Tri-Cities businesses brace for tariffs amid Canada-U.S. trade war

With the United States slapping a 25 percent tariff on Canadian goods, Chris Galer is keeping a close eye on the market.

Galer, the co-owner of Port-Coquitlam based PoCo Building Supplies, said he imports some products from U.S. wholesalers and purchases U.S. products through Canadian companies.

Galer’s business is less affected by the U.S.-imposed levy than by Canada’s counter tariffs.

Canada has imposed tariffs on $30 billion worth of U.S. goods including wine, beer, spirits, coffee, appliances, apparel, pulp, paper and peanut butter. After 21 days, tariffs are set to apply to $125-billion worth of products from south of the border.

Some of the products regularly sold at PoCo Building Supplies are on the list of products Canada is targeting, like various decking and specialty hardwood products.

“We’re more beholden to how the markets reacts,” Galer said.

Galer said they used the month-long pause in February to increase their inventory of U.S. products, “essentially just an insurance policy” for future tariffs.

This response to the threat of tariffs is called “pull forwards,” according to Samuel Roscoe, a lecturer at the University of British Columbia. He said many companies started doing this last November, when Trump first started threatening tariffs.

“The companies that have done it, of course, are going to benefit in the short term, but it’s certainly not a longer-term solution.”

Galer agreed. If they have to buy products with tariffs slapped on them, it will drive up their retail prices.

“It’s going to be affected at the till, when people are buying retail from us, unfortunately it’s not something we can absorb into our margins,” he said.

He said they are looking to different suppliers for their products — like Lunawood from Finland instead of hardwoods from the U.S.

However, it’s difficult to avoid the U.S. completely, he said.

“It’s a big market, and a lot of stuff is produced there or eventually travels through the U.S.”

He said they may have to decide if they want to pay tariffs or stop selling certain products.

Potential economic impacts

While big companies like Lululemon have the resources to look for new suppliers and markets months in advance, this wasn’t feasible for small and medium sized businesses, according to Roscoe.

“They can’t just start breaking contracts and opening up new suppliers on the off chance that Donald Trump might change his mind, which he did – a lot,” Roscoe said.

Roscoe said the economic impact of the tariffs might take five to six months to feel. While U.S. companies purchasing Canadian goods have the advantage of a low Canadian dollar, that advantage is taken away by the 25 per cent tariff, and U.S. companies will likely start to look for cheaper sources of aluminium, steel, or lumber.

“And as they begin to break contracts with B.C. and Canadian firms, then what happens is our companies then have to either pause production, lay off workers, and look for other sources. But that type of process might take a while to kind of work its way through the system.”

Finding other markets

Companies that don’t trade directly with the U.S. have still felt the impact of the tariffs.

Tyler Moore is the CEO of Larix Resources Ltd, a lumber consulting company based in Port Moody that ships finished products mainly to Europe.

In about mid-January, he said they started to feel the effects of tariff threats when they couldn’t get lumber deliveries to their manufacturing facilities.

“Mills were motivated to get as much of their material across the border as fast as they possibly could . . . to avoid getting charged that 25 percent tariff,” said Moore.

He said it might be unfeasible to sell to U.S. customers in the future. In addition to the 25 percent tariff, the U.S. Department of Commerce recently announced plans to increase anti-dumping duties on Canadian softwood lumber to nearly 27 percent.

Sawmills might try to sell to non-U.S. markets, which could flood the market with products and drive down the price for lumber, Moore said.

“The amount of volume which is produced in British Columbia that ships into the United States can’t be consumed in global markets,” he said.

It’s also difficult to break into other markets because a lot of it comes down to making relationships, according to Torsten Jaccard, a professor at the University of British Columbia.

“Some of these economic relationships between companies are decades old. You really start to learn about your counterpart, and you start to learn what they need from you,” he said.

The repercussions of tariffs on B.C. businesses is challenging to predict, he added.

“We’ve never really seen a tariff of this magnitude between two countries as economically tied to each other as the U.S and Canada,” he said.