Trump's One Big Beautiful Bill offers American businesses a myriad of incentives to grow domestically.DARRYL DYCK/The Canadian Press
Jeff Baryshnik is the president of Republic Funds, a private equity firm.
On the Fourth of July, U.S. President Donald Trump signed into law the One Big Beautiful Bill (OBBB). Observers have focused on its impact on the U.S. fiscal situation and its potential tax hikes for foreign investors. But there’s another aspect of it that, while less talked about, is no less important.
The bill included a sweeping tax overhaul aimed squarely at revitalizing U.S. manufacturing. South of the border, the new law will offer a massive financial incentive to build, expand and reshore factories to the United States. North of the border, it will cause One Big Brutal Blow for Canadian jobs – unless we respond rapidly and decisively with comparable tax incentives.
The OBBB allows U.S. businesses to immediately expense the cost to build factories, improve existing factories, purchase equipment and invest in research and development – costs that previously could be claimed only over many years or decades as depreciation. The U.S. Small Business Administration’s website now proudly boasts that the new law will “Make Onshoring Great Again.” It’s not just Trumpian bravado – it’s shrewd industrial policy with sharp teeth.
To understand the OBBB’s magnitude, consider this example: a new $20-million factory generating $2-million in annual operating income in the U.S. would pay zero income tax for a decade under the OBBB. A comparable new Canadian factory, under current Ontario and federal tax rules, would pay roughly $3-million in taxes during its first decade. That’s before factoring in debt financing, which further prolongs the U.S. tax holiday.
What happens when the tax holiday ends? Well, even before factoring in OBBB benefits, 24 U.S. states already offer lower combined corporate tax rates than Ontario’s specially reduced manufacturing tax rate, according to the U.S. Tax Foundation. Factor in lower U.S. dividend tax rates plus a new 23-per-cent tax deduction for pass-through businesses (those which pass all their income on to their owners or investors), and the incentive to choose the U.S. over Canada becomes too attractive for global manufacturers to ignore.
This is not a theoretical risk – the OBBB already is affecting where companies choose to invest. Last month, the Toronto Region Board of Trade concluded that the OBBB “would make expansion in the U.S. more financially attractive for manufacturers, while making Canada a less attractive destination for new investment.” The organization further noted that “the longer Canada delays offering similar incentives, the greater the risk that [economic activity] will shift south of the border.”
In 2024, Canada attracted $40-billion in new manufacturing foreign direct investment and approximately 21,000 related new jobs, based on data from Invest in Canada. Extrapolating over the coming decade, almost half a trillion dollars of inbound manufacturing investment and nearly a quarter million new jobs are at risk in Canada from the OBBB. We also must defend the 1.8 million existing Canadian manufacturing jobs to avoid the steep societal cost from expected layoffs and missed job creation opportunities – including lost wages, lower tax revenues and fewer downstream economic benefits.
Canadians see the big brutal blow coming. We surveyed 1,000 Canadian adults over the weekend, and 75 per cent – 90 per cent of those with an opinion – agree that the OBBB will lead to manufacturing job losses in Canada. Nearly half of respondents expect those losses to be significant.
Canadians expect a policy response. When asked whether Canada should “beat” the U.S. manufacturing tax benefits to defend our own industrial job base, 58 per cent agreed – 74 per cent of those with an opinion. More boldly, 57 per cent of Canadians – 70 per cent of those with an opinion – think Canada should “beat” the U.S. tax benefits with even more generous Canadian tax incentives.
Canadians aren’t just asking for action: they’re demanding it. We must allow Canadian businesses to immediately expense the full cost of building new factories, improving existing factories, purchasing equipment and investing in research and development capital expenditures. Tax parity for Canadian manufacturers is both good policy and good politics, whether billed as “Canada Strong” or “Canada First.”
The OBBB creates a strategic realignment of U.S. industrial policy. If Canada doesn’t respond with equal clarity and ambition, we will lose not only our jobs but also our struggling manufacturing base.
President Trump likes to compare negotiating and legislating to a poker game. With the One Big Beautiful Bill, America is going all-in on manufacturing, so the immediate expensing of factory costs has become table stakes. Canada must up the ante rapidly and decisively, or we will experience One Big Brutal Blow for Canadian jobs.
This is no time for Canada to fold.