Republican President Donald Trump paused his 25% tariff threats against Canada and Mexico last week, leaving Minnesota business owners to navigate an uncertain landscape.

“Tariffs of this size have never been contemplated between Canada and the U.S. ever,” said Beth Richardson, consul general of Canada in Minneapolis. “The trade between Canada and Minnesota alone is $21.5 billion a year. A staggering number in international trade.”

The order Trump penned last week put 10% tariffs on all imports from China, which went into effect Tuesday, and 25% tariffs on imports from Mexico and Canada — although energy imported from Canada would be taxed at a 10% rate.

Circular B2B inputs

Trading done between the U.S. and Canada can be very circular. “We tend to trade inputs, not finished products,” Richardson said.

Take potash, a component of fertilizer, for example. More than 70% of potash used in the U.S. comes from Canada, Richardson said. Potash is used to grow cereals, which are converted into products like animal feed and exported to Canada. The animal feed is used to raise livestock in Canada, then the livestock is exported back to the U.S. to be slaughtered and processed. And then the meat is sold back to Canada.

“The tariffs will interrupt all those supply chains,” Richardson said, which could result in American farmers having to swallow the costs.

Republican Iowa Sen. Chuck Grassley pleaded with Trump on Monday “to exempt potash from the tariff because family farmers get most of our potash from Canada,” he wrote on X, the social media platform formerly known as Twitter.

The back-and-forth trade between the two countries extends to other products like the oats used in General Mills cereals. “A lot of oil refineries in the upper Midwest, including the two in the (Twin Cities) process Canadian crude oil,” Richardson added. General Mills is based in Golden Valley.

Having an ally “a lot like America with similar laws, values and culture creates a lot of stability” for farmers, producers and manufacturers, Richardson said.

Canada has said that if the U.S. does implement the tariffs, it would respond with a tariff against the U.S.

Trump said on social media that the tariffs were necessary “to protect Americans,” pressing Canada, China and Mexico to do more to curb the manufacture and export of illicit fentanyl and for Canada and Mexico to reduce illegal immigration into the U.S., the Associated Press reported.

“Canada accounts for 0.2% of fentanyl coming into the U.S.,” Richardson said, and about 1% of immigrants. “Frankly, it is in both of our interests to take that 1% down to zero,” she said.

While the tariffs on our bordering neighbors have been paused, local business owners don’t feel out of the woods yet.

Local impact

“I’m nervous about these tariffs,” said Lily Coyle, owner of St. Paul publisher Beaver’s Pond Press.

Founded in 1998, Beaver’s Pond Press publishes between 50 and 60 books a year from independent authors. Of the dozen printers the publisher works with, one, Friesens, is located in Manitoba, Canada.

In addition to being Canada’s largest printer of hardcover books, Friesens also prints for Beaver’s Pond. “We rely on them for many of our reprints,” Coyle said. “I like having them available because they can do things domestic (printers) can’t,” she said, like rounded corners or foil stamping, for example.

Friesens’ pricing is good and the quality is “fantastic,” Coyle said, “but shipping prices are tough.” If an additional tariff is added on top of that, Coyle said she would have to reassess.

Elizabeth Cleveland, a Minneapolis-based sales representative for Friesens, estimates the printer works with as many as 25 publishers based in Minnesota.

While a potential price increase is worrisome, Coyle is also concerned about being squeezed out of U.S. printers because she is a small business.

“We’re a small publishing company printing between 1,000 and 5,000 books at a time,” Coyle said. Many larger publishing companies who print tens of thousands of books at a time choose to print their products in China for a lower price, she said.

“We have fantastic printers here, but if everyone who is printing in China is forced to print here, it will be hard on the system and I get pushed out,” she said. “I’m small potatoes.”

Beaver’s Pond Press experienced this firsthand during the onset of the COVID-19 pandemic.

“It was not easy to have everyone return home,” Coyle said. There were paper shortages, worker shortages and books that would normally take four weeks to print took nine months, she said, destroying her cashflow at the time.

Supply chain headaches

When the tariffs were initially announced, Rob Kress, CEO and founder of supply chain servicer Waypost Advisors, said his company received a lot of inquiries from their clients.

Based in Eden Prairie, Waypost works with middle market companies, or those with less than $1 billion in revenue, to solve supply chain issues and operational challenges.

“A lot of manufacturers are very concerned,” he said. “You have a very integrated supply chain across the U.S., Canada and Mexico for manufacturers.”

A lot of media coverage has focused on the impact to consumers, “which is important,” Kress said, but many of his company’s clients are concerned about the impact the tariffs could have on manufacturing intermediaries.

“A part might start in Mexico and end up getting finished in the U.S.,” Kress said, emphasizing the scope of impact the tariffs could have.

Should the tariffs come to fruition, many businesses will feel the effects, especially small businesses who may have less leverage, Kress said.

“If you’re a smaller company selling to (a larger company), you may not have the pricing leverage to pass those costs along because the big company could go elsewhere,” he said. As a result, smaller companies could end up either eating the extra cost or finding alternative ways to lower the cost.

Unless further action is taken, Canada and Mexico tariffs would go into effect the first week of March.