Charting a course through uncertain waters

Increased protectionism is the key driver of Canadian exporters’ collective mood swing. One-third of TCI survey respondents reported that trade disruptions and rising tariffs were having an impact on their global strategies. There appears to be no end in sight, as nearly half of the respondents expect the trend towards protectionism to increase in the next year. More than one-third have borne the brunt of the steel-and-aluminum tariffs, while just less than one-third are feeling the pain from the U.S.-China trade tiff.

In addition, there’s continued concern over the Canada-United States-Mexico Agreement (CUSMA), the ratification of which requires a significant uphill climb, especially in the U.S. Although half of Canadian exporters remain neutral in their overall assessment of CUSMA, about one-third view the prospects of a ratified deal negatively, with a notable minority (19%) expecting the deal will actually fail to pass. The bottom line: More than half of respondents are telling us that they’re holding off their investment plans in the U.S. as a result.

Interestingly enough, during the protracted negotiations for the new North American free trade deal, Canadian exporters started looking elsewhere to do business. Unfortunately, that rise in diversification simmered down after the three leaders shook hands on CUSMA. Regardless of the small dip, diversification plans amongst Canadian exporters are alive and well, especially for Europe and Asia-Pacific—markets with which we have new trade agreements now in effect.

Despite this period of trade uncertainty, Canadian companies can’t afford to pause their international business ambitions. In my view, isolationism is a limited and short-sighted business strategy, especially if you’re a small business. Trade works, plain and simple. Repeated studies point to the fact that exporters do better, on average, than non-exporters. They’re more agile, productive, earn higher revenues, experience better profit margins, are engaged in innovation and grow faster. Moreover, exporters can weather periods of trade uncertainty precisely because they’re diversified.  Even if you’re feeling put off by the international rhetoric, there’s plenty you can do to ensure your company’s in optimal trade shape. Here’s a summary of some practical steps you can take.

Look backward: Tighten your supply chain

Don’t wait until an issue arises at customs before you take the time to do a proactive 360-degree assessment of your current supplier relationships. Even if you’re operating in an industry that’s remained untouched by international tariffs, you could be exposed to disruptions and supplier risk through retaliatory measures. Play it safe by following the rule of three: For every supplier you have, make sure you have two other viable players in your registry. You may want to consider new suppliers from less volatile markets or opt for local suppliers who may be more expensive, but offer greater stability. Be sure to set up a simple monitoring process and governance mechanism, so you can review your supply-chain risks on a routine basis and define mitigating actions if needed.