30% Tariffs on Mexico/EU? 35% on Canada? BIG Impact on Retail Suppliers???

With 30% tariffs on Mexican imports and 35% on Canadian goods potentially going into effect this Friday, the landscape for retail suppliers could shift dramatically. We explore the potential ripple effects on pricing, supply chains, and the broader economic implications.

Keywords

#tariffs, #retailsupplier, #supplychain, #pricing, #HRG, #CanadaTariffs, #MexicoTariffs, #tradedeals, #consumerimpact

Summary

The conversation delves into the implications of upcoming tariffs on imports from Mexico, the EU, and Canada, focusing on how retail suppliers should prepare for potential price increases and supply chain disruptions. Key themes include the importance of communication, managing accruals, and understanding supply chain dependencies. The discussion also highlights the role of HRG in providing strategic advice to navigate these challenges effectively.

Takeaways

• 30% tariffs on imports from Mexico and the EU are imminent.
• Retail suppliers must manage accruals due to uncertainty.
• Communication is crucial in understanding expectations.
• Canada's trade deal with the EU may impact U.S. exports.
• Automotive and packaging sectors may face significant challenges.
• Hidden costs in the supply chain could lead to price increases.
• Retailers need to notify customers about price hikes in advance.
• Short-term absorption of costs may lead to long-term consumer impact.
• HRG offers expertise to help suppliers navigate tariff challenges.
• Strong relationships with retailers can facilitate better communication.

Titles

• Navigating Tariffs: What Retail Suppliers Need to Know
• The Impact of Tariffs on Supply Chains

Sound Bites

• "30 % tariffs are set to go into effect"
• "Canada seems to be in a precarious situation"
• "HRG is ready and able to help"

Chapters

00:00

Navigating Tariffs and Their Impact on Retail

03:00

Understanding Supply Chain Dependencies and Risks

06:00

Leveraging Expertise for Strategic Advantage

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"Wiser Decisions, Fewer Deductions"

Transcript

Boyd, 30% tariffs are set to go into effect August 1st on imports from Mexico and the EU and 35 % tariffs on Canada. Maybe it will happen, maybe it won't. So much uncertainty. What should retail suppliers do while this all gets sorted out?

One thing top of mind would be accruals is to make sure you manage those accruals because you have no idea where this is going to land and the retailer could push some or all of the burden onto you. And you may have not built that into your pricing. So I think just leading off with that, of course, communication. You want to keep the lines of communication open and understanding expectations. Just before I got on with you talking to one of our major clients, CPG company.

They're concerned about tariffs and they said that there's a lot of noise surrounding that, meaning that they don't really have a clear line of sight into what the pricing should be in going into the fall. anything could happen, but I think, again, communication and accruals are probably the two top things that I would focus on.

Canada seems to be in a precarious situation last year. 65.9 % of Canada's exports, basically two thirds of all their exports went to the United States. But Canada has announced a trade deal with the EU and they seem to be leaning very strongly into that partnership at the moment. If it plays out that Canada's exports to the United States do shrink, what categories do you think will take the biggest hit?

Well, top of mind automotive, certainly, but I think the greater concern is suppliers having dependencies for other suppliers that feed into the manufacture of the product and packaging that they might not have a clear line of sight into some of the cost inputs are coming from Canada and just how that will impact things. I think, I think one of the concerns I have is how far upstream are some of these costs going to enter.

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the system. And so we might see a rippling effect of price increases, which is always painful because in retailing, passing on a price increase, you usually need to give a 60 day notification. In some cases, it's 90, which what that ends up doing is it puts pressure on having those initial price increases maybe being larger than they need to be because they need to make up for lost ground in that intermediate period of time. My biggest concern is just those hidden costs and how that's going to play out.

The old NAFTA agreement, you had big partnership between Canada, United States and Mexico. Mexico with a 30 % tariff increase.

think Mexico is a much greater problem and I have serious concerns because a lot of companies, lot of suppliers use that as a staging ground where they'll bring in maybe some imports from Asia and finish assembling it there. I think every retailer has major operations including DCs just south of the border where they can stage things, put it on rail and ship it into the US and that is going to really

have potentially a severe impact, right? So I'm more concerned about the tariffs on Mexico, just because I know there's far more suppliers that leverage that country versus Canada. I maybe it's a little easier to see some of those cost inputs just simply due to all of the warehouses in DCs that you have just south of the border, whereas you don't have that.

in Canada, you have other things where Canadian products might be factoring into the creation of CPG items within a retailer.

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Increases have brought in a lot of money for the United States, well over $100 billion so far this year, which is an all-time record. But do think there will be any unintended consequences from these tariff increases?

Yeah, I think in the short term, the retailers and suppliers are going to absorb some of these until they sort it out. But once they do, I think it's unavoidable that either it's going to end up impacting the consumer and price increases or the shareholders, right, where the earnings. There's that old saying that companies don't pay taxes, people do, right? Because companies are owned by people. And so eventually those costs will trickle down. But I think in the short term,

It's gonna be harder to see, but I think in the long term, we're gonna see the impact.

President Trump has sent letters to 23 different countries about tariff increases and they range from anywhere from 20 to 50%. So much hangs in the balance and I know that there are many suppliers looking for wise advice right now. How can they get some help from HRG?

What HRG does is it helps you understand what's going on in your particular category. We represent suppliers in all of the major categories and all of the major retailing channels. So we're able to leverage best practices that are occurring within those channels and categories. Also too is that we can help size up the challenge because essentially what tariffs are going to do is they're going to bring about price increases eventually and

(05:09.774)
how you message those to your customers, to the different retailers and the different channels, really matters because if you don't message it properly, you're going to end up getting a claim a year or two later renegotiating that price increase. So I think it's really to their advantage to leverage HRG simply because we can help them mitigate any potential risk.

And by virtue of the fact that you're servicing many clients, one particular supplier might not be able to have that kind of vantage point, but HRG does.

Yeah, exactly. And the other factor too is that we have great relationships with all of the major retailers in the sense that they understand we're an advocate for the suppliers and vendors, but we basically try to honor the spirit of the agreement. So they know that we're not going to create a lot of noise in their business. We're just there to make sure there's clear communication occurring. So from all aspects of a business for a supplier, I think we can really help.

Well, thank you, Boyd. It's good to know that retail suppliers can count on you and the experts at HRG. And if you would like for HRG to look at your particular situation and to help you get a clearer picture of your next steps, you can schedule a free strategy call by going to the HRG website at HRG-audit.com or you can call HRG at 479-616-1600. You can email us at info@HRG-audit.com.

HRG is ready and able to help you. And our wish for you is this, wiser decisions, fewer deductions. See you next time on the Savvy Supplier.