Some Manitoba businesses may benefit from trade war, but reality is that most are 'going to get spanked'
'We're about to get a lesson in why you shouldn't get involved in trade wars if you can possibly avoid them'
Some businesses and producers may see an increase in sales as the Canada-U.S. trade war heats up, but the reality is most will ultimately be hit in the pocketbook, say experts and business owners.
On Thursday, Canada released a list of goods that will see tariffs imposed on July 1, in retaliation against U.S. tariffs on Canadian steel and aluminum that came into effect Friday.
The Canadian list focuses on steel and aluminum, but also includes consumer goods from mustard to toilet paper to chocolate.
Erin Crampton, owner of Crampton's Market in Winnipeg says while some of the local goods her store produces may see an increase in sales following the new tariffs on items coming from the U.S., it's not that easy — nor does it happen quickly.
"When there's a trade war, there are no winners. We're all going to get spanked," she said.
"The products that we make require products from the US, and packaging from the US, and different places, and trade wars are stupid."
Among other local goods, Crampton's family produces seasonal jams and jellies, including strawberry jam — which is on the list of tariffed products.
While stores may inquire about stocking her jam to offer consumers more choice, there's no guarantee the Cramptons can meet demand with ingredients that are only available in July in Manitoba.
That doesn't mean no local businesses could meet demand — Crampton gives the example of local company GORP, which produces energy bars and is already expanding, and may be able to move quickly if a price advantage came along.
However, most have no guarantee their products will stay on shelves when the trade war is over, making it risky to significantly ramp up production, she said.
Bruce Cran of the Consumers' Association of Canada echoed Crampton's remarks, saying local producers generally don't have the capacity to quickly fill a large gap in the market.
"We're about to get a lesson in why you shouldn't get involved in trade wars if you can possibly avoid them," he said.
"This sort of thing can change almost day by day. And it will take a little time for the effects to be known and recognized, but this is going to be a big problem for Canadians and it's going to hurt us in the pocketbook."
While local businesses may struggle to fill sudden demand, other Manitoba industries will also see immediate impacts, said Peter Hall of Export Development Canada.
"Anybody that [uses steel] has to be thinking about the impact that's going to be on them. Same goes for aluminum," said Hall.
"So there's a bus manufacturing industry here, [the] aerospace industry … those would be affected directly by that."
The trade expert was in Winnipeg Friday to give a lecture on the state of the world economy. He told CBC other local manufacturing industries, like farm equipment and specialized components, will have little choice but to pass costs on to end users and ultimately, consumers.
"It's very difficult to know how to capitalize on a situation like this when these are policy decision that are turned on one day and turned off the next," he said.
Opportunities in other markets
While it might be difficult for businesses to capitalize on opportunities created by the tariffs, they underscore a major point Hall made during his presentation, which is that Manitoba companies need to diversify their export markets and reduce their reliance on the United States.
Behlen Industries in Brandon manufactures steel buildings, but the company makes a point of purchasing its steel in Canada. Most of the company's customers are in Canada or Europe.
"We support local, so we buy our steel in Canada, so I think that way we shouldn't have that impact," said Rosa Villamizar, marketing and business development manager for Behlen Industries.
Hall says Manitoba's agrifood industry has an opportunity to take advantage of a growing global middle class hungry for high-quality food, something Kiyomi Togi hopes to encourage.
Togi is the CEO and co-founder of East Nexus Inc., which connects Manitoba producers with markets in Japan and other Asian countries. She thinks the recent tariffs provide an incentive to explore other opportunities.
Anytime the market changes, Togi said, "you can panic, and say, 'Oh, what can I do, the regulations changed'.… On the other hand, you can see this is another opportunity, or another possibility for you to explore new markets."
Stores will scrutinize
Karl Littler of the Retail Council of Canada said larger grocery stores are scrutinizing their products to find out which ones are of U.S. origin. They'll also be figuring out what products they can substitute with Canadian ones and what their contractual obligations are to suppliers, he said.
They may be able to easily substitute some imported products with Canadian alternatives, like maple syrup, which is on the list, said Littler. Others may not be so easy.
"We don't, on the other hand, grow a whole lot of orange juice," said Littler, which is on the list. "We don't make a whole lot of lawn mower parts. We don't know what might replace those."
It's important to understand the 10 per cent tariff isn't on the retail price, said Littler, it's on the import price of the product. As for when those retail prices may start to rise, that's also a bit of a guessing game.
"It wouldn't be immediate," he said. "You've also got stock in hand," although merchants don't like to sit on inventory, and stocking up may not be an option.
"The impact will definitely be felt more intensely the longer this goes on."