Creative Solutions: What Canadian Businesses Are Doing in the Trade War

When Canadian retaliatory tariffs on US steel and aluminium hit 50%, a combine assembled in Nebraska and shipped to Saskatchewan got taxed twice. Once on the parts going into the US plant. Once on the finished machine coming back into Canada. German company CLAAS builds its LEXION 8000 Series combines in Omaha, Nebraska though Western Canadian farmers are its primary market. CLAAS ran the numbers and moved production of its Canada-bound machines to Harsewinkel, Germany to avoid being tariffed twice because Canada has a free trade agreement with the European Union through CETA.

A German company protected its Canadian market share by routing around the United States entirely. The businesses finding a way through are not waiting for Washington to change its mind, they got the memo, so they are making decisions and taking action.

Companies Built Plans Before They Needed Them

Companies had Plan for Trade War

Purolator commissioned a survey of 348 supply chain and logistics decision-makers across Canada and the United States in June 2026 and found tariffs have reduced revenues of affected businesses by an average of 23%.

The survey also determined the Canadian companies are restructuring more aggressively than their US counterparts by eliminating the most tariff-exposed product lines. They are exiting markets that no longer work, moving manufacturing, and systematically reducing dependency on a single trading partner who made clear that it sees Canada's dependency as leverage to exploit.

Since 2019, CEO of Ennis Fabrics in Sherwood Park, Alberta, tracked product-level tariff information in his company's ERP system. When the crisis arrived, Ennis was not scrambling through a spreadsheet trying to figure out which products crossed which borders. He already knew. Ennis Fabrics raised prices on US-sourced products, absorbed higher freight and energy costs, and grew market share in 2025 because he had the information and a plan. Ennis Fabrics proves the businesses with information move faster and lose less.

Product Line Rationalization

The fastest decision available to any manufacturer is to cut the most tariff-exposed SKUs. A business that eliminates its three least viable product lines and redirects production capacity toward its five strongest ones is a more focused competitor, has lower input costs, simpler logistics, and a clearer value proposition in the markets it chooses to stay in.

This is the most commonly reported restructuring move in the Purolator data. It is also the move that creates the least visible story, because rationalization looks like a company getting smaller. Often it is a company getting sharper, like Bombardier.

Sourcing Decisions Are Becoming Strategic Decisions

The Canadian Federation of Independent Business documented switching a supplier from a US source to a new source takes weeks to months. Replacing a US customer base with a European one takes years. Focusing on reducing vulnerability by finding new venders in free trade countries creates certainty and reduces barriers. Chapman's Ice Cream cancelled it's US vender contracts when it found European replacements, the result was increased reach of it's brand story and increased sales during the 'Buy Canadian' momentum.

Canadian imports from the US fell by approximately $2.86 billion in the first half of 2025 compared to the same period in 2024. This shows Canadians are buying differently. A manufacturer buying US steel, US packaging, US components, or US raw materials has options because Canada negotiated free trade agreements with the CPTPP nations across the Asia-Pacific and CETA partners in Europe.

Chapman's isn't the only company moving to new partners in free trade geographic areas. PNP Pharmaceuticals in British Columbia is scouting Asia for new pharmaceutical manufacturing customers after US tariff pressure hit their North American business. "We are now venturing into other markets as we see that we need to pivot," said the company's partnership sourcing manager.

LabelPak Printing in BC, a distributor of packaging products sourced from Asia, made a different call. Rather than chase new international markets, the company's founder is deliberately pulling back from the 15% of sales that come from the US and concentrating on the Canadian market entirely. "We are going to put more emphasis on the Canadian business," he said. They are refocusing to go deeper into the market without tariffs.

Two businesses in the same province, facing similar pressure, reading the same trade environment and reaching opposite conclusions about where to concentrate. Both decisions are putting them in a position to meet future opportunity as global trade recalibrates.

The Domestic Market

Chapman's Ice Cream absorbed all immediate tariff-related cost increases rather than raise prices on Canadian consumers. They sourced replacement ingredients from European suppliers to replace US inputs that became unviable. Their sales increased.

Loblaw reported a 10% uplift in sales of Canadian-made products in early 2025. The company's "Swap & Shop" feature in its PC Optimum app, which suggests Canadian alternatives to US products on a shopper's list, saw 75% week-over-week growth in usage as Canadians wanted to know which brands were made in Canada.

Karen Thorpe is a woodworker in Newfoundland who made a deliberate decision to stop selling to American customers entirely. The result is that her sales have gone up, not down. "Where Canadians have decided to support local and support their own within their own country, my business is actually up over the last two years," Thorpe told CBC News, adding she no longer sells her products south of the border.

CIRA's 2026 Canadian Internet Trends report found that 77% of Canadians say they will pay more for a Canadian-made item. Sixty-five per cent say they prefer buying from a Canadian retailer when they have a choice. This is the pricing conversation Canadian businesses have been waiting to have with domestic customers for decades. It is happening now because Canadians are choosing Canadian.

The New Canadian Customer is Government Procurement

Canada's Buy Canadian Policy mandates federal contracts over $25 million prioritise Canadian materials, expanding to $5 million in spring 2026. The policy requires Canadian-produced steel, aluminium, and wood be used in large federal construction and defence projects where a Canadian source of supply is available.

Build Canada Homes has approximately $700 million in funding and is prioritising projects using Canadian wood products, including cabinet companies, which are struggling from high US tariffs. The federal government estimates this generates between $70 million and $140 million in new demand for Canadian lumber alone.

For a cabinet maker, a steel processor, or a lumber mill whose never sold to government, this is a new customer who is contractually obligated to prefer Canadian products. Public Services and Procurement Canada publishes all federal tender opportunities through Buyandsell.gc.ca. Provincial procurement portals have the same information.

The Market Unlocked Inside Canada

In July 2026, the premiers of nine provinces signed an agreement allowing direct-to-consumer alcohol sales across provincial borders. Eight of those provinces are implementing their approaches immediately. British Columbia commits to having its system operational by February 2027.

Ontario's local wine sales increased approximately 79% in the first year after American alcohol was pulled from provincial shelves. That number came from a shelf gap, not a marketing campaign. The gap is now structural policy. The question for every Canadian craft beverage producer is whether they will be positioned to fill it.

The Canadian Mutual Recognition Agreement, which took effect June 30, 2026, goes beyond beverages. It allows goods lawfully sold in one province to be sold across the country without meeting additional provincial requirements, except where specific rules still apply. For any business that has been treating provincial borders as a practical barrier to national distribution, those borders just got lowered.

This enabled Isaac Tremblay, owner of Distillerie du Quai, to make a decision running directly counter to conventional retail wisdom. He stopped trying to get listed at the SAQ, Quebec's provincial liquor monopoly. The listing fees, the process, the margin compression, the waiting, none of it was working for him. "We stopped spending money to be listed at the monopoly and instead focused on creating organic demand and connecting directly with customers." The result were their profits doubled by building direct to customer relationships instead of being dependent on retail shelves.

Jordan Ramey from Burwood Distillery in Calgary built what he calls an "experience first" strategy around the insight that even when consumer spending tightens, people continue to prioritize memorable experiences over things. "Our most effective strategy was doubling down on tourism and education. While retail spending tightened, consumers continued to prioritize high-value experiences. Our gin schools, tours, and Veranda dining experiences all saw strong growth, proving that connection and education still matter." Gin schools. Tours. A dining experience inside a working distillery. None of these are export strategies. All of them build local customer loyalty no tariff can touch, because the product being sold is the relationship with the maker and the consumer.

The IMF estimates by eliminating all Canadian internal trade barriers will boost GDP by as much as $200 billion over time. The One Canadian Economy Act, which became law in June 2025, eliminated all 53 federal exceptions under the Canada Free Trade Agreement.

Canada has been leaving money inside its own borders for decades. This is changing.

Consortiums and Shared Export Infrastructure

Small businesses going to market alone in Europe or Asia carry the full cost of market research, trade show attendance, logistics setup, and distributor development. This is a huge barrier to small and mid-sized businesses to break into new markets being opened by Prime Minister Carney.

There is a way for small businesses to come together to share the risk.

The consortium model is well established in Scandinavian and Italian manufacturing, where clusters of small producers in the same region share export agents, booth space at international trade shows, consolidated shipping containers, and sometimes shared brand identities for export markets while maintaining separate domestic brands. Canada has almost no equivalent infrastructure at the SME level.

A furniture maker in Guelph, a cabinet maker in Kitchener, and a millwork company in Cambridge could share a European distributor, split a booth at interzum in Cologne, consolidate a 40-foot container, and divide CanExport-eligible market research costs three ways. CanExport provides up to $75,000 for international market development costs. The 2026 intake is open. None of these businesses could afford to move at the speed this crisis demands going alone, but together, the economics change.

The Trade Accelerator Program, delivered through World Trade Centre Vancouver since 2017, with more than 500 companies graduating across British Columbia, is the closest model Canada currently has. TAP graduates report export revenue increases of 23% within six months of completing the program. But TAP is a training and introduction program teaching businesses how to export. It is not a structural consortium that does the exporting with them. That infrastructure gap is real, and the cost of building it is far lower than the cost of losing export markets for lack of it.

This is a new business idea for an entrepreneurial exporter who can organize businesses who want to expand into new markets by packaging them together.

They can even take advantage of government export agencies who will help them and provide funding. Export Development Canada added $5 billion in capacity through its Trade Impact Program to help eligible Canadian exporters access credit insurance, financing, and guarantees. This program helps businesses of all sizes.

Buying Groups for Input Costs

The retail industry has used buying groups for decades to take advantage of economies of scale. Canadian manufacturing SMEs can band together to coordinate higher order volume for a lower price per unit.

A buying group aggregates volume across multiple small buyers to negotiate better pricing with non-US alternative suppliers, share the switching cost of qualifying a new supplier, and split the logistics cost of smaller initial orders from new sources. The same tariff pressure making US inputs unviable is creating the commercial case for Canadian manufacturers to pool their purchasing the way their retail counterparts have always done.

This is a business decision that requires finding two or three companies with similar input needs and similar willingness to act. An entrepreneur with experience in procurement could put this together and build their own business to take advantage of economies of scale.

Licensing and White Labelling

Direct export requires a business to be present, represented, and supported in a foreign market. Licensing and white labelling removes this requirement.

Lind Furniture makes upholstered sofas and chairs in Woodbridge and has survived through department store collapse, multiple recessions, and the shift to online retail. It white-labels for Costco Canada, meaning Costco brand sofas are manufactured by Lind in Woodbridge.

A Canadian manufacturer with genuine IP, a distinctive process, or a product design that cannot easily be replicated can license the right to manufacture and sell the product to a foreign company in exchange for royalties. The Canadian company collects revenue without managing foreign distribution, foreign customer relationships, or foreign market risk. It is underused by innovative Canadian SMEs who have not identified what in their operation is licensable.

White labelling works in the opposite direction. A Canadian manufacturer with production capacity and expertise produces goods under a foreign buyer's brand rather than their own. Canadian food processors already do this for large US and European retailer private labels. The foreign buyer takes on market development. The Canadian manufacturer runs the line. It builds no Canadian brand equity abroad, but it keeps the line running and the workforce employed while longer-term market development strategies are built.

Renegotiating Contracts to Share the Pain

New tariffs and economic shocks are landing on top of existing contracts that priced in a different world. The instinctive reaction is litigation or a zero-sum renegotiation. The productive response is neither.

A Canadian exporter who goes to a long-standing US customer and proposes a tariff adjustment clause, rather than simply raising prices or walking away, is offering a partnership rather than a demand. This conversation acknowledges shared pain, adjusts pricing formulas to include tariff pass-through mechanisms, and builds in review triggers tied to tariff levels. It preserves the relationship and signals the supplier intends to still be a supplier when the current uncertainty resolves.

What the Data Shows

The Canadian Chamber of Commerce's Business Data Lab analysed the trade pivot through mid-2026. Non-US exports increased 17% between 2024 and 2025. But roughly 90% of Canadian businesses still describe themselves as local in nature.

The diversification is being driven by businesses who already had some international infrastructure. They expanded it. The businesses with no international footprint are not pivoting abroad in meaningful numbers. They are pivoting domestically, into the Canadian market the Buy Canadian movement has made more valuable, and into government procurement channels restructured to prefer them.

Benjamin Bergen, CEO of the Canadian Venture Capital and Private Equity Association, said policymakers and firms must pursue a "Canada plus" strategy. Bolster the domestic market. Diversify where companies sell and from where they attract investment.

The businesses finding their footing in this environment are not waiting for that table to be set by a trade deal. They identified what they own in terms of product quality, process, intellectual property, or brand, and built their solution from that point outward.

Need a good go-to-market plan, book a time to chat.

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Shannon Peel is a Brand Narrative & Communications Leader based in Vancouver looking for opportunities to help Canadian brands tell their stories and take products to new markets.

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