President-elect Trump has proposed sweeping tariffs across goods coming in from Mexico, Canada, and China. And they range between 25% and 100%, with the former aimed squarely at Mexico and Canada.
Obviously, this is cause for alarm. As I've explained in other posts, tariffs only hurt the consumer, not the company, nor the companies or country of origin. Plus, those same countries have a tendency of applying retaliatory tariffs on the tariff-levying country, i.e. the United States. See what happened with US steel and Harleys in the EU last time Trump was president for proof.
Yet, though these proposed tariffs would affect Canadian powersport company BRP, which makes Can-Am, Ski-Doo, and Sea-Doo, the brand's executives aren't worried quite yet. Instead, they're apparently taking a "wait and see" approach. That's certainly one way of doing it.
Speaking on a conference call to investors last week, BRP's chief financial officer Sebastien Martel said, "I don’t think we should overreact right now. We should not speculate too much, because there are hundreds of different possibilities.” This may have to do with President-elect Trump's penchant for making big, bold statements, as they work on the campaign trail, but later walking them back because of outside economic pressure.
But I'm not sure that BRP can take this approach. Especially since one of its biggest launches in recent memory—its return to two wheels in the form of two electric motorcycles—are manufactured in Mexico. And if you're doing the math at home, that means they're Canadian imports, but built in Mexico. I'm not sure if tariffs can be compounded, but this one may just test that ability.
According to The Globe and Mail, Martel told the call that though around 70% of the company's products are made in Mexico, with the other 30% in Canada, "We believe we would not be the same company had we not had that footprint in Mexico." Furthermore, about 10% of the company's parts come from China, which would further be affected by Trump's proposed tariffs.
If, however, BRP's executives' belief in waiting and see doesn't work out, and Trump's tariffs go into effect, it could have serious repercussions on the company.
Like the rest of the industry, BRP is facing a downturn. Long gone are the days of pandemic spending when cash was plentiful, interest rates low, and consumer spending strong. Folks have tightened their belts and reduced their toy-spends, or at least the really expensive toys that make up the lineups of a lot of name-brand powersport companies. As such, revenue and profits are down, and inventories are starting to pile up at dealerships. If that continues, and these tariffs go into effect, that'll just exacerbate the situation with increased prices on already inflates MSRPs.
And that, dear friends, won't be good for BRP.
