Canada vs USA Trade War- A Wakeup Call for Canadian Businesses

By: Ava Saunders

With Canadian/American relationships tightening, Canadian businesses are left with a simple question of "How should we respond?".

Personally, I see this a wakeup call for Canada to lessen their dependance on the US.

What's Going On?

The United States have placed new tariffs on imports from Canada and Mexico blaming economic policy and security concerns. Canadian stores have responded with removing American whisky brands and other goods manufactured in the United States. Canadian and Mexican officials have expressed their opinions on this new act, showing their annoyance with America's confusing tariffs, which have violated the terms of the trade agreement (USMCA).

Businesses must deal with this unpredictable new event. Every time a new trade policy is implemented, businesses that depend significantly on international exports are put in a challenging situation. Whether they are food producers, retailers, or manufacturers, companies must find new suppliers, bear growing expenses, and risk losing money.

My Take: Canada Needs to Rethink It's Trade Strategy

Canada should concentrate on long-term measures that strengthen its economy rather than responding to U.S. trade policy:

Diversifying It's Trading Partners

Although Canada and the United States have long had a close economic relationship, it is dangerous to rely too much on one trading partner. Although trade with Europe and agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) have been beneficial, Canadian companies should consider markets outside of North America. Rapid market expansion is occurring in Asia and Latin America, and Canada has a chance to improve trade ties in those areas.

Boosting Regional Supply Chains

COVID-19 has already exposed the flaws in international supply chains in the past, we should see this as a signal for domestic reliance. It's time for companies to make more investments in local sourcing and production because of these tariffs. This is about long-term stability, not just pride our country. Although using local suppliers may be more expensive initially, doing so lowers the danger of changes in trade relations over time.

Companies Must Be Active, Not Reactive

Trade tensions between the United States and Canada aren't going away anytime soon, despite the fact that many businesses wait until tariffs are imposed before making any adjustments. Companies must prepare ahead. If a product is dependent on imports from the United States, what is the alternative? What is a company's plan for international expansion if it exports mostly to the United States? Businesses that succeed will be differentiated from those that fail by their proactive approach.

Assistance from the Government to Small and Medium Enterprises

Bigger businesses can often adjust to trade disputes by moving their operations or taking on additional expenses. But such large changes in tariffs can be disastrous for small and medium-sized enterprises. The Canadian government ought to do more to help companies wishing to enter international markets by offering tax breaks and financial support.

Final Thoughts

The need for more business and trade independence in Canada is ultimately shown by this trade battle. Although we have no influence over what the US does, we do have some power over how we react. Both small and large Canadian companies should take advantage of this chance to reconsider their approaches, lessen their dependency on the United States, and create a more resilient economy.