Canadian businesses are already feeling the effects of U.S. tariffs, even after the country won a reprieve from levies on goods and services imported into the United States.
A new survey by accounting giant KPMG of 250 companies across the country found that nearly two-thirds are working to mitigate the effects of the 10 per-cent tariffs U.S. President Donald Trump imposed on imports from China this week.
The findings show that even though Mr. Trump has hit pause on universal tariffs on goods from Canada and Mexico, Canadian companies are rushing to navigate a new global trade outlook under a U.S. administration poised to disrupt decades-old supply chains and trade agreements.
Nearly 90 per cent of the Canadian businesses in the KPMG survey – ranging in size and revenue from less than $10-million to more than $1-billion – have either diverted or are considering diverting goods to countries not facing U.S. tariffs. Nearly half the respondents said they’re “actively” reworking supply chains to redirect exports to countries unaffected by levies, and almost 60 per cent of the corporate leaders said they’re taking steps to move production out of China.
The survey’s results underscore how rapidly the Canadian business landscape is changing even before tariffs have been imposed. Companies were already expediting plans to expand south of the border to maintain access to their largest clients. With tariffs on Chinese goods in effect, a significant number of Canadian companies have been thrown yet another curveball.
“The uncertainty caused by potential tariffs on Canadian goods and newly-imposed tariffs on China has made it very difficult for Canadian companies to plan, operate and stay competitive,” said Alain Sawaya, a supply-chain expert at KPMG.
The findings highlight the sense of urgency with which politicians and business leaders are acting, even as uncertainty over Mr. Trump’s tariff plans remains. Prime Minister Justin Trudeau has called a summit in Toronto Friday to discuss the threat of U.S. tariffs and protectionism.
The summit will consider ways to diversify Canada’s international trade beyond the United States and tap new sources of economic growth and investment.
Those efforts will face potential hurdles in Mr. Trump’s promises to lower taxes and loosen regulations in the U.S. As Ottawa attempts to show the White House how decades of free trade have spurred economic growth for both countries, Canada is also losing a battle to stem the flow of domestic investment.
In Canada, a productivity crisis building since the onset of the pandemic has made retaining capital and talent even more challenging. While the U.S. has seen healthy growth in labour productivity in recent years, Canada has flatlined by the same measure.
Renaud Brossard, vice-president at the Montreal Economics Institute, said the lack of investment in Canada is “the direct result of our high levels of taxes and regulations compared with neighbouring jurisdictions.”
“The fact it was already hard enough to attract investment will only be compounded by the uncertainty created by President Trump’s tariff threats. Lawmakers at all levels of government will need to take a good hard look at their shared regulatory and fiscal burden to figure out how we can make Canada an attractive place to invest in once more.”