Navigating Tariffs and Trade Tensions: Strategies Trump Tariff: Understanding how Small Businesses Can Stay Competitive (1)

This weeks newsletter is all about the Trump Tariff’s and breaking it down to ensure for an easy step-by-step guide to work out the implications and how to reel back that margin.

President Donald Trump’s latest tariffs on Canada, Mexico, and China have heightened global trade tensions, triggering immediate economic and diplomatic repercussions. Effective from 4 February 2025, the measures impose a 25% tariff on most imports from Canada and Mexico (with Canadian energy resources taxed at 10%) and a 10% levy on Chinese goods. The move has already provoked retaliatory measures, market volatility, and uncertainty in global supply chains.

Key Details of the Tariffs

• 25% Tariff on Imports from Mexico and Canada: Focused on curbing illegal immigration and drug trafficking. Both Mexico and Canada have agreed on certain terms, which will delay these taking effect for 30 days from 4th February. (1)

• 10% Tariff on Chinese Imports: Aims to stop Fentanyl imports into the USA and Mexico. (1,). China has not negotiated terms, but has issued counter tariffs, which will take effect 4th February, 2025. 

• Elimination of the de minimis exemption, which previously allowed duty-free imports under $800, significantly impacting e-commerce and small shipments. Chinese companies like TEMU and SHEIN have long leveraged this exemption to dominate the market, shipping smaller parcels directly to consumers as orders are placed. This approach bypasses duty costs that would otherwise apply if goods were imported in bulk to a third-party logistics (3PL) warehouse. This is something that will not impact Titan. (2)

These tariffs have been imposed under the International Emergency Economic Powers Act (IEEPA), citing national emergencies linked to immigration and drug trafficking. The measures are indefinite, with the potential for further escalation should trading partners retaliate.

Retaliation and Diplomatic Fallout with Canada and Mexico

As of 4th February 2025, both Canada and Mexico have secured last-minute agreements with the U.S., delaying the implementation of 25% tariffs for 30 days. This move temporarily eases trade tensions and allows time for further negotiations.

Canada has committed to strengthening border security by investing C$1.3 billion in a new initiative, deploying 10,000 frontline personnel, and using advanced surveillance technology to curb migration and fentanyl trafficking. Prime Minister Justin Trudeau stated that these measures align with Canada’s ongoing efforts to enhance security cooperation with the U.S.

Meanwhile, Mexico has agreed to deploy 10,000 National Guard members along its northern border to combat drug trafficking, particularly focusing on fentanyl smuggling into the U.S. Mexican President Claudia Sheinbaum described her discussions with Trump as productive and respectful, emphasising the importance of maintaining sovereignty and strong diplomatic ties.

In return for these commitments, Trump has paused the 25% tariffs for 30 days, preventing an immediate trade war. However, the 10% tariff on Chinese imports remains in place.

…and China

China has lodged a complaint with the World Trade Organization (WTO) and is preparing unspecified countermeasures. Analysts suggest that China’s reduced dependence on U.S. imports, due to its shift towards domestic production, may limit the impact of these tariffs, alongside implementing counter tariffs.

China’s Counter Tariffs: 15% tariff on coal and liquefied natural gas, a 10% tax on crude oil and machinery, an anti-monopoly probe into Google, export controls on rare metals, and the addition of PVH Corp and Illumina to its "unreliable entities" list. (18)

 European Union (EU)

Even though there has been no confirmation, Trump has suggested that there will be some sort of tariff that will impact them in the near future. The EU has warned of retaliatory tariffs should the bloc be targeted. Trump, in response, has hinted that tariffs on European goods are imminent.

 Economic and Industry Impacts

Energy and Shipping

• Canada: Analysts predict 330,000 barrels per day of Canadian crude oil will be redirected to Europe and Asia, while the U.S. may replace Canadian imports with supplies from the Middle East and South America, increasing demand for oil tankers.

• Mexico: The 500,000 barrels per day of Mexican crude oil exports to the U.S. face uncertainty, potentially reshaping regional energy markets.

Agriculture and Consumer Goods

• Pork Industry: Canadian pork producers, who export 40% of Manitoba’s production ($200 million annually) to the U.S., warn that tariffs could cripple the industry, leading to supply chain disruptions and higher consumer prices.

• Fresh Produce: American consumers may face price increases on avocados, fruits, and vegetables, as 60% of fresh produce is imported from Mexico.

Global Markets

• Stock Market Declines: Wall Street futures dropped, reflecting fears of an extended trade war. The U.S. dollar surged as investors turned to safe-haven assets.

• Supply Chain Disruptions: Businesses are preparing for higher costs and delays, with analysts predicting a contraction in container shipping volumes. Delays at ports will be due to the Elimination of the de minimis exemption, as each shipment however big, will now need to be checked and documented in the same way as its bigger volume shipments

Canada-U.S. Resolution

Canada will invest C$1.3 billion to enhance border security and combat fentanyl trafficking, delaying Trump’s 25% tariffs for 30 days. Measures include deploying 10,000 personnel, using drones and helicopters, appointing a "fentanyl czar," and launching a C$200 million intelligence initiative. Canada will also form a joint task force with the U.S. and designate cartels as terrorist organisations, accelerating its December border strategy.

Provinces like Ontario have escalated tensions further by removing U.S. liquor from shelves, impacting $1 billion in annual alcohol trade.

U.S.-Mexico Trade Talks

President Donald Trump has temporarily suspended the planned 25% tariffs on Mexican imports following an agreement with Mexican President Claudia Sheinbaum to deploy 10,000 troops to the U.S.-Mexico border to curb immigration and drug trafficking. While this move has eased immediate tensions, it has not led to a definitive resolution, and the situation remains fluid.

Negotiations are set to continue throughout February 2025, with Trump personally participating alongside Secretary of State Marco Rubio. Discussions have been described as “very friendly,” and significant progress has been made. Meanwhile, Mexico is preparing a contingency plan, dubbed “Plan B”, which includes tariff and non-tariff measures targeting U.S. goods. In response to Trump’s accusations of government-cartel collusion, Sheinbaum has called the claims “slanderous.”

Trump has hinted at a possible UK exemption from upcoming tariffs but has also criticised Britain’s trade deficit with the EU, arguing that European nations unfairly restrict U.S. exports, stating, “They don’t take our cars, they don’t take our farm products.” This stance suggests that while the UK may receive temporary relief, broader EU-U.S. trade tensions are likely to escalate.

So with all that information, what does it actually mean for small businesses? Read on….

How Small Businesses Can Navigate Tariffs and Supply Chain Disruptions

With tariffs and trade tensions escalating, small businesses don’t need to completely halt shipments or overhaul their entire supply chain overnight. Instead, this is an opportunity to reassess sourcing strategies, optimise costs, and strengthen supplier relationships. Here are some key steps and tips to help small businesses adapt and stay competitive:

1. Reassess Your Supply Chain

• Map out your suppliers: Identify where your products and materials are coming from and assess potential tariff impacts.

• Find some Cashflow Masterclasses out there: My favourite is Titan Network, which has been the forefront of this and everything shown in the Cashflow Masterclass gave all the insights and tips to lower your costs, from freight forwarding to packaging and lowering your Amazon costs.

2. Focus on Cost of Goods Sold (COGS) Optimisation

• Negotiate better terms: Work closely with your suppliers to see if they can offer bulk discounts, extended payment terms, or alternative shipping methods to offset tariff increases.

• Improve inventory management: Avoid overstocking and explore just-in-time (JIT) inventory to minimise excess costs.

• Analyse pricing strategies: If tariffs increase costs, explore small price adjustments or product bundling to maintain margins without alienating customers.

3. Strengthen Supplier Relationships

• Communicate openly: Keep suppliers informed about your business challenges and explore ways to collaborate on cost-saving solutions.

• Leverage supplier expertise: Many suppliers have insights into tariff regulations, alternative materials, or production adjustments that can help reduce costs.

• Build long-term partnerships: A strong supplier relationship can lead to priority production slots, better pricing, and flexibility during supply chain disruptions.

4. Explore Alternative Logistics and Shipping Strategies

• Use third-party logistics (3PL) providers: These companies consolidate shipments, navigate customs regulations, and optimise routes to reduce costs.

• Re-evaluate shipping methods: Air freight, sea freight, and ground transport each have different cost structures—choosing the right method can make a significant impact on your bottom line.

• Take advantage of trade agreements: Stay updated on regional trade deals or tariff exemptions that could provide cost-saving opportunities.

5. Stay Agile and Informed

• Monitor trade developments: Tariffs and trade policies can change quickly—staying informed allows you to adjust your strategy in real-time.

• Leverage technology: Tools like supply chain analytics, AI-driven forecasting, and automated inventory management can help you adapt faster and make data-driven decisions.

• Engage with industry groups: Joining trade associations, networking groups, or consulting with trade experts can provide valuable insights and early warnings on policy changes.

6. VISIT YOUR SUPPLIER!

The most effective way to tackle these challenges is through a face-to-face meeting with your supplier. Communication and trust will come across from across the table, rather than across the pond, making in-person discussions far more impactful than long-distance negotiations. Sitting down together fosters sincerity, open dialogue, and a stronger working relationship, allowing you to explore cost-saving strategies and alternative solutions. Your supplier knows their market better than anyone and can provide valuable insights to help you mitigate rising costs. With government subsidies and strategic opportunities available, many suppliers are ready and willing to negotiate, making this the perfect time to strengthen partnerships and secure the best possible terms. 

Rather than seeing tariffs as a roadblock, small businesses should treat this as a strategic opportunity to streamline operations, optimise costs, and build stronger supplier relationships. By taking a proactive approach, businesses can stay competitive, protect profit margins, and adapt to changing trade landscapes with minimal disruption.