Posthaste: Food manufacturers take drastic measures to fight U.S. tariffs

Canadian food manufacturers and distributors are frantically renegotiating longstanding contracts and trying to expand their footprint internationally to combat steep United States tariffs, according to

a recent report by Richter LLP

.

Canadian exporters face a blanket 25 per cent tariff from the U.S., though many exports are exempt if they comply with the Canada-U.S.-Mexico Agreement.

To make matters worse, U.S. President Donald Trump has threatened to hike the tariffs to 35 per cent on Aug. 1.

“Tariff disruption is no longer a temporary hurdle; it is a defining feature of the North American trade environment,” the report said. “Companies that fail to evolve will remain exposed.”

Canada’s food industry already heavily relies on U.S. trade, with more than 60 per cent of its agri-food exports heading south,

according to the Canadian Federation of Agriculture (CFA)

.

“With protectionist sentiments on the rise, our cross-border supply chains face serious risks,” the CFA said on its website. “Now, more than ever, dialogue, advocacy and collaboration are essential to ensure our agricultural sectors remain strong and mutually beneficial.”

To protect themselves, food manufacturers have renegotiated deals with longtime suppliers, added clauses into their contracts and have looked at exporting their products to Asia, Mexico or Europe.

“There is now a shift from transactional purchasing to more strategic, risk-aware procurement,” the Richter report said. “Some companies have successfully negotiated volume-based discounts or revised payment terms with suppliers, relying on scale or long-term partnership potential to reduce exposure to tariff-driven price fluctuations.”

The measures have had varying levels of success, however, because many food suppliers have significant pricing power, the report said, leaving some manufacturers with no choice but to accept the costs.

Despite the measures meant to mitigate tariffs, a lot of the cost increases are still passed down to the consumer.

“To manage rising input costs, many food operators have implemented selective price increases, the report said. “However, customer resistance, particularly in value-driven segments, continues to limit how much of those increases can be passed through.”

As food costs climb, manufacturers are considering different price models to keep costs down, including bundling items together as demand for higher-end products slows.

Richter recommends food manufacturers diversify their supplies, get creative to bypass tariffs, use analytics to forecast tariff scenarios and reduce their reliance on the U.S. market by looking elsewhere.

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Canada’s inflation rate climbed to 1.9 per cent in June, up from 1.7 per cent in May.

Prices climbed in seven of the major categories within the index, while gas prices fell at a slower rate compared to May, which helped prop the inflation figures higher.

Without energy, inflation rose to 2.7 per cent.

Economist say the inflation numbers all but end speculation of another interest rate cut later this month.

Read more here. 

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Landlords can often claim tax deductions on a rental unit in the event of losses from the property, amounting to up to 54 per cent depending on the province, but the property must be rented with the purpose of making money. Recently, one landlord was denied tax deductions after rental to their mother at a severely discounted rate, with the judge noting that the property could not have been a business at that rate and was instead a personal venture.

Read more here.

Send us your summer job search stories

Recently, we published a feature on the

death of the summer job

as student unemployment reaches crisis levels. We want to hear directly from Canadians aged 15-24 about their summer job search.

Send us your story, in 50-100 words, and we’ll publish the best submissions in an upcoming edition of the Financial Post.

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fp_economy@postmedia.com

under the subject heading “Summer job stories.” Please include your name, your age, the city and province where you reside, and a phone number to reach you.

McLister on mortgages

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Financial Post column

can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his

mortgage rate page

for Canada’s lowest national mortgage rates, updated daily.

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Today’s Posthaste was written by Ben Cousins with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at 

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.

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