The Maddening Uncertainty of Trump’s Tariffs

I started Evolution Wheel out of my garage in 2014. We manufacture solid, airless tires for heavy equipment like backhoes, skid steers and other industrial and construction machinery. We have 40 full-time employees, and we make everything at our factory in Winnipeg, mixing our own rubber, cutting steel and doing metal fabrication. 

I started exporting to the U.S. almost as soon as I founded the business. Why wouldn’t I? It was a huge market, right next door. Today about 85 per cent of our products go to America, and we’ve always had good customers and great relationships there. 

When Trump was campaigning last year and talking about tariffs, I thought at first that it could end up benefitting our business. Most of our domestic competition manufactures their products in Asia, which seemed to be Trump’s target at the time, so I figured all our competitors would be hit and we’d have an advantage. That all changed when he came to power and started picking on Canada and Mexico as well.

Simply put, the tariffs he’s put in place now have the potential to be devastating. It’s not just our exports to the U.S. that are vulnerable—about 80 per cent of our material inputs, including steel, come from there. That means we’ll be hit by Canadian retaliatory tariffs when importing raw materials and again by American tariffs when exporting finished products. The cost impact is enormous. A tire that used to cost $1,000 is likely to go up to $1,400. We’re already making products that sell at a premium price point, and I know our customers won’t pay more. The extra $400 will become our burden to bear.

It’s hard to overstate the risk to my business. This spring, a few days after the tariffs began, I was sitting in our boardroom with my production manager, and we were looking at $750,000 worth of orders to the U.S. that hadn’t yet shipped, figuring out how we’d foot the bill for almost $250,000 in tariffs. To our enormous relief, that was the day Trump announced a 90-day pause. A few days later, Canada announced a six-month relief period for goods used in manufacturing. 

We were saved temporarily, but the constant go/no-go started to become almost as stressful as the tariffs themselves. Navigating it all put a huge strain on my mental and physical health—I was getting tightness in my chest when reading the news or going over accounting and paperwork. Sometimes it felt like I was struggling to breathe. My doctor told me that I was probably close to a heart attack, and I’ve had to go on blood-pressure medication. Since then, the tightness in my chest has gone away.

I have no idea what we’re going to do long-term, and it’s that uncertainty that’s the real killer. If I know what’s going to happen, I can plan. Right now, there’s nothing to do but anticipate the worst. We’re looking at shifting some suppliers away from the U.S., but we’d have to buy a full container of products, like steel, bolts, nuts, washers and fasteners, to last us two years. That requires a lot of upfront capital. I’ve considered doing a hybrid manufacturing model, setting up a second facility in the U.S. to avoid tariffs. But moving has huge costs, in addition to finding labour and training. I’m not sure it’ll be worthwhile.

I hate to do it, but I’m speaking with the banks right now to secure a low-interest, seven-figure loan to help us survive. I believe our best option is to mitigate costs by continuing to grow. We just launched a new product—a wheel-loader tire that can be used in rock quarries, and waste management and recycling. It’s a high-revenue item and if it sells well, it could help us weather future tariffs. We’re investing in that line of business as much as we can. I’ve hired three new sales and marketing employees, too, and increased our marketing budget to support it. It feels as if a great deal is riding on the success of this one new product. 

Cutting back the business isn’t an option. I don’t have a family, but my staff have their own expenses—mortgages, rents, families, car payments—and that’s all on the line. In the worse-case scenario, my entire operation goes under and I lose everything: my house, my car, my retirement.

Recently, I’ve been travelling to the U.S. to attend trade shows and speak with potential customers, in St. Louis, San Diego and Las Vegas.  The actual people I talk to, Americans themselves, are friendly. Our customers don’t have a problem with where our products are made. Everyone talks about the trade war, and our government has been dropping bombs with retaliatory tariffs, but I wish we were talking more about what we can do to improve the relationship between the U.S. and Canada, and how we can strengthen the cross-border economy. Basically, I wish we were talking more about how we can work together, instead of getting into fights.