Canadian Manufacturers Contemplate U.S. Relocation Amid Trade Tensions

📅 1 week ago

A recent KPMG Canada survey reveals that trade tensions are prompting many Canadian manufacturers to consider moving production to the U.S. or delaying investments. With over 40% contemplating relocation, the findings highlight the growing need for a competitive manufacturing environment in Canada.

OTTAWA — A recent survey has unveiled that trade tensions are influencing Canadian manufacturers to either contemplate relocating production to the United States or to postpone capital investments. According to KPMG Canada, 42 percent of Canadian manufacturing firms have indicated that they have either already moved or are considering moving their production across the border. Notably, among those contemplating a move, a significant 77 percent expect to complete this transition within the next two years.
Anamika Gadia, a partner and the national leader of industrial markets at KPMG Canada, remarked on the resilience shown by domestic manufacturers over the past year, but she emphasized that there are limits to this resilience. "Our survey clearly shows that while companies have been making short-term decisions to adapt to tariffs and trade uncertainty, they’re now moving toward making longer-term investment decisions," Gadia stated in an interview. "In other words, they’re not waiting to see what might happen with the trade situation, including the CUSMA discussions, and they’re moving to make longer-term investment decisions, including investment decisions that see them shifting their production to the U.S."
The survey results were collected from business owners, executives, and decision-makers across 275 Canadian manufacturing companies between May 11 and May 29, utilizing Angus Reid’s business research panel. Last week, U.S. Trade Representative Jamieson Greer announced that the United States would not renew the Canada-U.S.-Mexico Agreement (CUSMA) in its current form; however, the trade agreement will remain in effect as negotiations continue. This decision initiates a rolling annual review that could extend for up to a decade, with the agreement set to expire unless an extension is negotiated. CUSMA continues to shield Canada from numerous tariffs imposed by U.S. President Donald Trump, but Canada is still impacted by sector-specific tariffs on industries such as steel, aluminum, automobiles, and cabinetry.
Gadia pointed out that the issues at hand extend beyond the trade landscape, emphasizing the necessity for Canada to establish a competitive environment for manufacturers to thrive. "This survey clearly shows that manufacturers need to feel more comfortable and see some action from the government in order to continue to produce and invest and grow in Canada," she asserted. Key factors cited by companies include a desire for greater certainty regarding interprovincial trade barriers, more tariff predictability, lower corporate taxes, better access to capital, and more affordable energy.
The survey also revealed that 57 percent of manufacturing firms have either paused, diminished, or canceled capital investment projects. Specifically, 36 percent reported scaling back their investments, 12 percent have paused their plans, and 9 percent have canceled their intended expenditures. Gadia indicated that delays in capital investment could signal a potential redirection of investment dollars toward the U.S.
Furthermore, the survey indicated that while 80 percent of manufacturers intend to keep their headquarters in Canada, 11 percent are planning to relocate their head office to the U.S. within the next five years. Such a loss could significantly affect Canada's gross domestic product, as KPMG Canada has noted. The manufacturing sector is responsible for approximately 10 percent of Canada's overall GDP, underscoring the potential economic ramifications of these trends.

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