Tariffs and trade wars: Pet businesses struggle to predict the future

The current environment of escalating tariffs, as well as the uncertainty surrounding the Trump administration’s ever-changing approach to levies, are weighing heavily on the global economy – with both large and small pet companies already feeling the repercussions.

Implications for small business

Expansion to the United States has always been the natural next step for Healthybud, a small Quebec-based pet food brand.

Like many Canadian companies, Healthybud found that shared language and culture – plus relatively free and easy trade – has made the market transition into the US simple and profitable.

Now, with the nations’ leaders levying heavy tariffs, Healthybud CEO Kyle Feigenbaum is struggling to find a path to maintain the company’s operations in either country. “We can’t plan,” he tells PETS International. “I can’t start problem solving because I don’t know what’s going to happen in a month.”

Healthybud produces and sells freeze-dried pet food on both sides of the border. Tariffs introduced by the US under President Donald Trump have eaten into the company’s margins and forced Feigenbaum to question its production process and even the product itself.

He says he can temporarily cover the cost of the tariff levied by the US without raising prices, but if the trade war continues, he may need to pull manufacturing out of the US, scale back operations or even shut down entirely.

Latest wave of tariffs

“Small business owners, we’re tough,” Feigenbaum says. “We’ve been through a lot, and if you give us a problem, we will find a way to fix it. If you give us a potential problem without a finish line in sight, what can we do?”

On 4 March, President Trump dealt allies and adversaries alike a heavy blow, levying 25% tariffs on Canadian and Mexican goods. Tariffs on goods traded under the United States-Mexico-Canada Agreement (USMCA) free trade agreement – pet food included – were then delayed until 2 April.

As of 2 April, which Trump dubbed ‘Liberation Day’, a raft of new tariffs was introduced with a 10% baseline introduced on 5 April. In addition, reciprocal rates were announced to take effect from 9 April.

For Chinese imports, the blanket tariff was set at 34% – so is effectively now 54% given the previous 20% levies – with the European Union facing tariffs of 20% on all goods.

Serbia at 37%, Thailand at 36%, India at 27% and South Korea at 25% are also heavily hit, while the UK, Brazil, Australia and Saudi Arabia emerged with just the 10% imposition.

However, rather than the proposed levies – the prospect of which had sent stock markets plummeting around the world – coming into force on 9 April, there was yet another twist as Trump announced a 90-day pause on most of the higher tariffs and reverted to 10% instead.

Across industries, businesses and investors scrambled to prepare for various possibilities, ranging from a brief levy used as a negotiating tactic to a long, drawn-out trade war that could cause massive disruption to the global economy and create a new wave of inflation.

Targeted economies react

Canada quickly slapped reciprocal tariffs on the United States, including 25% levies on imports of many American food products, which may impact pet food industrial inputs. The country retaliated to the steel and aluminum tariffs with new duties on about $20 billion (€18.5B) of US goods.

The two countries have agreed to new trade talks, but even after Trump delayed many tariffs on Canada, the government did not immediately remove its retaliatory charges. More tariffs are possible in the weeks and months to come.

China responded with reciprocal tariffs of up to 15% duties on US agricultural and food imports such as chicken and pork, which went into effect on 10 March, and, at the time of writing, is imposing tit-for-tat levies as Trump raised tariffs on China again on 9 April to 125%. Mexico did not immediately announce details of its retaliatory plan.

The EU responded to metals duties by proposing tariffs on $28 billion (€26B) of US goods, but has delayed the implementation of some of those tariffs until mid-April to allow time for a “mutually agreeable solution” to be found, according to EU trade chief Maroš Šefčovič.

The American Feed Industry Association (AFIA) had pushed the administration to limit its tariffs, particularly on animal food ingredients that are not produced in the US.

After tariffs went into effect, the body representing the feed industry in the US encouraged dialogue between countries to avoid harming the agricultural industries that form the base of the pet and animal food industry.

“When shocks are introduced into the global supply chain, it makes it harder for domestic manufacturers to keep feed and pet food costs low for farmers, ranchers and pet owners, and has the dual threat of jeopardizing the supply of vital animal nutrition ingredients that may only be produced overseas,” AFIA President Constance Cullman said.

The group has taken a cautious approach to communicating with the notoriously fickle administration and has declined to oppose specific tariffs as of 7 March.

Industry advocates express concern

The Washington DC-based Pet Food Institute (PFI) released a statement expressing concern over retaliatory tariffs but also stopped short of condemning the Trump administration’s trade moves.

“US pet food manufacturers stimulate the country’s overall agricultural and rural economies through the purchase of ingredients, labor and services from related industries,” said Dana Brooks, President and CEO of the PFI.

“We are concerned that retaliatory tariffs could have severe supply chain impacts that affect the availability of our products. To be clear, we are in favor of policies that support domestic manufacture and the global distribution of safe, quality pet food, that provide for consumer choice and help dogs and cats live long, healthy lives.”

Obstacles to business

Mike Bober, President and CEO of the Pet Advocacy Network released a more directly oppositional statement in March. “We all support efforts to strengthen and grow our countries’ respective economies, but imposing steep, broad tariffs on one of our best and closest trade partners will hurt the pet care community and millions of pet owners,” he said.

The Pet Food Association of Canada (PFAC) echoed business owners like Healthybud’s Feigenbaum. Chris Nash, PFAC’s Executive Director, said the uncertainty of the situation was making it “incredibly challenging for any business to properly operate”.

“For now, we continue to advocate for members with government, identifying key and critical ingredients sourced from the US that are not easily replaced in Canada or elsewhere, in preparation for future tariffs and trying to minimize the impact that US-imposed and retaliatory tariffs will have,” he said.

Billions worth of pet food affected

The US imported 313.6 million kg of dog and cat food in 2023, according to World Bank data. 94.5 million kg of that came from Canada, worth $407 million. 21.4 million kg came from China, while 12.7 million kg were imported from Mexico.

Together, the 3 countries accounted for roughly 41% of the country’s pet food imports. All of those imports will now have additional costs attached to them.

But the costs will be much more severe in Mexico and Canada. The latter, a much smaller country than the US by population, imported 419.5 million kg of pet food in 2023. 396.1 million kg of that, or 94%, was from the US.

Mexico imports much less pet food. But of the 89.2 million kg it imported in 2023, 98% of it came from the US. China imported 86.9 kg of pet food in 2023, and 59.6 million kg came from the States. That’s 68.6% of its imports.

These numbers hint at only the direct impact of tariffs on pet food. As input goods are also being tariffed, production prices and, ultimately, consumer prices, are likely to rise throughout the sector.

Uncertainty in Europe

Trump’s tariff on EU goods has naturally sparked major concern on the continent. Dutch bank Rabobank estimated that agriculture may see the greatest impacts.

In a report, the bank said that shifting costs to US importers, reducing prices for competition reasons, withdrawing from the US, bypassing tariffs with new supply chains or investing in US production could help avert new costs.

“The best option for a given company depends on a number of factors, including the price demand elasticity of its products and its international footprint,” the bank said.

The EU imported 18.1 million kg of dog and cat food from the US in 2023, per the World Bank.

Europe’s pet food industry may be more insulated from indirect impacts of tariffs, as the continent’s agricultural sector is largely independent of the US.

Moreover, 25% tariffs on some European agricultural products entering the US are already in effect, possibly limiting the shock of new barriers on goods crossing the Atlantic.

Corporate projections on hold

In the months leading up to Trump’s first major levies, many large corporations hosted their 2024 fiscal year earnings calls, where companies traditionally outline their expectations for the coming year. In the face of the erratic nature of the situation, some disregarded the possibility of tariffs in their guidance.

Swiss-based multinational Nestlé, which owns Purina, was one such company. At a recent earnings call, CFO Anna Manz said the company’s guidance would not anticipate any new trade barriers or major shifts in exchange rates during what was “clearly a particularly uncertain period”. The company produces significant amounts of pet food in Mexico.

At the Consumer Analyst Group of New York (CAGNY), General Mills’ CEO Jeff Harmening said it was “a volatile couple of months” and that, while the company is largely insulated from tariffs, aluminum and steel tariffs could impact the price of canned pet food.

Even Pet Valu, a Canadian pet food retailer and franchise that imports 15% of its goods from the US, assumed no major trade policy changes when calculating its projections.

Speaking at an earnings call just hours after the tariffs on Canada were levied, CEO Richard Maltsbarger said the company was watching the situation. “As a proud Canadian company with deep roots here and locally owned businesses with over 350 owners, this is a specific topic we’re paying a lot of attention to,” he said.

If tariffs persist, many companies may have to adjust their expectations accordingly.

Small businesses hardest hit

Healthybud moves products in both directions across the US/Canada border, with much of the company’s production based in the US.

Feigenbaum says that as a relatively small company, his ability to resist new costs is limited. After the US tariffs on Canada and Canada’s first round of retaliatory tariffs went into effect, he said he was able to cover the cost temporarily.

The strength of the US dollar against the Canadian dollar means that the company’s margins are larger in the US. However, if the tariffs last, he said he may need to raise prices in the States.

The fear of more retaliatory tariffs looms even larger, however. If forced to pay a 25% tariff on goods moving from the US into Canada, it could eliminate his profit margin in Canada.

Feigenbaum said he has looked into moving his production from the US into Canada to avoid that fee. However, limited capacity for freeze-dried pet food production exists.

As of early March, retaliatory tariffs were popular in Canada. Feigenbaum chalks this up to an emotional response to Trump. He’s lobbying Canadian MPs against retaliatory tariffs.

“I believe Canadians need their leaders to step up to be able to go to Washington and be able to negotiate a good deal, and that is the only outcome that’s going to work,” he says. “Otherwise, the Canadian economy is going to be decimated, and it’s going to kill small businesses.”

As his country is faced with an unwinnable trade war, Feigenbaum wants Canada to cut a deal and save businesses like his. “It’s like a fight between a little brother and a big brother, and the little brother can be tough, but eventually everyone knows what’s going to happen,” he says.

If pet food is hit with a retaliatory tariff, Feigenbaum says production may be paused and a new product may need to be developed.

To continue operating as a freeze-dried pet food company in Canada under that scenario would require a steep price hike that he’s “confident” Canadian consumers would not support.

Some stand to benefit – for now

While many suspect that high tariffs and uncertainty around trade could spark a larger economic downturn, some companies are set up for success in the new trade environment – at least for now.

Ontario-based PetsCool primarily bills itself as a grooming and boarding service company. The supplies and products in its limited retail selection are largely sourced within Canada, protecting the company from the direct impacts of tariffs.

“Since day one, PetsCool has focused on creating a resilient supply chain,” CEO Lin Zhang says. “Unlike many businesses that rely on international imports, we source 95% of our supplies from Ontario, Canada. This decision has helped us minimize exposure to tariff-related price fluctuations, ensuring stable operations even in uncertain times.”

“Markets shift, and challenges come and go, but resilient entrepreneurs build stronger businesses,” she said in a LinkedIn post decorated with an AI-generated image of a golden retriever raising a paw patriotically in front of a Canadian flag.

But even she admits that there will be headwinds posed by the trade barrier, including consumer spending declines and ripple effects from supply chain disruptions.