Four strategic steps to help Canada’s consumer product and retail sector navigate tariff uncertainty

Assessing your position

The first step in preparing for the unknown is to evaluate where your business stands. There are three categories of consumer product and retail businesses that are most likely to be impacted by potential tariffs:

• Export 40% or more of their products to the US. The demand for products could drop if tariffs make it more expensive for customers south of the border to purchase Canadian goods. These businesses could face significant revenue loss if demand dips and tariff-related costs rise.

• Import US products to sell here at home. These organizations face the risk of supply chain disruptions. They must decide how to absorb increased costs — whether to pass them on to consumers or risk losing sales to competitors.

• Have cross-border operations across North America. Organizations with supply chains spanning both Canada and the United States may initially seem to have an advantage in an environment defined by additional tariffs. For example, they could shift production or sourcing within regions. But they face challenges, too. Transfer pricing, the potential for double taxation and other incremental costs could become meaningful issues for these businesses as products move back and forth across international borders multiple times during production or distribution.

With so many unknowns, it’s vital to understand which category your business falls into so you can address your potential tariff exposure and develop effective action plans. Once you’ve established that, you can prepare to launch your strategies, depending on which tariff scenario ultimately comes to fruition.

How can you actively plan for an uncertain future?

To effectively navigate the unpredictable landscape, Canadian consumer product and retail businesses should bring people together from across departments, exchange insights and build action plans capable of safeguarding the business.

How? At the EY organization, we’re taking a four-step approach to help businesses make headway fast. We recommend Canada’s consumer product and retail businesses set out with intention to:

1. Understand tariff risk exposure and model different scenarios

You can dig in by assessing your organization’s risk exposure to changing trade policy, and then quantifying the impact of those risks. Right now, you need a holistic lens. That means considering how potential tariffs under different scenarios would affect supply chain, costs, pricing strategies, market demand, consumer behaviour, regulatory requirements, financial implications, risk management, strategic planning and stakeholder communications.

This gives you… the ability to frame out scenarios and quantify top- and bottom-line vulnerabilities and implications.

2. Brainstorm and evaluate potential responses

Supported with a set of scenarios to consider, you’re ready to develop responses for different situations. Think bigger than right now. A solid set of potential responses will include no-regret options that would improve the business no matter what. After all, you need horsepower to keep moving the business forward regardless of a potential trade war. That’s in addition to shorter-term options — think supplier or product substitution, product flow path changes, planning around customs, pricing, relationships and more — as well as medium- to longer-term solutions, from product and bill of materials reengineering to strategic footprint, operating model or partnership changes.

This gives you… the beginning of a playbook for each scenario you can draw on as we gain clarity and certainty around tariffs.

3. Define change and investment requirements for each response

It’s not enough to know what you will do if a potential scenario becomes reality. You must also understand the organizational changes and investments that might be required for the proposed solution to work well. That means proactively looking at systems and processes, business and operating models, capabilities and other enablers as well as investments overall.

This gives you… a detailed list of strategic and necessary shifts ahead of time, so you’re ready to act decisively if a given scenario triggers a preplanned response.

4. Monitor the environment carefully and prepare your team to mobilize

Even the best plans won’t work if you’re not carefully monitoring the broader environment. Much in the way that organizations practice safety and business continuity responses for a potential crisis, consumer product and retail companies must stay close to the evolving tariff environment. Get dedicated people and processes in place to continuously monitor your tariff risk so you know when to mobilize. Lay out clear plans for what rapid mobilization will look like. That way, your business will be ready to move when the time comes. Include a clear map of who will do what, when and how — and communicate often across the business so people feel prepared for what may be just around the corner.

This gives you… a response plan, enabling your team to quickly unleash a thoughtful action plan.