Navigating USMCA Tariffs: A Guide for Mid-Market Business Owners
By Nokomis Advisory Associate Ben Morley
Tariffs have been in the news of late; although a détente has occurred with Canada and Mexico as of this writing, understanding the impact of potential tariffs on trade with Canada and Mexico is crucial for your bottom line and strategic planning. The United States-Mexico-Canada Agreement (USMCA) has reshaped the North American trade landscape, bringing both opportunities and challenges for mid-market companies.
The Current Tariff Landscape
The USMCA maintains the general duty-free treatment of goods that qualified under NAFTA but introduces new requirements and considerations. Key sectors affected include automotive, steel, aluminum, agriculture, and textiles. For mid-market businesses, compliance with these regulations requires careful attention to origin certification and supply chain documentation.
What This Means for Your Business
Supply Chain Costs
If your business relies on Canadian or Mexican suppliers, you’ll need to carefully evaluate your supply chain costs. While many goods remain duty-free, certain products face new or continuing tariffs. For example, steel and aluminum products may be subject to Section 232 tariffs, which can significantly impact manufacturing costs.
Documentation Requirements
The USMCA introduces stricter documentation requirements for proving origin. Mid-market companies must maintain detailed records of their supply chains and be prepared for more frequent customs audits. This may require investing in better inventory management systems or dedicated compliance personnel.
Strategic Opportunities
Despite these challenges, the agreement creates opportunities for mid-market businesses. The higher regional value content requirements in the automotive sector, for instance, may benefit U.S. parts manufacturers. Similarly, new provisions for digital trade and small business support can open new markets for technology and service companies.
Action Steps for Business Owners
- Conduct a thorough supply chain audit to identify exposure to tariffs. In his book “Exit with Style, Grace, and More Money: Creating a Large Exit for Your Small Business” John explains, “Part of supply chain management is having choices. Don’t get caught with limited suppliers because buyers will note that.” (p. 40)
- Update your documentation processes to ensure USMCA compliance
- Consider strategic sourcing alternatives where tariffs significantly impact costs
- Invest in technology or expertise to manage compliance requirements
- Explore new market opportunities created by the agreement
Looking Ahead
While tariffs create immediate challenges, they also encourage businesses to innovate and adapt. Consider this an opportunity to strengthen your supply chain resilience and explore new strategic partnerships within North America.
The key to success is staying informed about trade policy changes and maintaining flexibility in your business operations. For mid-market companies, this might mean developing relationships with multiple suppliers or investing in domestic manufacturing capabilities.
Conclusion
As a mid-market business owner, your company is large enough to be significantly impacted by tariffs but may be small enough to adapt quickly to changes. Use this agility to your advantage. Consider working with trade consultants or industry associations to stay ahead of policy changes and identify new opportunities in the North American market.
Remember, successful navigation of tariff policies isn’t just about minimizing costs—it’s about building a more resilient and competitive business for the future.