As Donald Trump prepares to take office in less than a week, his government’s threats to impose sweeping tariffs on Canadian imports have sparked significant concern across industries. For Canadian retailers, the looming tariffs signal potential disruption that could reverberate through supply chains, pricing structures, and consumer habits.

Retail Insider spoke with George Minakakis, retail strategist, and Gary Newbury, supply chain specialist, to unpack how these tariffs could affect retailers, consumers, and the broader economy. Both experts painted a stark picture of potential consequences while offering insights into strategies for navigating this uncertain terrain.

Retailers Brace for Tariff Shock

“Retailers need to get really smart about where they source their products,” said Minakakis. “This could mean shoring up inventory now or diversifying supply chains to mitigate the risks. But make no mistake—if these tariffs go into effect, they could be a linchpin that pushes struggling retailers over the edge.”

He highlighted how vulnerable smaller retailers are in this scenario. “For businesses that were already on the edge, this could be the final straw. They might not have the financial flexibility to weather this storm,” Minakakis added.

Newbury echoed these concerns. “Larger players might have the resources to adapt, but for smaller retailers, this is existential,” he said. “Without careful planning, some of these businesses may simply not survive.”

Inflation and Its Ripple Effects

One of the most immediate consequences, should the Canadian government implement new tariff arrangements on US imports, is inflation. Increased costs on imports force retailers to either absorb the difference or pass it on to consumers. “If Canadian retailers are forced to absorb increased costs, they’ll pass those costs to consumers,” Minakakis explained. “This will create inflationary pressures that could drive up interest rates and make everything more expensive—from groceries to discretionary items like clothing.”

Newbury elaborated on how specific product categories could see disproportionate impacts. “Porcelain products, for instance—everything from toilet seats to bathtubs—could see skyrocketing costs, prompting consumers to delay purchases or seek alternatives,” he said. “This creates a domino effect on both retailers and manufacturers.”

The potential impacts go beyond retail shelves. Minakakis shared a grim statistic: “For every percentage point these tariffs reduce Canada’s GDP, unemployment could rise by 0.6 to 0.7 percentage points. That’s thousands of jobs on the line.”

Consumer Behaviour Under Pressure

When costs rise, consumer habits shift. “Higher prices mean families will spend less on discretionary items and focus more on essentials,” Minakakis explained. “This will hit mid-tier retailers and department stores particularly hard, as these are often the first places consumers cut back.”

Newbury predicted that independent retailers might be better positioned to adapt. “Smaller businesses have the agility to pivot quickly, whether that’s by sourcing locally or reimagining their product offerings,” he noted. “They can turn this challenge into an opportunity to build resiliency.”

For larger retailers, the challenge lies in managing scale. “Big-box stores may struggle to shift sourcing strategies quickly enough to mitigate the impact of tariffs,” Newbury said. “It’s a question of whether their supply chains can adapt in time.”

Impact on U.S.-Based Retailers in Canada

Tariffs wouldn’t just affect Canadian businesses. U.S.-based retailers with operations in Canada could face significant challenges. “Take Costco, for example,” said Newbury. “If a significant portion of their product line is sourced from the U.S., they’ll face higher costs to operate in Canada. This could hurt their competitiveness or even force them to rethink their Canadian footprint.”

Minakakis pointed out that other US retailers could face similar predicaments. “If your supply chain is entirely dependent on U.S. manufacturing and distribution, tariffs could effectively make your business model unviable in Canada,” he said.

Diversifying Supply Chains: A Long-Term Solution

Both experts agreed on the urgent need for Canada to diversify its trade relationships. “Building new partnerships with countries like China or the UK could take years,” said Minakakis. “But it’s a necessary pivot for Canada, given our reliance on U.S. trade.”

Newbury emphasized the importance of strategic planning at the retail level. “Retailers need to analyze their entire product catalog, pinpoint goods sourced from the U.S., and evaluate alternatives,” he said. “This might mean sourcing locally, tapping into European markets, or even cutting underperforming product lines.”

Minakakis highlighted that the challenge isn’t just logistical but also cultural. “We’ve leaned on the U.S. for so long that breaking away feels daunting,” he said. “But this is a wake-up call to reimagine our trade strategy.”

Government Response and Political Dynamics

The federal government’s role will be critical in shaping Canada’s response to Trump’s tariffs. However, Newbury expressed concerns about Canada’s ability to act decisively. “With Parliament prorogued, there’s limited capacity to implement legislation or take bold actions,” he said. “This weakens our negotiating position.”

Newbury suggested that Canada consider more assertive measures. “If Trump imposes tariffs, Canada could respond by halting U.S. imports altogether,” he proposed. “It’s a drastic move, but it would send a strong message.”

Broader Economic Ramifications

Tariffs could ripple through the economy in unexpected ways. “If inflation rises, the Bank of Canada might be forced to raise interest rates,” Minakakis said. “This would exacerbate the pressure on households already grappling with higher costs.”

Newbury pointed to the impact on housing. “Many Canadians renewed their mortgages at low rates during the pandemic. As those mortgages come up for renewal this year and next, higher interest rates could be devastating for families,” he said.

The manufacturing sector could also face fallout. “Trump’s goal is clear—he wants to shift jobs from Canada to the U.S.,” said Minakakis. “That could devastate industries like automotive manufacturing, which are deeply integrated across the border.”

Preparing for a Dark Economic Period

Both experts stressed the need for proactive planning. “Retailers should be preparing for the worst,” said Minakakis. “They need contingency plans—Plan A, B, and C—to navigate potential cost increases, supply chain disruptions, and declining consumer spending.”

Newbury called for greater collaboration across sectors. “This isn’t the time for businesses to operate in silos,” he said. “Retailers, suppliers, and government agencies need to work together to find solutions.”

They also emphasized the importance of transparency. “Retailers need to be honest with their customers about the challenges they’re facing,” Minakakis said. “People appreciate honesty and will support businesses that communicate openly.”

A Call for Unity and Domestic Opportunity

While the potential impacts of Trump’s proposed tariffs are significant, Minakakis sees opportunities for Canada to strengthen its internal trade and unity.

“There are two opportunities,” said Minakakis. “The first is for provinces to take down their own interprovincial trade barriers. This would help stabilize U.S. trade shortfalls. The second is one of national unity. It’s time for businesses and consumers to send a message: Canada stands united as a nation in our sovereignty and economy. I believe this would give the story a positive reinforcement.”

By fostering greater interprovincial trade, Canada could offset some of the economic shocks from diminished U.S. trade, while presenting a united front in the face of external pressures. Minakakis’ perspective highlights the potential for Canada to emerge stronger, even amid adversity.

Conclusion: A Defining Moment for Canadian Retail

As Trump’s inauguration fast approaches, Canadian retailers find themselves at a crossroads. The proposed tariffs are part of a bigger potential seismic shift that could reshape the retail landscape, testing the resilience of businesses and the economy alike.

“Retailers who act now—whether by diversifying supply chains, reducing reliance on U.S. goods, or engaging with government advocacy—will be better positioned to weather the storm,” said Minakakis. “This is a defining moment for the industry.”

Newbury agreed, adding, “This isn’t business as usual. It’s a wake-up call for Canada to rethink its trade relationships and build a stronger, more self-reliant economy.”

More from Retail Insider:

• Trump’s Tariff Threats Send Shockwaves Across Canada’s Economy
• Trump’s Tariff Threats Signal Crisis for Canada’s Agri-Food Sector
• How a Trump or Harris victory could raise grocery prices in Canada