenues decline while costs rise over the next four quarters. In sectors with long cash cycles or thinner liquidity, it’s critical to maintain a daily cash position model and reinforce tight financial controls across payables, receivables, and discretionary spending.
5. Keep Your Ear to the Ground
With uncertainty still evolving, it’s more important than ever for management teams to stay close to the ground—listening to both employees and customers.
Structured check-ins with staff can uncover frontline insights that don’t surface through financial reporting. A simple “Start / Stop / Keep” framework—What should we start doing? What’s not working? What’s worth continuing?—can help teams quickly identify what needs attention.
Likewise, asking questions like “What are you hearing from customers?”, “How are our competitors responding?”, or “Where are the bottlenecks?” can lead to faster, more adaptive responses in pricing, operations, and service delivery.
