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Managing Around Tariffs and Cost Uncertainties in Manufacturing

Published on: Jul 18, 2018

Sage softwareWith the rising uncertainty created by American President Trump’s protectionist tariffs, Canadian manufacturers need all the facts they can gather to manage around marketplace uncertainties. Sage software offers transparency, real-time data from cloud-based products, and solid reporting capabilities to help you manage costs in an uncertain environment.

American Tariffs and Their Potential Impact on Canadian Businesses

The proposed 25% tariff on steel and 10% on aluminum are expected to significantly cut into American manufacturing profits. Fully one-third of the 100 million tons of steel used by American businesses is imported into the United States each year and 90% of the total 5.5 million tons of aluminum used by U.S.-based companies is also imported. Approximately 17% of that steel is imported from Canada.

Although the thought behind protective tariffs is often popular, the results may be anything but popular once companies raise their prices to accommodate the additional tariffs. Canadian companies may find steel orders falling if their American customers cannot order as many products, which in turn could potentially impact Canadian businesses.

… and Canada Retaliates

Canada isn’t taking these moves towards protectionist tariffs lightly. Canada announced its plans to retaliate with $16.6 billion worth of restrictions on United States imports. The affected goods include steel, aluminum, and other products.

There are many other items that could possibly be impacted by the retaliatory tariffs. Many of the raw goods and materials used by Canadian manufacturers to fill their orders could be affected. While the actual amount per item may vary, the overall impact is one of potential rising costs and uncertainties. And, as most business people know, the stock market and the business world hates uncertainty. It nearly always has a negative impact on business.

These uncertainties are unintentional consequences of a change in tariffs. While your business cannot change the laws surrounding exports of products into other countries, it can use the data available to manage around such uncertainties.

Using Sage Software Data to Manage in an Uncertain Environment

When tariffs tack on fees to imported raw materials, what should you do? You can increase your prices to cover the increased costs, but that can result in lost business. Or, you could keep prices the same, but recognize that the new tariffs have cut into your profit margin.

There’s another way that helps you manage the uncertainties around trade wars, tariffs, and everything in between—managing from your data.

With Sage software in place, you’re collecting a lot of useful, valuable data. You’ve probably read in countless business journals that you should be using data to drive decision-making. Now is the time to use that data from your Sage software to make your decisions!

For example, you can:

  • Review your supply chain vendors and favor those without restrictive tariffs to keep costs down
  • Find new, local or at least in-country sources of raw materials needed
  • Consider offsetting the additional costs from tariff-based items by finding lower-cost alternatives to other elements used to make your products
  • Find other methods to lower the final cost of goods sold without sacrificing quality

We can’t answer these questions for you, but the data you can run from Sage software may go a long way to helping you make wise choices for your business. Let the politicians in Washington and Ottawa fight it out—you’ve got a business to run. With Sage software, you’re armed with the facts to make smart moves that can help you maintain profitability.

IWI Consulting Group

IWI Consulting Group helps Canadian businesses and non-profits choose and adapt the best enterprise resource planning (ERP) software for their needs. Small to mid-sized companies will find the help and resources they need to choose the right software at the right value. For more information, visit IWI Consulting Group or call 1-866-916-3851.