BRP stock plunged 35% midweek after a tariff change hit profits hard.

Tariff overhaul slams margins

BRP Inc., the Valcourt, Que.-based maker of Ski-Doo snowmobiles and Can-Am vehicles, told investors that a reworking of U.S. Tariff rules will shave more than $500 million off its results this year.

The hit arrived without warning — the presidential proclamation took effect on April 6 and immediately altered BRP's tariff outlook. A presidential proclamation that took effect on April 6 reclassifies products made "substantially" of steel, aluminium or copper so that they're now subject to a 25 per cent levy on the full value of the finished goods. That replaces an earlier approach under which BRP paid a tariff only on the metal content — roughly 50 per cent on the metal portion — a far smaller charge.

The company said the change forced it to suspend its financial guidance. Shares tumbled 35 per cent to $70.40 in midafternoon trading the day the announcement came, reflecting investors' concern about the immediate profit squeeze and the uncertainty ahead.

Where BRP sells and makes its products

BRP generates about 60 per cent of its revenue in the United States, and most of the inventory sold there's manufactured outside the U.S. Seventy per cent of BRP's total production takes place in Mexico, and the rest is built in Canada and other locations.

BRP's production footprint explains the impact: about 70% of its output is made in Mexico and roughly 60% of revenue comes from U.S. sales. Snowmobiles for BRP are largely built in Quebec, while many off-road models and personal watercraft are produced in Mexico. So when the tariff is applied to the full value of those vehicles, the company faces a much bigger bill than before.

Management and market reaction

Denis Le Vot, who became chief executive on Feb. 1, told shareholders that the tariff move has created a highly volatile and unpredictable operating backdrop. "Like many manufacturers, we're operating in a highly volatile and unpredictable tariff environment that continues to create uncertainty across the market," he said in the company's statement.

"Despite the material burden of these tariff changes, we expect that, with our solid balance sheet, the agility of our teams and the strong start of the year, we will be able to manage our business through this challenge and continue to push BRP forward," Le Vot added.

Investors wanted hard numbers: days earlier BRP had issued guidance projecting net income up to $480 million. BRP had only days earlier been forecasting a strong year; guidance issued in late March put projected net income as high as $480 million for the fiscal year. That forecast assumed a much smaller tariff drag — roughly $90 million — on U.S. Duties. The newly disclosed $500-million-plus impact effectively wipes out the difference between the prior estimate and reality.

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Analyst take and how rivals fare

Analysts quickly flagged that the bigger levy changes the company's profitability profile. Cameron Doerksen, an analyst at National Bank, warned investors that the scale of the added cost "fundamentally changes the profitability profile for BRP and injects a high degree of uncertainty into the outlook."

Polaris, a U.S. Rival with substantial manufacturing in Mexico, will feel a hit too. But Doerksen noted that the burden on BRP is especially large because the company makes categories of vehicles — like snowmobiles — in locations that now attract the full 25 per cent charge, whereas Polaris manufactures some of those models in the United States.

Limited options for immediate relief

The company says it's exploring mitigation measures but hasn't identified sweeping offsets yet. For now, BRP has paused its guidance and is signaling that short-term earnings will take a major hit before any mitigation is in place.

Management stressed the company's balance sheet strength and operational agility as buffers. BRP can tap cash and working-capital measures to bridge the shortfall while it weighs pricing, sourcing and logistics changes; management has cited the company's solid balance sheet. But big shifts in supply chains or production locations take time and cost money. Shifting supply chains or production won't erase the tariff overnight — plant moves, supplier contracts and certifications take months and cost money.

What the tariff change actually did

The administration behind the proclamation framed the revision as a response to national security concerns tied to metal imports. The new rule imposes a 25 per cent levy on the full value of finished products that are made substantially of steel, aluminium or copper — a definition that now captures many recreational vehicles and parts.

Under the previous interpretation, BRP and similar manufacturers were subject to a tariff that applied only to the metal content within a product — a much lower effective rate. The switch to a full-value basis magnifies the duty by several times for products where metal is only a portion of the total value.

Wider implications and tough choices

The immediate fallout is financial: a hole in 2026 earnings and a hit to investor confidence, as shown by the share-price drop. But the longer game could force faster shifts in where companies build and how they price products for the U.S. Market.

Some manufacturers may try to move production back to the U.S. to avoid the full-value levy, but capacity constraints and certification hurdles will limit how fast they can do that. Others will try to redesign products to reduce the portion deemed "substantial" metal content. And many will look at passing part of the cost to dealers and customers — a move that could pressure volumes.

BRP earns about 60% of revenue in the U.S. and builds most vehicles in Mexico and Canada, so any production shift would be operationally complex and time-consuming. Shifting snowmobile production back to the U.S., for instance, isn't straightforward. There's plant capacity, labour, supplier networks and certification timelines to consider.

Company profile and brands

BRP is best known for Ski-Doo snowmobiles and Can-Am off-road vehicles, and it also makes personal watercraft and other powersports products. The firm says its mission is to create experiences that move people and has built a global business around a set of consumer brands in the recreational market.

Revenue concentration in the U.S. Market and manufacturing spread across North America made BRP particularly exposed to a change in how duties are calculated. The company now faces the task of balancing near-term financial pain with longer-term strategic options.

Investor questions and next steps

Investors will watch closely for any operational plans BRP lays out: pricing moves, supplier negotiations, production shifts, or cost reductions. For now, management's public comments emphasise resilience and a willingness to use the company's balance sheet to weather the storm.

Right now, though, the math is stark. A tariff methodology that applies to the finished value of goods versus the metal content can multiply the duty bill many times over. That's what happened here — and it's why the stock market reaction was so sharp.

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"Despite the material burden of these tariff changes, we expect that, with our solid balance sheet, the agility of our teams and the strong start of the year, we will be able to manage our business through this challenge and continue to push BRP forward," Denis Le Vot, CEO, said.

This article was created with AI assistance.