U.S. tariffs: 5 tips to protect your SME's finances

The trade war between Canada and the United States is creating significant uncertainty for Quebec entrepreneurs. The repercussions of tariffs don’t just affect exporters. Rising costs, disruptions in supply chains, and declining consumer purchasing power can affect a large number of small and medium-sized businesses (SMEs).

This is not the time to downplay the situation. But it’s also not the time to make hasty decisions. In times of uncertainty, the best course of action is to be prepared.

1. Assess your risks and develop scenarios

Before making any decisions, you need to know exactly where you stand. Ask yourself the right questions:

• Which customers, suppliers, or markets are most exposed to tariffs?
• What could be the impact on your sales, costs, and margins?
• What would your cash flow situation be if revenue dropped by 10%, 20%, or 30%?

Once you’ve established this picture, prepare different scenarios: a baseline budget, a contingency budget, and an action plan for each. You won’t be able to predict everything. The goal is simply to avoid being caught off guard and having to react under pressure.

Pay particular attention to your cash position and working capital. In times of uncertainty, these are what determine your room to maneuver.

2. Protect your margins against tariffs

Tariffs drive up costs. If you don’t take action, your margin will absorb the impact. And it has its limits.

Here are some practical steps:

• Review your pricing. A rise in input costs often justifies a price adjustment. Communicate this clearly to your customers by explaining the context. Most will understand.
• Cut back on non-essential expenses. Review your expense categories. Some can be deferred or eliminated without affecting your operations.
• Renegotiate your agreements with suppliers. Some of them may be willing to adjust their terms to retain a good customer. It’s always worth asking.
• Review your contracts. They may include adjustment or escalation clauses in the event of rising costs.

3. Diversify your markets and suppliers

Reliance on a single market or supplier is a risk under normal circumstances. In the midst of a trade war, this risk becomes critical.

Some avenues to explore:

New markets

Canada, Europe, emerging markets: other opportunities exist. Investissement Québec International, regional export promotion agencies (ORPEX), and Export Development Canada (EDC) can assist you with your diversification efforts. Don’t hesitate to reach out to these resources.

New suppliers

Are there local suppliers or suppliers from other countries that could replace your U.S. sources? Find out right away.

New customers

If part of your revenue comes from exports to the United States, start expanding your customer base elsewhere right away.

Diversification takes time. It’s therefore best to take action before the pressure on your cash flow becomes too great.

4. Anticipate the effects on your customers

Tariffs drive up consumer prices, which reduces Quebecers’ purchasing power and changes their spending habits.
For SMEs that sell locally, this can result in:

• a decline in demand for certain products or services;
• customers postponing their purchases or seeking cheaper alternatives;
• increased pressure to maintain competitive prices.

Talk to your customers. Understand their current challenges. Adjust your offerings if necessary. An SME that stays attuned to consumers’ needs weathers difficult times better than one that simply waits for demand to return.

5. Act quickly if your finances become unstable

Financial difficulties related to tariffs can take hold slowly and then escalate rapidly. That’s why it’s important to take action at the first sign of trouble, such as:

• recurring cash flow problems
• delays in paying your suppliers
• increased use of credit to cover day-to-day expenses
• difficulty meeting your financial obligations

Tariffs: Take early action to keep your options open

The extent and duration of the trade war’s impacts remain difficult to predict. But one thing is certain: the small and medium-sized businesses that weather periods of uncertainty best are those that anticipated the situation, acted early, and sought help before the situation became critical.

You don’t have to navigate these turbulent waters alone. Don’t hesitate to contact us for practical advice adapted to your situation. The first consultation is free, confidential and judgment-free.