In advising businesses, KPMG is hearing that most Canadian companies are focused on mitigation strategies to reduce the costs of U.S. tariffs.Justin Tang/The Canadian Press
Lachlan Wolfers is the National Leader of KPMG Law in Canada and KPMG’s Global Head of Indirect Taxes
As the news on tariffs changes daily, this uncertainty may be prompting some Canadian businesses to consider relocating to the U.S. The idea of avoiding the economic storm directed at Canada may seem a logical response to mitigate the risk of tariffs.
However, moving a company is easier said than done. The economics of moving a company’s operations to the U.S. requires a very careful examination of all the complex factors involved. It’s a decision that should not be taken lightly and may not be for every company.
Among these are legal costs in setting up new entity structures, finding new premises, fitting out or securing a new plant and equipment and relocating or hiring new employees.
Canadian companies contemplating a move will need to navigate unfamiliar employment and environmental regulations, build new supplier and customer relationships, manage the complexities of U.S. federal and state taxes, develop new routes to market, and manage transportation, shipping and domestic energy costs.
Then there is the potential need for licenses, permits and approvals, negotiating new banking relationships – and the list goes on.
That’s before you’ve tallied up the costs of closing your existing operations in Canada. There will be tax costs for exiting Canada, employment termination costs, ending leases or selling off premises, inventory, plant and equipment (often at a discount), along with ending supplier and customer contracts. There’s also the challenge of transitioning the business to its new location, which can feel like changing the tires on a car while it’s moving.
In advising businesses, KPMG is hearing that most Canadian companies are focused on mitigation strategies to reduce the costs of U.S. tariffs. Many have expedited shipments to the U.S. and are pivoting to relocate specific production activities south of the border. Fewer are considering a more permanent shift to the U.S.
Canadian paper products company KP Tissue Inc. KPT-T, which manufactures Cashmere and Purex products in Canada, has said about one-third of its revenue is exposed to potential U.S. tariffs. The company has existing facilities in the U.S. and is considering expanding there. Longer-term, CEO Dino Bianco recently stated the company may consider setting up a facility in the United States. Ottawa-founded Shopify SHOP-T has stoked some speculation by recently listing a New York headquarters in a U.S. regulatory filing for the first time.
Trucking company Mullen Group MTL-T is also exploring their investment options amid fears of capital fleeing south of the border. Chairman Murray Mullen has warned Canadian political leaders to take strong action in response to threatened tariffs, saying otherwise the company will be forced to turn its attention to the U.S.
Others have walked back plans to redomicile to the U.S. due to concerns by investors about the effect on Canadian jobs and the economy. They also recognize that a move to the U.S. would come with great costs. Bill Oplinger, CEO of Alcoa Corporation AA-N, a Pittsburgh-based global producer of aluminum, recently talked about how difficult, complex and risky it would be for his company to shutter its Canadian operations and make a major investment in the U.S. as a way of avoiding tariffs. The company previously reduced its operations in the U.S. due to high electricity costs.
Now consider doing all of this when the timeline of the problem you are trying to solve is so uncertain. U.S. tariffs announced in 2018 on Canadian steel and aluminum stayed in place for one year. What would the costs be to unwind a move a year later or less?
All of this is before we factor in Canada’s response with retaliatory tariffs. Would your business really benefit if it moves, only to find itself caught in the crossfire of such levies?
The landscape here at home also warrants consideration. Our currency is trading at five-year lows, cushioning at least some of the immediate effect of tariffs for exporters. The prospect of future interest rate reductions may also be a stabilizing factor. Interprovincial trade barriers are starting to come down and consumer sentiment favours a ‘Buy Canadian’ approach. Although this sentiment may not hold at that level, it could continue to be a consumer priority for the foreseeable future.
The message is simple: Relocation tends to be the nuclear option made with a longer-term investment horizon. Typically, it should be activated only after much foresight, planning and meticulous execution.
Editor’s note: (March 21, 2025): A previous version of this article contained imprecise wording indicating that KP Tissue Inc. said potential U.S. tariffs would have "major revenue impacts." KP Tissue said one third of is revenue is exposed to U.S. tariffs. The article also incorrectly said that the company may consider a move to the United States. KP Tissues is considering setting up a new facility in the United States. This version has been updated.