In imposing tariffs upon Canadian aluminium, steel, automobiles, light trucks and parts, the United States breached Chapter 31 of the Canada-United States-Mexico Trade Agreement, signed by the president, Donald Trump, on 29 January 2020.

Canada has launched a request for consultations at the World Trade Organization.

Tariffs on copper, timber and lumber, and semiconductors, certain critical minerals, and energy and energy products, exported from Canada to the United States, may also occur,

President Trump has threatened to annex Canada, in breach of Article 4 of the North Atlantic Treaty.

Policy governance

In pivoting away from its former reliable trade partner, Canada will soon initiate, under its newly elected prime minister, Mark Carney, a series of economic and fiscal reforms that include:

(i) The removal of all internal Canadian trade barriers by Canada Day, 1 July 2025;

(ii) The deepening of trade relations with counterparties in the United Kingdom, European Union and Asia, who seek a reliable trade partner and access to Canadian resources and other goods;

(iii) Trade corridor infrastructure enhancement, to transport Canadian goods to target overseas markets, including roads, rail, water, ports, shipbuilding, integrated electricity transmission, and digital connectivity; and

(iv) Productivity and investment enhancements, including expedited and streamlined permits, construction and regulatory approvals; and tax reviews to strengthen Canadian productivity, competitiveness and investment return.

Carney holds a PhD in economics, has been governor of the Bank of Canada and Bank of England, and has the credibility, experience and contacts to mount a forceful response against the United States’ illegal action and threats.

Macroeconomic impacts, globally and in the United States, as a result of illegal and reciprocal tariffs, include projected growth contraction, consumer sentiment decline, rising inflation, stock market declines, and interest rate uncertainty, as central banks navigate growth contraction and expected domestic inflation increases.

Corporate governance

For company boards of directors, not only in Canada, the impact of tariffs may affect different industries and companies.

The following corporate governance actions and enhancements are recommended:

(i) Scenario planning, based on current or projected tariffs, reviewed by the board, including actions, resources and performance indicators to oversee the plan’s execution;

(ii) Legal updates provided to the board, including contractual obligations, use of domestic suppliers, labeling requirements, travel advisories, insurance changes, duties of directors, redomicile reviews, and conflicts of interest by non-resident directors;

(iii) Financial updates, including outlook changes, stress-testing of financial statements, variances from targets, workforce changes, reserve availability, and delayed or paused expenditures;

(iv) Customer development review, including risk sharing, contract amendments, domestic and international target market customer acquisition, and key performance indicators for management;

(v) Supplier resiliency review, including transitioning from tariffed to non-tariffed suppliers, procurement changes, n’th party reviews, and key performance indicators for management;

(vi) Governance agility by the board, including virtual meetings to accommodate overseas directors, agenda modification, shorter notice periods, a tolerance for incomplete information, partnering behaviour with senior management, and geopolitical and macroeconomic updates;

(vii) Amending the director competency matrix to include business development and growth, trade and international relations, legal and regulatory, languages, and “experience under fire”;

(viii) Rotating off of the board of certain non-resident directors, and replacing with non-resident target market directors to maintain a steady size; and

(ix) Investor engagement with a sub-set of directors and important or significant long-term investors, as needed.

‘Experience under fire’

A board of directors should be overseeing and advising management’s response to the United States’ tariffs, but should also be constituting itself to ensure that such oversight and advice to management is the best it can be, to benefit the company, at this moment.

Not all directors arrive to a board equally prepared, experienced or skilled during a steady state but also, importantly, during a crisis.

A board of directors experiencing a crisis or distress may anticipate, prepare for, and navigate through, by recruiting for “experience under fire”, or very similar wording.

When competency-driven recruitment and succession planning occurs, a director – or a policy-maker, as Canada has done with the election of Mark Carney – who possesses this type of “experience under fire” may be more likely to be demonstrably superior in knowing what action to advise management take, when to take it, how to take it, and what the results will likely be, given the experience base of such directors.

The quality of this advice, by such directors (or a policymaker), including the ability to transform a company and sometimes an industry (or country), is often superior.

In other words, boards of directors (and individual directors) may reflect and act upon board composition to reconstitute oneself to prepare for this moment.

Richard Leblanc is a professor of corporate governance, law and ethics at York University, Toronto. He is the editor of The Handbook of Board Governance. His full paper on tariffs and corporate governance can be found here.