Industry Insight: How U.S. Tariff Policies Could Impact Canadian MSBs
With Donald Trump returning to office in 2025, Canadian businesses, particularly Money Services Businesses (MSBs), should be aware of the potential ripple effects of renewed or expanded U.S. tariffs.
One of the key proposals under discussion is a 10% across-the-board tariff on all imports, which could reignite trade tensions and directly impact cross-border commerce between Canada and the U.S.
What This Means for MSBs
1. Increased Currency Volatility
Tariffs often trigger foreign exchange fluctuations. It is predicted that in the short-term, the Canadian dollar will continue to weaken if most of the U.S. tariffs remain in place for longer than a couple of weeks.
For MSBs, this could mean increased demand for FX services but also heightened exposure to volatility. Businesses may seek out MSBs offering real-time rates, hedging tools, or tailored guidance.
2. Disrupted Trade and Payment Flows
Clients engaged in import/export may face higher costs and cash flow pressures. This could lead to a shift in transaction volumes, delayed payments, or increased demand for international wire transfers and invoice factoring.
3. Regulatory Implications
A more protectionist U.S. policy may bring added scrutiny to cross-border payments. MSBs should ensure their compliance programs are prepared to handle evolving KYC, AML, and transaction monitoring requirements, particularly for U.S.-linked transactions.
One of the key proposals under discussion is a 10% across-the-board tariff on all imports, which could reignite trade tensions and directly impact cross-border commerce between Canada and the U.S.
What This Means for MSBs
1. Increased Currency Volatility
Tariffs often trigger foreign exchange fluctuations. It is predicted that in the short-term, the Canadian dollar will continue to weaken if most of the U.S. tariffs remain in place for longer than a couple of weeks.
For MSBs, this could mean increased demand for FX services but also heightened exposure to volatility. Businesses may seek out MSBs offering real-time rates, hedging tools, or tailored guidance.
2. Disrupted Trade and Payment Flows
Clients engaged in import/export may face higher costs and cash flow pressures. This could lead to a shift in transaction volumes, delayed payments, or increased demand for international wire transfers and invoice factoring.
3. Regulatory Implications
A more protectionist U.S. policy may bring added scrutiny to cross-border payments. MSBs should ensure their compliance programs are prepared to handle evolving KYC, AML, and transaction monitoring requirements, particularly for U.S.-linked transactions.
Staying Ahead: Actionable Insights for MSBs
In light of potential shifts in U.S. trade policies, Canadian MSBs must proactively adapt to maintain stability and growth. Here are three strategic actions to consider:
Enhance Foreign Exchange (FX) Risk Management Services
Tariff-induced currency fluctuations can present both challenges and opportunities. By offering advanced FX solutions—such as forward contracts, real-time rate alerts, and multi-currency accounts—you can assist clients in mitigating risks associated with volatile exchange rates. Educating clients on effective hedging strategies will further position your MSB as a trusted advisor in uncertain times.
Strengthen Cross-Border Payment Resilience
Trade disruptions may lead to delays and increased costs in cross-border transactions. Collaborate with clients to map out transaction workflows, identify potential bottlenecks, and implement solutions like expedited processing or flexible settlement options. Ensuring your payment systems are robust and adaptable will help maintain seamless operations for your clients.
Reinforce Your Compliance Framework
Evolving trade policies often result in heightened regulatory scrutiny, especially for cross-border financial activities. It's imperative to have a comprehensive compliance program that includes adaptive Know Your Client (KYC) and Anti-Money Laundering (AML) policies, as well as dynamic transaction monitoring systems. Our firm specializes in assisting MSBs with establishing and maintaining compliance programs that meet both Canadian standards, ensuring your operations remain secure and reputable.
If you have questions about how trade policy could impact your MSB or need assistance with compliance strategies, we're here to help.
In light of potential shifts in U.S. trade policies, Canadian MSBs must proactively adapt to maintain stability and growth. Here are three strategic actions to consider:
Enhance Foreign Exchange (FX) Risk Management Services
Tariff-induced currency fluctuations can present both challenges and opportunities. By offering advanced FX solutions—such as forward contracts, real-time rate alerts, and multi-currency accounts—you can assist clients in mitigating risks associated with volatile exchange rates. Educating clients on effective hedging strategies will further position your MSB as a trusted advisor in uncertain times.
Strengthen Cross-Border Payment Resilience
Trade disruptions may lead to delays and increased costs in cross-border transactions. Collaborate with clients to map out transaction workflows, identify potential bottlenecks, and implement solutions like expedited processing or flexible settlement options. Ensuring your payment systems are robust and adaptable will help maintain seamless operations for your clients.
Reinforce Your Compliance Framework
Evolving trade policies often result in heightened regulatory scrutiny, especially for cross-border financial activities. It's imperative to have a comprehensive compliance program that includes adaptive Know Your Client (KYC) and Anti-Money Laundering (AML) policies, as well as dynamic transaction monitoring systems. Our firm specializes in assisting MSBs with establishing and maintaining compliance programs that meet both Canadian standards, ensuring your operations remain secure and reputable.
If you have questions about how trade policy could impact your MSB or need assistance with compliance strategies, we're here to help.
