Global trade will never be the same: How your clients can change with the times

As the U.S. Trump administration continues to pursue a chaotic approach to applying tariffs on Canadian goods crossing the border, Canadian brokers have advised their commercial clients not to react in a knee-jerk fashion to the various day-to-day trade announcements emanating from the White House.

That said, it would be a mistake for clients simply to wait for all of the trade-related chaos to blow over, Marsh experts say, because the world won’t be the same again — even after the current U.S. administration leaves office.

“My general position is, companies should observe what is going on today and think of it from the perspective that changes are occurring incredibly fast,” Alex Lefort, partner at Oliver Wyman, says at the Marsh webinar, Navigating geopolitical risk and uncertainty: The impact of changing trade policies on Canadian companies. “And while we may down the road have a different administration, and a number of changes may…revert, fundamental changes that are taking place today are going to stay and…are going to last.

“And so, while there could be a strategy to say, ‘Let’s hunker down and wait this out,’ I think that it would be a wrong.”

Today, U.S. President Donald Trump announced letters would be sent out to various countries setting out tariffs to be applied in the absence of a trade agreement with those countries. Canada has been negotiating with the U.S. and has rescinded its Digital Services Tax to kick-start stalled trade negotiations after Trump called off talks because of the tax.

Trump’s 90-day pause to secure trade agreements with other countries ends next Wednesday, July 9.

Canadian brokers have urged clients to wait and see which tariff threats are real and which aren’t. But Lefort says waiting for global trade to revert back to what it was before the Trump administration is wrong for two reasons.

“It would be wrong to do it because, one, [global trade] will never come back in the same way,” he said. “But the second is: why not take this opportunity now…to break down those inter-provincial trade barriers within Canada, within the provinces?”

Also, he added, companies should be thinking ahead about what it may mean for them to reduce their dependence on trade with the United States in the future.

“Companies should take the same approach [i.e., challenging current assumptions about trade] and say, ‘Why not? Why not change a little bit of our strategy? How do we serve the U.S. market, and how maybe [do] we become less dependent on the U.S. market?”

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Elsewhere in the webinar, Lefort was asked about existing opportunities for Canadian businesses to navigate their way through the turbulent trade market. He said Canada still needs access to U.S. markets, and so must continue to negotiate in good faith with the current U.S. administration.

However, he added, Canadian businesses can also expand their global trade footprint as well.

“Let me remind you, Canada has 15 free trade agreements in force with 51 countries that represent two thirds of the global economy and basically connect Canadian corporations to 1.5-billion consumers around the world,” he said. “We are the only country of the G7 that has free trade agreements with all other members of the G7.”

Canadian brokers have already encouraged clients to assess and respond to risks of supply chain disruption.

Webinar panellists note Marsh has AI tools to help clients analyze their supply chain risks and the compound effect of tariffs on their businesses. One tool explores billions of shipping transactions globally, allowing clients to see beyond their direct suppliers and look at their second- and third-tier suppliers with limited input from those suppliers.

“The analysis has found that 65% of organizations have at least one hidden bottleneck in their supply chain and that bottleneck provides a good or component that’s critical to their operations,” says Daniel Kotwinksi, head of Marsh Advisory Canada.

Knowing this “allows clients to maintain a competitive advantage of preparedness so that, if there’s a critical issue within their supply chain, they can proactively evaluate, transfer and manage the business risk that can impact their organization,” he says.

At the beginning of the webinar, Lexi Kindbom, chief client officer of Marsh Canada, conducted a poll of webinar attendees asking them to identify their Top 3 strategies for dealing with the trade war. Seventy attendees responded to the poll question.

Their options included conserving cash, delaying capital expenditures, looking for alternative suppliers, shifting production, controlling costs, mapping risk exposures, scenario planning and testing, and lastly, realigning trading relationships.

The Top 3 answers were: controlling costs (61%); looking for alternative suppliers (47%); and scenario planning and testing (43%).

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.