Businesses seek new suppliers, shift production in response to tariffs

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This article was published 07/03/2025 (250 days ago), so information in it may no longer be current.

Businesses are rejigging their supply chains in response to tariffs, including finding new suppliers and shifting production, even as it’s unclear what will be subject to tariffs and for how long.

Dan Kelly of the Canadian Federation of Independent Business said about half of the organization’s members are either actively seeking new suppliers or looking into the possibility.

“This is a big concern to small businesses,” he said. 

However, it’s easier said than done depending on the business and the product, he said. 

“If you have specialty products … the U.S. may be the only game in town.” 

U.S. President Donald Trump levied tariffs on Canadian goods Tuesday and Canada responded with retaliatory tariffs, meaning many items imported into Canada will be more expensive.

But on Thursday the U.S. made goods compliant with the United States-Mexico-Canada Agreement exempt from the tariffs for another month, until April 2. Canada later agreed to wait until then to implement its second wave of retaliatory tariffs and the situation appears to remain fluid.

Kelly said almost half of the CFIB’s members import directly from the U.S., and many indirectly through a Canadian supplier that imports or includes components from elsewhere.

In addition to seeking new suppliers, some businesses are delaying expansion plans, looking for new markets to sell to, and stockpiling U.S.-made products, he said.

Lots of companies are actively working to source supply from companies around the world instead of the U.S., said Karl Littler, senior vice-president of public affairs for the Retail Council of Canada. 

“That’s a pretty widespread phenomenon,” he said. 

“The alternative of hoping for the best is probably not a viable one.”

Though there is uncertainty over how long tariffs will be in place, and how widespread they will be, many businesses aren’t waiting to find out, and many businesses started making these kinds of shifts before tariffs were in place. A Feb. 6 KPMG survey found almost half of businesses were already reconfiguring their supply chains. 

Amy Tughan’s Nova Scotia-based small business Cool Hand Nukes, which sells handmade microwave cozies, usually imports custom fabrics from a company in North Carolina.

But in the face of tariffs as well as a weaker loonie that’s already making the goods more expensive, Tughan is looking overseas for alternatives in South Korea and Japan. 

“Everything is just on tenterhooks,” she said. 

“We’re so small that something like that could cripple us.”

It’s not only Canadian companies making these changes, but also U.S. or multinational firms that operate in Canada, added Littler. 

This week, chocolate maker Lindt & Sprüngli said it’s shifting some production from the U.S. to Europe so its Canadian supplies aren’t subject to tariffs. 

“Currently, less than half of our Lindt products sold in Canada are sourced from our U.S. production facilities. To ensure uninterrupted availability of our premium chocolates, we temporarily increased stock levels in Canada while transitioning our supply chain from U.S. production facilities to European sites,” a spokesperson said in an email.

Even if the tariffs are entirely lifted in the coming weeks, “I think most business owners are accepting that we’re going to have four years of uncertainty,” said Kelly. 

Littler agreed, adding that companies signing new deals with suppliers aren’t going to do so temporarily. 

“I think that the uncertainty is problematic,” he said.

“We’re getting whipsawed.” 

This report by The Canadian Press was first published March 7, 2025.