How Will Canadian Consumers Respond To Tariffs?

It all may sound preposterous to you, but so was the pandemic as it was looming into an outbreak, and I wrote about how consumers would react. It turned out I was right. Now, we are faced with different creature Tariffs.

What are the odds of tariffs happening? It all depends on why, other than for reasons of the border, they would be enacted. Canada demonstrates good faith and a relatively strong coalition between the federal and provincial governments addressing the border immediately. We have already made strong commitments to protect the border. Yet the antics of making Canada a 51st State continue, and they are insulting. Is this an attempt to destabilize Canada? Will the same gang storming the Capitol in 2021 storm the Canadian border?

Let’s be clear: President-elect Trump has said that Canada owes 100 hundred billion dollars to the US; well, it isn’t that much, but let’s, for the sake of this exercise, say that it is. He is referring to the deficit in trade as not being equal. However, it would take enormous amounts of money from each Canadian to make it equal. With almost 42 million people in our country, we would each have to spend $2,380 US more a year to make up for the deficit. However, if we were to put the weight on those with jobs, about 22 million, it would be about $4,545 USD each after tax.

But why is this deficit so high? The US buys a lot of oil, gas, and other natural resources from us, including fertilizer, I might add—something we don’t need to buy from them. But let’s not forget that about 66% of Canada’s oil is owned by foreign companies, and most are US companies in Alberta, so with tariffs, they would be taxing their own US citizens and impacting American company profits. How much sense does that make?

How will Canadian consumers react to tariffs? And what should retailers and other businesses do or expect?  Consumers will retrench, of course, and spend a lot less. And they may retaliate by spending less on anything from the US. It is very possible that the issues with the border are no more than a ruse to do other things like push manufacturing conducted in Canada to the US. Like car manufacturing (Tesla, Ford, and GM). Taking Canadian jobs.

What’s made in the US and sold here? Consumer electronics, high-end apparel, health and beauty products, home goods and appliances, toys, books, outdoor equipment, sporting goods, automotive parts, pet supplies, and medical devices. These are not products that can’t be bought elsewhere in the world. There are plenty of better-made products in Europe and Japan.

Canadians, despite our political differences, the majority are loyal to this country. One lesson I learned running a company in China is that nationalism creates a healthier local consumer market and trust in their brands. Canadians could easily decide to stop travelling to the US for holidays, they may have to because it would be too expensive.  In 2023, Canadians spent over $20 Billion visiting the US, which will hurt the tourism of furthest southern neighbors. I don’t think that they want to see any decline.

Nevertheless, will the Canadian economy see a decrease in spending at home? Will tariffs cause economic damage? Yes, they will. It will change Canadian consumer behaviors and shopping habits. Canadians will become even more loyal, and a shift in retailing will occur. We could become leaders in circular economy. Consumers will look for ways to make money and reward themselves. Yes, we will still want to buy new, but retailers will compete with SHEIN and TEMU. Will a movement in Canadian nationalism move consumers away from Walmart and Costco? It’s quite possible.

So, retailers will have to evolve faster. To compete, we should not be surprised by the accelerated growth of AI. Our need to find new markets and customers, streamline operations, sell better, and keep up with consumers who will adopt AI will create a different Canadian landscape. A frugal consumer is looking for service and convenience and spending much less time browsing, fixating more on what they need versus what they want. Again, AI will optimize an organization’s ability to identify what they are looking for and instantly market to them with a product and offer for instant gratification.

There should be no question that this is about moving jobs to the US and economic Nationalism.

How Will Canadian consumers react to tariffs?  At first with their pocketbooks and then with their minds to rework and rethink their lives. Businesses in Canada would be smart to invest in AI and other advanced technologies aggressively. Canadian businesses must invest in technology to become more productive.

Of course, I have struggled to find the right words to define the threat of such devastating tariffs and economic nationalism. However, they are no less than economic coercion of a country and its people. Why else would you tempt them to become the 51^st state?

It will also be prudent that, as a nation, we begin to lead in AI, Robotics, Education of the skill sets needed for the future, and healthcare becoming the medical center for the world as a service. It’s time Canada became far less dependent on others as a nation.

Canada must rethink its economy because I assure you the biggest risks are not the tariffs. It’s the threat to US and foreign firms operating in Canada that they would do best to operate in the US completely. That is more dangerous to our economy. We need to reinvent our economy, we should not be fooled that our oil industry alone will save us, we need to assure Canadians of a strong future and the rhetoric that Canada is broken must stop because it has hurt our nation and weakened our position at the negotiating tables over tariffs. We are not a broke nation. We are constantly, democratically, and intelligently improving. It is a mistake to see our intellectual discourse as a weakness.

Canadian consumers will retaliate with Canada first, and businesses must be prepared for this shift. We may find that nationalism runs deep in Canadians.

But this calls for political will and vision, not just the pursuit of parliamentary debate experts who want to be kings.

George Minakakis is the CEO of Inception Retail Group Inc. and the Author of Predictive Leadership: How Humans and AI Will Transform Organizations, Innovation and Competition.