After Donald Trump promised a 25% tariff against Mexican and Canadian products, CFOs who import and export goods from those countries are trying to figure out how to manage the risks under the president-elect’s system of tariffs-as-bargaining chips.
They have a lot of developments to keep up with. Just over the weekend, Trump expanded his targets for export duties to any country that drops the dollar as a reserve currency.
Regardless of where these negotiations land, here’s what CFOs need to know about how other countries are reacting (or plan to react) to potential tariffs.
(Uh-)Oh, Canada. First, our neighbors to the north. Canadian Prime Minister Justin Trudeau pressed his country’s case at Mar-a-Lago on Friday, the AP reported. With 77% of its exports going to the US and the country more reliant on trade than most countries, the stakes for Canada are incredibly high, but so far Trudeau’s government has taken a more conciliatory tone toward Trump’s proposals, trying to address his concerns and not highlighting the potential to respond with tariffs of its own.
Kirsten Hillman, the Canadian ambassador to the US, told the AP that the country would spend more on helicopters, drones, and border law enforcement while emphasizing that “less than one percent” of people caught entering the US illegally were coming from the Canadian border.
As for the US trade deficit with Canada—something Trump strongly dislikes, whether it’s with Canada or any other country—Hillman implied that Canada can’t buy nearly as much from the US as vice versa, because Canada has “one tenth” its population.
Mexico(h no). Now to the south, where Mexico’s new president, Claudia Sheinbaum, pledged the country would retaliate against the tariffs. Companies that import materials from other countries, including from Mexico, should be modeling cost increases, according to a PwC article published just after the election.
Those that use maquiladoras—foreign-owned Mexican factories where US companies can send materials, duty free, which are then returned across the border as finished goods—face the potential for “double tariffing,” PwC said, because Mexico recently removed some materials eligible for tariff-free import through the program, so businesses “should reassess production and sourcing strategies.”
News built for finance pros
CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.
Businesses also need to make sure they’re integrating customs with other tax operations, PwC said, or they won’t be able to “anticipat[e] the full financial impacts under various tariff scenarios and ensur[e] strategic resilience across supply chains."
BRICS wall. Trump expanded his fight beyond Mexico and Canada, posting on X that unless BRICS Countries—which include Brazil, Russia, India, China, and South Africa—promise not to replace the US dollar as their reserve currency, “they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful US Economy.”
A Kremlin spokesman, Dmitry Peskov, said coercing countries to keep the dollar will do the opposite, Reuters reported. “If the US uses force, as they say economic force, to compel countries to use the dollar it will further strengthen the trend of switching to national currencies (in international trade),” Peskov said.
You all right, mate? Even countries that Trump hasn’t singled out are sweating. The UK is trying to get Trump to not put tariffs on services, since “over two-thirds of UK exports to the United States come from services rather than goods,” Reuters reported. The US imports more services from the UK than anywhere else, according to the US Trade Representative.
Goods exporters, though, are having to plan for the potential that Trump’s tariffs will be in place by the time that current shipments reach the US, according to George Riddell, director of trade strategy at EY UK.
Act now, no matter what happens. Companies affected by the potential tariffs need to get a move on, according to Lou Abad, a principal for international tax at KPMG. He told CFO Brew in an emailed statement that companies “must be proactive to blunt the impact of potential future tariffs.”
Among his recommendations: They could diversify their supply chains to change products’ countries of origin, renegotiate contracts so that new tariffs would “trigger pricing reconsideration,” and “reassess…customs duty saving strategies that may now have a better implementation ROI in the high tariff environment.”