There has been a barrage of reporting in the media about the incoming Trump administration’s plans to impose an initial blanket 25% tariff on all goods entering the U.S. from Canada and Mexico and a 10% tariff on goods coming from China.
The U.S. is Canada’s largest trading partner with almost two-thirds of Canadian exports going to the United States. Thirty-four U.S. states rank Canada as their number one export market, and Canada serves as either the first or second export market for 45 U.S. states. In 2022, U.S. exports to Canada exceeded total U.S. exports to Denmark, France, Germany, Italy, Spain, and the United Kingdom combined. Mexico merely eclipses Canada’s 14% as the biggest export market at 16% and China in third place at 11%.
If tariffs proposed by the incoming administration are adopted, we can expect retaliatory tariffs imposed on the U.S. by each of these countries.
So, what does all of this have to do with customer loyalty programs? The answer is simple, a lot.
Customer loyalty program performance is intrinsically linked to the health of the underlying economy. A trade war could have a negative ripple effect on every customer loyalty program. Whether it is retail, travel and hospitality, financial services, or any other sector, no loyalty program is fully insulated from the impact of macro economic events.
We don’t have to go back too far in time to remember the last time an economic disaster negatively impacted the loyalty industry. The economic fall out from COVID-19, and the resulting impact on loyalty programs should be a good lesson to loyalty operators trying to insulate their loyalty program operations and financials from potential tariffs/trade wars.
Loyalty operators had to be agile in changing their value propositions to provide members with new options, as well as to extend grace to engage with their programs and stay relevant during that catastrophic economic time.
While the impact of a trade war spawned by new tariffs is not expected to be as severe, loyalty operators should be cognizant of where the potential impact will land and make changes to their program’s value exchange with members to secure their member engagement while balancing their program’s financial viability.
Here is a roundup of potential challenges that loyalty programs in North America will encounter…
