As Canada recently announced tariffs as high as 50% on nearly 900 categories of US goods, brands have less than two weeks to reassess pricing and product assortments from the Great White North. But raising prices across the board could be just as damaging as absorbing the costs, particularly if it makes unaffected products more expensive or sends customers elsewhere.
Global-e, the platform powering global ecommerce for more than 1,500 brands, including SKIMS, Alo Yoga, and Adidas, has direct insights into the operational challenges brands are facing across markets.
In an interview with Retail Insider, Matthew Merrilees, CEO North America at Global-e, discusses how brands can adjust their pricing strategies to protect profitability and customer conversion, and how continued US-Canada trade tensions could push more retailers to diversify internationally.
Question: With Canada’s tariffs on nearly 900 categories of U.S. goods recently taking effect, what pricing strategies should retailers consider to protect margins without driving away price-sensitive Canadian consumers?
Answer: As a first step, retailers should identify exactly which products are affected, as the surtax is HS-code based and can apply differently even within the same category. Accurate product classification is critical to ensure the right duties are calculated and that unaffected products are not charged unnecessarily. They should then assess the impact across their product and sales mix, including which items drive the most volume, and use that analysis to determine the right pricing response. This can support a more balanced, targeted increase rather than simply passing the full additional cost onto every affected item. For retailers that are not significantly impacted by the new surtax, it may make sense to hold off on price changes until the dust settles, avoiding back-and-forth adjustments.
Retailers could also consider whether adjustments to the assortment offered in Canada could help manage the impact. Protecting profit margins is not just about pricing strategy; having a duty drawback solution in place for returned goods is also key to reducing the overall tariff burden and protecting profitability.
Q: Should retailers raise prices only on products directly affected by the tariffs, or is there a risk that more broadly increasing prices across an assortment could hurt customer conversion and brand loyalty?
A: First, to protect conversion, retailers should present their Canadian shoppers with product prices that are inclusive of applicable duties, with only sales tax added at checkout, as they are used to when shopping domestically. This ensures shoppers are not faced with unexpected charges upon delivery, which could significantly hinder the customer experience and retention. The question is how to incorporate the duty cost into product prices in a way that balances profitability without hampering sales. To decide whether to apply a more moderate increase across a broader assortment or raise prices only on products affected by the new surtax, retailers should take into consideration their product mix, local demand and the competitive landscape.
Q: How should brands determine whether to absorb tariff-related costs, pass them on to consumers, or find a middle ground, particularly in highly competitive categories such as fashion and apparel?
A: In the short term, retailers would need to find the right balance between protecting margins and maintaining demand, which may mean absorbing some of the additional cost while passing some on through pricing. Again, to determine that balance, retailers should analyze the impact across their products and take into consideration additional factors, including the competitive landscape — especially in categories such as fashion and apparel. Over the longer term, retailers could also review the product mix they offer in Canada and consider reducing the share of products that are more heavily impacted by the surtax, while prioritizing less-impacted or unaffected products within the same category.
Q: Could the continued trade tensions between Canada and the U.S. accelerate efforts by retailers to diversify their sourcing, suppliers and international markets, and what would that shift look like operationally?
A: Continued trade tensions reinforce the importance of diversification across international markets. Selling direct to consumers globally can enable retailers to capitalize on new market opportunities and help offset declines in other markets. It could also lead more retailers to consider diversifying their sourcing, although sourcing decisions are increasingly complex and cannot always be made based on one market alone. Shifting production or suppliers could, for example, create additional duty exposure in the U.S., where tariffs may apply depending on the country of manufacture. Retailers therefore need to assess their full trade and fulfilment setup, not just sourcing location. More broadly, having the right global trade and operational solutions in place — including fulfillment models that can help reduce the duty burden — can give retailers more flexibility to respond to policy changes, protect margins and continue growing across markets.
Q: What are you seeing among global brands in terms of how they are adapting their e-commerce pricing and product assortments to manage cross-border costs, and what lessons should Canadian retailers take from those strategies?
A: The brands adapting most effectively are managing pricing and proposition market by market, rather than treating international e-commerce as a single market. They are using country-level insights to understand the impact of duties, taxes and other trade-related costs, and adjusting their commercial strategies accordingly. They are also often working with specialized Merchant of Record partners that take on trade compliance liability and can support different cost-effective fulfilment models. This can help retailers remain agile and adapt quickly to changes, while protecting both sales and margins. The lesson for Canadian retailers, as well as retailers in other markets, is that with the rapid changes to import regulations — not only in the U.S. and Canada, but also in regions such as the EU — the ability to respond quickly without placing additional strain on internal resources is becoming increasingly important. At the same time, retailers should ensure they are able to offer a seamless, localized customer experience, with duties and taxes settled upfront instead of surprising the shopper at the door.
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