Dealing with Chinese Suppliers? Forget the US Dollar and Pay Local

Canadian businesses have long relied on the US dollar (USD) for international transactions, especially when sourcing goods from China. But with the United States proposing a 25% tariff on Canadian imports, it’s time to rethink this approach. At this moment, relying on USD in global trade exposes Canadian companies to currency fluctuations, transaction fees, and unpredictable US trade policies.

There’s a smarter way forward. By paying Chinese suppliers in local currency (Yuan or CNY) instead of USD, Canadian businesses can unlock significant cost savings, build stronger supplier relationships, and reduce their exposure to US trade policies. It’s a strategic shift that helps navigate today’s economic challenges and future-proofs businesses for the changing global trade landscape.

What does the 25% tariff mean for Canadian businesses?

The proposed 25% US tariff on Canadian imports is set to have a far-reaching impact on businesses that depend on cross-border trade. If implemented, this policy could increase costs, disrupt supply chains, and force businesses to rethink their sourcing and payment strategies. Here’s how this tariff could affect Canadian businesses:

Higher costs for imported goods: A 25% tariff means Canadian exporters selling to the US will face steep price increases, making their products less competitive in the American market. This could lead to declining sales and force businesses to either absorb the extra cost or pass it on to consumers.

Increased supply chain disruptions: Many Canadian businesses import raw materials or finished goods from the US before manufacturing or reselling them. Higher tariffs could disrupt supply chains, forcing companies to look for alternative suppliers in China or other global markets.

Greater exposure to US economic policies: Over-reliance on the US dollar for global trade means Canadian businesses are constantly affected by US financial regulations, sanctions, and currency fluctuations. The new tariff is another reminder that depending too much on the US market and financial system can be risky.

The need for alternative trade and payment strategies: With higher tariffs and increasing volatility in US-Canada trade relations, businesses should explore alternative sourcing and payment methods. One of the most effective ways to mitigate risk and cut costs is by shifting away from USD and paying Chinese suppliers in Yuan (CNY) instead.

The shift away from the US dollar: A global trend

The US dollar (USD) has dominated international trade and finance for decades. However, in recent years, there has been a growing movement toward de-dollarization—the process of reducing dependence on the USD in global transactions. As economic and geopolitical shifts accelerate, many countries and businesses are turning to alternative currencies to gain more control over their trade and financial stability.

Rise of de-dollarization: Governments and businesses worldwide are actively working to reduce their reliance on USD to avoid economic and political risks tied to US policies. Countries like China, Russia, and members of the BRICS alliance are pushing for a more diversified global financial system, using local currencies for trade instead of defaulting to USD.

China’s push for yuan in global trade: China has been at the forefront of this movement, encouraging the use of its local currency, the yuan (CNY), in international trade agreements. Through initiatives like the Belt and Road Initiative (BRI) and bilateral currency swap agreements, China has positioned the yuan as a viable alternative to USD, particularly in trade with Asia, Africa, and Latin America.

BRICS and the future of non-USD trade: The BRICS nations (Brazil, Russia, India, China, and South Africa) are actively developing alternative financial systems that bypass the USD. They have explored creating a new reserve currency, expanding the use of their national currencies in trade, and establishing non-Western payment systems to reduce exposure to US financial controls.

How does this affect Canadian businesses?

As the global shift away from USD accelerates, Canadian businesses need to adapt to these changes to remain competitive. By embracing direct yuan transactions when dealing with Chinese suppliers, businesses can gain the following:

• More stable pricing without being affected by USD exchange rate fluctuations.
• Lower transaction costs by avoiding unnecessary currency conversions.
• Stronger trade relationships with Chinese suppliers who prefer payments in their local currency.

With the world moving toward a multi-currency trading system, Canadian businesses that reduce their dependence on USD now will be better positioned for long-term success in the evolving global economy.

Why Canadian businesses should pay in yuan (CNY) instead of USD

For years, Canadian businesses sourcing goods from China have defaulted to using the US dollar (USD) for transactions. However, with the proposed 25% US tariff on Canadian imports and growing global efforts to reduce reliance on the USD, it’s time to rethink this approach. Paying Chinese suppliers in yuan (CNY) instead of USD offers a range of benefits, from cost savings to greater financial stability. Here’s why Canadian businesses should make the switch.

Cost savings and better pricing

• Avoid exchange rate fluctuations – Since CAD is typically converted to USD and then to CNY, businesses are exposed to multiple exchange rate risks.
• Lower transaction fees – Banks and financial institutions charge conversion fees when moving between CAD, USD, and CNY.
• Supplier discounts – Many Chinese suppliers prefer payments in CNY and offer better pricing for buyers who pay in local currency.

Reduced exposure to US trade policies

• Protection against US financial restrictions – The US government can impose sanctions, financial restrictions, or new tariffs that affect USD transactions.
• Mitigating risks of future tariffs – Since US-Canada trade relations can be unpredictable, reducing reliance on USD helps insulate businesses from policy shifts.

Stronger relationships with Chinese suppliers

• Faster and more efficient transactions – Paying in the supplier’s local currency eliminates delays caused by USD processing and conversion.
• More negotiating power – Suppliers appreciate CNY payments and may be more open to offering better terms, priority service, or longer credit periods.

Aligning with global trade trends

• China is actively promoting CNY trade – Through initiatives like BRI and currency swap agreements, China is making it easier for businesses to settle trade in yuan.
• More financial institutions support CNY – Fintech platforms now offer CNY business accounts and payment solutions, making transactions more accessible.

Pay your Chinese suppliers in CNY with MTFX

Switching from USD to yuan (CNY) when paying Chinese suppliers can help reduce costs, minimize exchange rate risks, and strengthen supplier relationships. However, many Canadian businesses hesitate because they believe sending payments in CNY is complicated. That’s where MTFX comes in.

Competitive exchange rates and lower fees

Traditional banks often charge high conversion fees and provide exchange rates that don’t favour businesses. MTFX offers more competitive exchange rates, ensuring you get the best possible value when converting CAD to CNY. By eliminating hidden fees and unnecessary USD conversions, more of your money reaches your suppliers, helping you reduce overall costs.

Fast and secure CNY payments

Speed and security are crucial when making international payments. MTFX ensures same-day or next-day transfers to China, allowing your suppliers to receive payments quickly and reducing the risk of shipment delays. Payments are processed through trusted banking channels, ensuring secure transactions that comply with international banking regulations.

Multi-currency account for seamless transactions

Managing multiple currencies can be a hassle, but with MTFX, businesses can access a multi-currency account to hold and convert CNY as needed. This feature eliminates the need for frequent currency exchanges, giving businesses the flexibility to pay Chinese suppliers at the most favourable rates.

Automated payments for efficiency

Manual payment processing can be time-consuming and prone to errors. MTFX offers automated payment solutions, enabling businesses to schedule and process transactions effortlessly. Whether you need to set up recurring payments or lock in exchange rates for future transfers, automation ensures smooth and efficient payment processing without manual intervention.

Seamless online platform

MTFX provides a 24/7 online platform that allows businesses to access real-time currency conversion, monitor exchange rates, and process payments conveniently. The intuitive interface makes it easy to schedule transactions, track payment history, and manage international transfers without relying on traditional banking processes.

Expert support and guidance

Navigating international payments and currency exchange can be complex, but MTFX’s team of foreign exchange specialists is available to help. Businesses receive personalized guidance on timing currency exchanges to get the best possible rates while ensuring compliance with Chinese banking regulations.

Reduce overreliance on USD – future-proof your business

The global trade landscape is shifting, and Canadian businesses must adapt to remain competitive. With the proposed 25% US tariff on Canadian imports and the growing trend of de-dollarization, relying on USD for international transactions could expose businesses to unnecessary risks and higher costs. By switching to yuan (CNY) payments for Chinese suppliers, businesses can reduce currency conversion fees, avoid USD volatility, and strengthen supplier relationships.

Partnering with a trusted foreign exchange provider like MTFX makes this transition seamless, ensuring fast, secure, and cost-effective payments. Now is the time to take control of your international transactions and future-proof your business. Make the shift and confidently leverage local currency payments to deal with the evolving global trade environment.

Create your MTFX account today and start paying your Chinese suppliers in yuan.

FAQs

1. Why should my business pay Chinese suppliers in yuan (CNY) instead of USD?

Paying in CNY eliminates unnecessary currency conversions, reduces exchange rate risks, and often results in better pricing from suppliers. It also helps businesses avoid exposure to USD volatility and trade-related financial restrictions.

2. Is it difficult to make payments in CNY from Canada?

No, with the right foreign exchange provider like MTFX, paying in CNY is simple. You can set up payments online, access real-time exchange rates, and process transactions quickly and securely.

3. How can I open a CNY account in Canada?

MTFX offers a multi-currency account, allowing you to hold CNY and make payments when rates are favourable, avoiding last-minute exchange rate fluctuations.

4. How do I avoid high banking fees when sending CNY payments?

Traditional banks often charge high fees for international payments. Using a specialized provider like MTFX can significantly reduce transaction costs and offer better exchange rates.

5. Will switching to CNY impact my cash flow management?

Not significantly. In fact, it can improve cash flow by allowing you to time your currency exchanges strategically and avoid unexpected USD rate swings.

6. Can I lock in exchange rates for future CNY payments?

Yes, businesses can use forward contracts to lock in exchange rates for future payments, protecting against currency fluctuations.

7. Are more Canadian businesses adopting CNY payments?

Yes, as global trade shifts away from USD dominance, more Canadian companies are making the switch to CNY to stay competitive and reduce costs.