Will a North American Trade War Hurt Your Art Gallery?

With a new administration in the United States looking to change North American trade relations, there are many potential implications for Canadian and Mexican businesses, including art galleries. One major concern is a looming 25% tariff, including tariffs on art, on all Mexican and Canadian imports into the U.S. As a result of these tariffs, art galleries in Canada and Mexico are bracing to face several potential challenges.

The Cost of Buying Canadian or Mexican Art in The U.S. 

Tariffs on Mexican and Canadian imports into the United States are designed for two purposes: to encourage industries to manufacture products within U.S. borders and as a negotiation tactic with foreign governments. However, these tariffs will impact any import into the U.S., including artwork. 

Who Pays the Cost of Tariffs on Art?

For larger businesses, the U.S. importer must pay the cost of the tariffs, and this extra cost is usually transferred to the consumer in the form of higher prices for their goods. However, with artwork, the collector or buyer of the artwork is also the importer, which means that if these tariffs go ahead as planned, the collector will be paying a 25% increase on top of the artwork purchase price.

How Does this Impact International Galleries?

As a Canadian or Mexican art gallery, the major concern would be that American buyers may reconsider buying Canadian or Mexican artwork. As artwork can be expensive to acquire, an initial 25% fee on top of the purchase price could turn off potential buyers, leading collectors to turn away from foreign art purchases.

What Can Art Galleries Do?

While these tariffs may change, the issue of uncertainty will still remain, and Mexican and Canadian galleries need to consider other options to move their artwork. Galleries essentially have three options:

Lower the Price of Their Artwork: The easiest option would be for the gallery to eat the additional 25% cost and lower the price of their artwork to U.S. buyers by 25%. This can be challenging as this also impacts the artist and gallery sales projections. 

Lowering artwork for specific buyers can be a challenge depending on your payment and inventory systems, so if your gallery is going this route, it’s important to make sure you have a flexible invoicing system that allows you to easily apply discounts and capture the reason for the discount on the final invoice. Galleries may want to get ahead of any potential concern by letting their U.S. collectors know that they are willing to lower the price of their artwork to cover the cost of the tariff. This would require the ability to create a list of all U.S. collectors and then the ability to send personalized messages to each one, something a lot of galleries may not have the time or ability to accomplish. 

Target Domestic and International Buyers: If U.S. buyers are hesitant to buy Mexican and Canadian art due to increased costs, Mexican and Canadian galleries can turn to buyers in their own countries or in countries that don’t have trade restrictions. 

Similar to the above point, you will need a flexible system that allows you to isolate your contacts by location and send them personalized messages and images of artwork while also being able to understand and track how these domestic and international collectors are interacting with your messages, offers, and artwork. 

Increase Gallery Awareness: The 25% percent additional fee for Canadian and Mexican artwork may not be a concern to every American collector, so casting a wider net and bringing in new potential buyers could also help.

Increasing social media awareness, reaching out to new collectors, and using online viewing rooms (OVRs) are all ways you can attract new buyers. Also, digging deep into your contact list and re-egaging dormant contacts can also be a way to try and recoup costs when regular collectors are reluctant to buy. 

Potential Retaliatory Measures

In response to the U.S. tariffs, Canada and Mexico have indicated plans to implement retaliatory tariffs on U.S. goods. This tit-for-tat escalation could further strain international relations and complicate the operations of galleries involved in cross-border activities. The uncertainty surrounding trade policies may make it difficult for galleries to plan exhibitions and collaborations involving U.S. partners, and can lead potential collectors away from new purchases. 

While the 25% tariffs present significant challenges for art galleries in Canada and Mexico, they also offer an opportunity to reassess and adapt business strategies. ARTERNAL is continuing to monitor the situation, and we can help you strategize ways to continue getting your art into the hands of worthy collectors. Reach out to learn more about how ARTERNAL can help.