Canadian businesses facing US tariff exposure are underestimating one risk, according to David Dienesch (pictured), CEO of Allianz Trade in Canada, who said the real danger isn't only lost sales but the cash flow strain that follows them.
Dienesch said the current environment, shaped by Section 338 tariffs that have pushed the overall tariff rate on Canadian goods from roughly 5.9% to 8.4%, will cost businesses sales and future opportunities as US customers look for alternative suppliers. He said the pressure isn't confined to the sectors making headlines.
"We all know what the impacted sectors are. The motor vehicles, the alcoholic beverages, the dairy, that's front and center," Dienesch said. "But it's all the other stuff too, the hockey sticks, the cement, the plywood, the fishing rods, the clothing. That's about $20 billion worth of goods."
Amid that pressure, Dienesch said the more urgent problem for most companies is what happens to their cash position once sales start to slow.
"There's the supplier risk, there's the customer risk, and then obviously there's the financial risk," Dienesch said. "And to me, that's all about cash flow at this point in time."
That emphasis is deliberate, he said, because cash flow is what determines whether a business can keep operating at all while it works through everything else.
"Cash runs businesses," Dienesch said. "Cash is how you pay your suppliers and your employees. And gaining access to that cash is paramount for businesses right now."
Dienesch said companies need to be asking pointed questions about their access to credit before conditions worsen, rather than after. That includes whether existing lines of credit will hold up under pressure, and whether banks and financial institutions are prepared to extend more capital if sales into the US decline.
"Do they have the lines of credit? Because it's going to start to stretch right now," Dienesch said. "If they're exposed to the US market and those sales start decreasing, cash is going to start to run dry."
Allianz Trade is already seeing evidence of that strain, Dienesch said, in the form of rising claims from its own customers, even though the company had anticipated the current environment.
"We recognize that we planned for it, but our customers are sending us more claims because the environment is uncertain right now," Dienesch said.
Trade credit insurance is designed to address exactly that kind of exposure, Dienesch said, both by helping companies avoid bad debts that would otherwise hit their bottom line directly and by improving their access to working capital. He said Canadian banks already accept trade credit insurance as part of their lending assessments, which can make a business a more attractive borrower.
"We help them avoid bad debts, so it's not going to impact their bottom line, but we can also help them gain access to new working capital," Dienesch said. "It just makes the business for the banker more secure."
Dienesch said this isn't a temporary condition businesses can simply wait out. He expects the current uncertainty to persist for years, which means treating risk management as a continuous discipline rather than a one-time response to the current tariff environment.
"Risk management really is a full-time job," Dienesch said. "It can't just be an afterthought for Canadian businesses right now."
Beyond the immediate liquidity concerns, Dienesch said Allianz Trade is telling its clients to treat this as an ongoing condition rather than a temporary disruption to manage through. He said the firm is encouraging clients to look closely at their existing relationships, seek out new opportunities, and lean on partners, including their own banks, for support navigating the uncertainty.
"We're telling them, ‘Look hard at your existing relationships and look for new opportunities because we can support you in those new opportunities’," Dienesch said.
That approach, in his view, is what will separate businesses that come through this period intact from those that don't. Waiting for conditions to settle down, he said, is the weaker strategy given how long the current uncertainty is likely to persist.
"Find partners who can help them with risk management," Dienesch said. "And a lot of the time, that's their existing financial institutions who support us as we support them."
