Roman Shimonov, the CEO of smart armoured-vehicle-maker Roshel, in his manufacturing plant in Brampton, Ont. on Jan. 31. Roshel is one of the Canadian manufacturers to become American manufacturers to avoid tariffs.Jennifer Roberts/The Globe and Mail
One Canadian manufacturer of armoured vehicles is shifting production to a new plant in the United States. Aluminum and food producers are preparing to redirect sales away from the U.S. to different markets. Other exporters have stuffed tractor trailers full of their goods and parked them on the American side of the border in recent weeks.
In the lead-up to U.S. President Donald Trump’s promised tariffs on imports from Canada, which the White House said will take effect on Saturday, companies have scrambled to find ways to tariff-proof their operations.
In some cases they’re exploring alternative markets to ship to, in others they’re overhauling their factory footprints to qualify their goods as Made-in-America and thus avoid the tariffs. And where possible, some companies are overhauling contracts to ensure that U.S. customers carry the freight of higher prices on Canadian imports.
In recent conference calls with investors, companies have spelled out their plans to lessen the impact of Mr. Trump’s tariff threats.
Bottled water company Flow Beverage Corp. has a “great mitigation plan,” said Trent MacDonald, the company’s chief financial officer in a Jan. 30 call, citing a spring on a 144-acre site in Virginia the company held on to when it sold a nearby production facility to another beverage producer in 2022.
The company can “pivot fairly quickly” to using that water source and partnering with co-packing manufacturers to bottle it, he said, though he admitted that would lower the company’s profit margins. “It’s a much better strategy than living with the tariff,” he said.
Blackline Safety Corp. BLN-T, which makes wearable employee safety monitoring equipment for utilities, oil and gas companies and other industries, is planning to expand its manufacturing capacity and “depending on where all this lands” with tariffs, the company may do that expansion in the U.S. and “remove that tariff threat,” said Cody Slater, the company’s CEO.
At Maple Leaf Foods MFI-T, which last year generated $538-million in revenue from the U.S., or about 11 per cent of its total sales, the company said tariffs would force it to “redirect” fresh pork products to “somewhere else in the world,” said Curtis Frank, the company’s CEO.
In a statement, Maple Leaf spokesperson Charlene Magnaye said the company has done “extensive planning and scenario analysis” around the tariffs and is “looking intensely” at its supply chain channels.
The hunt for non-U.S. markets has emerged as a common theme.
In a recent earnings call with investors, William Oplinger, CEO of aluminum producer Alcoa Corp. AA-N, said tariffs would upend established trade flows as American businesses seek out supply from countries with lower import duties. Meanwhile, the company, which is based in Pittsburgh, would redirect supply from its Canadian aluminum operations elsewhere.
“We could reroute supply from our Canadian smelters to Europe,” he said. “While it is an advantage to have this option, it certainly is not a benefit for our customers and supply chains.”
Canada produces 3.2 million tonnes of primary aluminum annually, and 90 per cent of that goes to the U.S., according to Jean Simard, president and CEO of the Aluminium Association of Canada.
“We will not run out of clients or lose our place in global markets, we’ll just shift our products elsewhere because the world needs our aluminum,” he said.
But with the U.S. consuming five million tonnes of aluminum per year while only producing 670,000 tonnes – roughly the equivalent of one of Canada’s nine smelters – “it will be a disaster for American consumers,” Mr. Simard said.
Another tactic for exporters has been to front-load shipments to the U.S. before tariffs take effect, with manufacturers of consumer goods, building products and non-perishable foods renting trailers to store inventory stateside.
Dan Leslie, president of Warehouse on Wheels Canada, which provides trailer rentals and flexible storage, has been fielding calls from companies in those sectors looking for ways to soften the blow from tariffs while they craft longer-term contingency plans.
“We’ll get a call saying, ‘We need increased capacity. We need, for example, 50 trailers and we need them tomorrow because we’re going to load them up with our goods and have them sitting in the U.S. in a location as standby inventory or reserve inventory heading into this,’” Mr. Leslie said in an interview. “So they’ve landed in the States before the deadline.”
Even before Mr. Trump was elected for a second time, companies were safeguarding themselves with contracts that ensure any tariff costs are taken on by customers.
During a recent investor presentation. Tim Gitzel, the CEO of uranium producer Cameco Corp. CCO-T, said in the wake of Mr. Trump’s first round of tariffs on metal producers in 2018, all new contracts it signs with U.S. customers have such a provision.
“It’s a pass-through for us. It’s their issue,” he said.
Similarly Enerflex Ltd., which makes equipment for natural gas producers and electricity generators, began adding tariff riders to its steel contracts six months ago because the company was “worried about steel from China tariffs,” said CEO Marc Rossiter at a recent investor conference. “We have to broaden that language to include sort of any tariffs.”
But the company may also “pivot” some production work to the U.S. from Canada.
“It’s a real shame for our Canadian workers,” he said, noting the company has 500 employees at its shop in Calgary. “Unfortunately, they just won’t have that business if these tariffs happen, and I don’t expect the U.S. buyers are going to take the risk.”
One way Canadian manufacturers are avoiding Mr. Trump’s tariffs is by becoming American manufacturers.
Sometime in the coming months, the first smart armoured truck will roll off the line at Roshel Inc.’s new factory in Shelby Township, Mich., which was announced in mid-December.
In the past, the privately owned manufacturer of vehicles for the commercial and defence sectors, which launched in 2016, constructed all its vehicles at plants in the Greater Toronto Area.
With U.S. customers accounting for the majority of Roshel’s sales, the company had taken steps to eventually open a factory south of the border, though it remained more efficient to keep all its production under one roof. That changed with Mr. Trump’s election and his tariff threats, said Roman Shimonov, Roshel’s founder and CEO.
“Tariffs played a vital role in our decision,” he said. “Without being able to overcome it by having a facility in the U.S., I doubt that many companies that rely on exports will be able to survive.”
U.S. protectionism isn’t the only reason Roshel headed south. Mr. Shimonov said operating a defence company in Canada “sometimes feels like the government is working against you,” and he said the lack of government support for small manufacturers “is leading to a massive outflow of companies like us that are supposed to be the backbone of Canada’s economy.”
As for the company’s 400 employees in Brampton, Ont., “if all our orders are coming from the U.S., it will lead to major disruptions and a lack of orders to justify hiring people,” he said.
In general, companies have been taking a wait-and-see approach to Mr. Trump’s tariffs, according to an analysis of corporate earnings calls, reflecting the uncertainty of the moment.
That’s the case for Yorkville Sound – a sister company to musical-instrument retailer Long & McQuade – which manufactures audio equipment for musicians at a plant in Pickering, Ont. About 30 per cent of its $135-million in annual sales goes to the U.S., with most of the rest sold in Canada.
Steve Long, the second-generation owner of the companies, said if the U.S. imposes tariffs on Canada but not China, then the business would struggle because most of its competitors are in Asia.
But in general, he said, it’s hard to plan for chaos.
A man tests out instruments among Canadian-made Traynor amplifiers at a Long & McQuade store in Toronto's on Jan. 31.Cole Burston/The Globe and Mail
“One of the things I’ve had as a business rule is don’t spend a lot of time worrying about something until you can do something about it,” Mr. Long said, adding: “If tariffs come on and they go on for two weeks or whatever, it’s going to be a non-issue. If they come on and go on for months and months and months, there’s not a whole lot of planning you can do to fix that.”
There are also many U.S.-dependent exporters for which there are few options to avoid a tariff hit, particularly if their American customers can easily switch to domestic suppliers or imports from other countries not subject to tariffs, said Florence Jean-Jacobs, principal economist with Desjardins.
In a recent analysis, she found one-quarter of the goods the U.S. imports from Canada are at risk of being easily substituted.
All of this is frustrating for trade experts like Stuart Bergman, chief economist at Export Development Canada, who have long argued Canadian businesses need to broaden their customer bases.
“It’s just easy to do business in the U.S. so a lot of exporters are risk averse,” he said. “But how many times do we have to get hit upside the head for us to recognize the importance of diversification.”