In a Canadian winter, all drivers learn that when your vehicle encounters icy or dangerous road conditions, you should “lean into the skid” or “turn into the skid,” while seeming to be counter-intuitive; it does work.
Canadian organizations that deal with the United States are faced with an illegal tariff situation that is not of our making. Arguing about how or why we are in this situation is less important than how we plan, react, and act now and moving forward. My personal belief that appeasement will not work doesn’t matter, it is very likely tariffs and counter-tariffs are going to happen, and as leaders of small and medium-sized organizations, we are going to be affected … so we need to have a plan and need to be ready when it happens.
I am suggesting we “lean into the skid” and consider what follows as a starting point to deal with this dangerous situation.
Don’t panic. Be concerned because tariffs are going to be a problem; and no aspect of our economy or lifestyle will be unaffected. What every organization needs now is to have critical, logical, and creative thinking and problem-solving conversations. Like all the obstacles you have overcome in the past, tariffs are just something else to be overcome; they do not have to be the end of your world.
Become Informed. Talk to your suppliers, your legal advisors, your competitors, your local chamber of commerce, and your local politicians; being informed and understanding what is happening is vitally important. Everyone will have different opinions, and you must navigate for yourself; however, being more aware will allow you to make better decisions.
What are the facts? While being informed is vital, be aware that not all information is true. The media is full of opinions, rhetoric, and even misinformation and certain leaders and politicians are worse. Listen to people who can verify or welcome fact-checking; avoid ones who don’t.
Talk to your people and make them part of your decision-making processes. Welcome collaboration and ideas; you will still be the leader, but a formidable team is better in a crisis than just an individual. Use discussions to build confidence and to implement your plans.
Keep your customers up to date. Educating and bringing your customers up to speed on tariffs and how you are pivoting to continue to provide them with the best service and prices is a key component to “turning into the skid.” Keeping them informed of your plans and how your plans evolve will build trust and loyalty among those people who rely on your organization.
Base all your decisions on how it will affect you, your business, and your customers. Tariffs are an inflationary shock to the economy. The effect on supply and demand will disrupt supply chains, affect purchases, shipments, cash flow, jobs, and confidence, and create uncertainty. Alleviating stress and anxiety, continuing to deliver value, and anticipating how to overcome these shocks will help your team navigate this new world.
Look for positives. Begin by using a simple “T chart” of the positives and negatives. Part of “turning into the skid” is that instead of avoiding the reality of tariffs by embracing this reality, you can take positive action to mitigate this situation.
Look for alternatives. If you haven’t done this in the past, now is better than tomorrow. Relying on one or two primary suppliers is not “good business,” and having a diverse group of suppliers will make your organization stronger. Look for Canadian suppliers, look to the European Union countries, and look to the Asia-Pacific Economic Cooperation organization. These countries and organizations will likely feel the wrath of American tariffs as well and they will have supplies and resources that may help you avoid dependency on US suppliers and perhaps will help isolate the Americans until they realize the world may not need them as much as they think.
What elements of your business will be affected; what elements will not be affected, and can you strengthen those that are unaffected? Looking objectively at your organization, you may realize you have opportunities that are tariff-resistant and could help lessen the effects of the tariffs on those areas that are affected.
Talk to your suppliers, both the ones affected and those not affected by tariffs. Collaborate and communicate to help them withstand this “tariff environment.” We are a trading nation and trade succeeds when all parties benefit.
Make the best decision you can with the facts and time that you have. Moving forward, set goals and look at the facts, evaluate the alternatives, make the best decisions you can with the time you have, and then adjust as necessary.
Pivot towards your competitive advantages. Tariffs are going to change you and your organization; realize they are unavoidable but you can do something about it and appreciate we are not going back to the world it was before.
Get and stay involved. Join your Chamber of Commerce, and network with politicians and government leaders. Engage in your community, locally, provincially, and federally.
More than ever get better connected to trendsetters; and new suppliers, and constantly be looking for your next competitive advantage. This maxim is true for businesses, service providers, non-profits, and charities.
Secure supplementary financing if necessary. Having access to liquidity is important; having access to a line of credit is vital; and ensure you are maximizing the return on every dollar you spend.
Watch your cash flow, particularly on your American purchases. Have a contingency plan for when tariffs take effect. Plan for having to cancel orders and refund customer orders if necessary. Do the calculations for how your margin will be affected if you must “eat” the entire tariffs for existing orders.
Constantly monitor the political and economic realities of your marketplace and adapt as necessary. Depending on the severity and length of the tariffs, planning and being able to accept the worst and then taking action steps to mitigate your situation is the best course of action before, during, and after this crisis.
Is there a magic bullet for this crisis?
Tariffs may be avoidable; however, educating your people, customers, and your community is not. The best way for your organization to survive tariffs and other external threats is to “lean into the skid,” make plans, and be ready.
All small and medium-sized organizations are resilient you have weathered Covid-19, economic upturns, and downturns. Charities have survived the effects of good and bad governments; the latest crisis manufactured by a fascist American President is one of the greatest so far, but you do not have to be a victim. Learn what to expect, plan, prepare, and then act accordingly. `
Good luck,
Paul.