Ashley Chapman, the chief operating officer with Chapman's Ice Cream, at the company’s dry warehouse in Markdale, Ont., on April 15. Because of the tariff issue, Chapman’s has been stockpiling items such as sugar cones, containers and plastic wrappers.Fred Lum/The Globe and Mail
Leah Corrin has been rapidly expanding the warehouse capacity of her company based in White Rock, B.C. The founder of skin care brand Essence of L has been making room for more than a year’s worth of extra raw materials, packaging and specialized technology needed to create the brand’s signature moisturizers and cleansing gels, among other products.
The move, which required tens of thousands of dollars in upfront capital investment, has allowed her company to fulfill orders quickly, sidestep customs delays and – crucially – avoid raising prices for consumers in the foreseeable future in the face of mounting economic headwinds.
“I don’t want to have to be another business putting these prices up by 25 per cent,” she said. “Anything that we can do that can help us stabilize our price point, we’re trying to be pro-active in doing that.”
Like Ms. Corrin, many other business owners across the country have been purchasing heaps of excess inventory from both the United States and elsewhere around the globe in preparation for U.S. tariffs on Canada, among other global trade partners, and for Canada’s counterlevies.
According to a February survey from the Canadian Federation of Independent Business, 13 per cent of participants were stockpiling U.S.-made products in response to possible levies.
But with U.S. President Donald Trump regularly shifting course on tariffs – and Canada largely spared in the latest round of sweeping levies announced on April 2, which ranged from 10 to more than 100 per cent – the strategy involves significant risk.
In a Toronto warehouse, hundreds of pallets are stacked one atop the other. The cartons are brimming with cookies, walnuts and almonds, fruit stabilizers and emulsifiers.
The space was rented by Ashley Chapman, chief operating officer of Canadian-owned Chapman’s Ice Cream, to stockpile ingredients from the U.S. in light of tariff threats.
“We’ve been rushing shipments, renting storage in the [Greater Toronto Area] and putting stuff in,” said Mr. Chapman. “You can barely walk around these places.”
While the company had been affected by Canada’s first round of 25-per-cent countertariffs on $30-billion worth of goods imported from the U.S., which included key ingredients such as pecans, it’s been spared in the second round, which Mr. Chapman said the company feared. Despite this reprieve, the business still faces the fees from stockpiling inventory.
“I’m sitting on 100 pallets of cherries right now that I frantically brought in,” he said. “We are now incurring additional costs … the uncertainty is very aggravating.”
While a growing number of businesses on both sides of the border have embraced stockpiling as a buffer against potential disruption in the trade of supplies and finished goods, it’s also become yet another example of how uncertainty around tariffs can hurt businesses even before tariffs themselves take effect.
Steve Bozicevic, chief executive officer at A&A Customs Brokers, said business was up 30 per cent year-over-year in March, ahead of Mr. Trump’s April 2 tariff announcement, with much of it tied to companies pre-emptively ordering and stockpiling.
But some businesses that stockpile face new risks tied to perishing food items and waste, added warehouse rent and cash-flow crunches. “If we hit a recession and customers stop buying, that leaves excess inventory risk,” he said.
Many of Ms. Corrin’s ingredients are also perishable and the company’s products are only formulated to last two years. Investing this far in advance has tied up capital and requires gambling that consumer demand lasts in a shifting economy.
“People are just being more mindful with their money,” she said. “If they were on a 12-step [skin] routine before, maybe they’re on a seven-step routine now.”
While stockpiling might introduce added costs, Michael Kotendzhi, chief executive officer of Burnaby-based 18 Wheels Warehousing and Trucking, said it’s better than the alternative risk. “There’s always someone else who will take the market share from you if you’re not flexible,” he said.
In the past few weeks alone, he’s been fielding triple the number of calls from new and existing customers looking to amp up their warehouse storage.
The company’s facilities in Vancouver, Calgary, Toronto and Halifax offer regular and bonded warehousing, a type of storage where imported goods can be kept without the immediate need to pay duties.
“You kind of park in the product here temporarily until the politicians make the deal,” he said.
A recent contract with a company moving empty aluminum cans from the U.S. into Canada to avoid the impact of tariffs will see his team bring in product in “three to 10 truckloads per day” and keep it in a warehouse until needed, he said.
Whether the risks of stockpiling outweigh the rewards also depends on the type of business.
Liza Amlani, principal at Retail Strategy Group, said apparel retailers, who are now especially susceptible to tariff pressure owing to large swaths of products coming from Asia, have been stockpiling enough inventory to avoid price increases for the next three to six months. This has allowed many to prevent price hikes until at least back-to-school season.
For many, the move remains a gamble.
“We’re taking it day by day,” said Ms. Corrin. “We’ve seen a lot of other skin care companies and local companies that are shutting down the business with the uncertainty and with staffing issues. … It’s like this puzzle, and we’re constantly moving the pieces.”