When Prime Minister Mark Carney stepped up to the microphone after winning a sizable minority government in the recent federal election, his assessment of Canada-U.S. trade relations was familiar. After all, he’d repeated it endlessly throughout the campaign as U.S. President Donald Trump levelled near-daily tariff and sovereignty threats. His remarks nonetheless set a chilling tone for Canadian entrepreneurs and business leaders, many of whom built their commercial success on the cross-border flexibility of the free trade era.
Carney told the audience: “Our old relationship with the United States, a relationship based on steadily increasing integration, is over. The system of open global trade anchored by the United States, a system that Canada has relied on since the Second World War, a system that well not perfect has helped deliver prosperity for a country for decades, is over.”
That a Canadian Prime Minister was compelled to make such a blunt statement would have been unthinkable less than a year ago. Now, it’s our cross-border trade reality. To be clear, the real risk not only derives from tariffs. Canada was largely exempted from the crippling reciprocal tariffs imposed by the U.S. on most countries around the world on April 2nd, 2025, though higher duties on exports such as steel and aluminum are weighing heavily on Canada’s economic output.
The real culprit is uncertainty. Business leaders rely on clarity, rule of law and predictability to make strategic decisions. As many would argue, ‘We don’t care if you give us a bad trade deal, as long as we have a deal that we can follow based on enforceable rules that allow us to respond with the best possible financial decisions for our organizations.’ While U.S. Treasury Secretary Scott Bessent defended the Trump administration’s ‘strategic uncertainty’ as a clever negotiating tactic—the ‘art of the deal’ writ large on the global stage—the business communities in the U.S., Canada and abroad recognized the tremendous threats to their ongoing success.
We heard from one Canadian entrepreneur who owns a small, but fast-growing, company that manufacturers storage trailers. He noted that the company had already begun building out manufacturing and distribution capabilities South of the Border to service its surging list of U.S. clients, but due to tariff threats—and the increased cost of steel—it is now moving to segregate its business on either side of the border to mitigate potential cross-border financial risks. Production that could have been done in Canada will now largely occur in the U.S.
So, at a time when Prime Minister Carney has warned of the need to pivot Canadian trade away from the U.S., many entrepreneurs are wondering if that same imperative applies directly to their business. The answer, in many cases, will be ‘yes.’ This will pose tremendous challenges, but also opportunities to grow in dynamic new, like-minded markets beyond the U.S., as organizations move their supplier or customer bases to new countries. The Adams + Miles team is already working to support several privately-owned companies, in conjunction with our AGN International partners, to help them discover new trade avenues. This can be a jarring process, given the ease with which Canadian businesses have exported to the easily accessed and profitable U.S. market, only a couple of hours drive (or less) to the border from most of our major cities.
We’ll have more on this process in the coming weeks, but not before outlining the key starting point of any strategic trade analysis, one that our advisory team initiates on behalf of our clients: a risk exposure study, specifically to determine the impact that tariffs or other trade barriers may (or may not) present to their organization. It involves asking these questions:
How would new tariffs impact your cost structure and margins?—It means determining the percentage of your company’s inputs or finished goods that are subject to new tariffs, then the degree to which these tariffs would increase unit costs or reduce gross margins. With that data in hand, it’s possible to model tariff scenarios to estimate financial exposure and their potential to erode profitability.
Can your business absorb shocks through operating cash flow and available liquidity?—Analyze your organization’s current ratio, available lines of credit and cash flow from operations. Stress-test the latter under several scenarios, including declining revenue, lack of access to supply chains or increased costs due to tariffs or retaliatory measures.
Are your supply chains stable?—Determine if your organization’s supply chain is both flexible and robust, including whether it may be exposed to just-in-time risk or the need to hold excess inventory (in the case of a manufacturer or retailer). Tariffs can cause major supply chain disruption and the stockpiling of key inputs. Capital and inventory can both become scarce, leading to delivery snarls. For manufacturers, for example, an assessment of inventory turnover and days inventory outstanding will help gauge efficiency and operational resilience.
Can your company remain profitable?—It’s one thing to keep a business afloat as tariffs mount, but quite another to maintain profitability. Scenario planning tools can help to assess profitability under various tariff levels—including your organization’s break-even point—and whether tariff-driven price increases will be tolerated by customers. Important metrics to monitor include EBITDA margin, net income margin and how tariffs impact return on assets.
Are your company’s customer base and market adequately diversified?—This is a fundamental question that extends even beyond tariff discussions. Determine the percentage of revenue that’s derived from U.S. customers and whether that business can be replaced by new markets or market segments. While high exposure to U.S. customers was once the goal for many Canadian companies, that may no longer be the case due to possible demand shifts or the organization’s vulnerability to U.S. trade policy changes. A revenue concentration analysis and both regional and customer diversification strategies can help to mitigate that risk.
In our next blog, we explore how Canadian companies can diversify their exports beyond the U.S. and into new global markets.
Tony Sokic, Managing Partner
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