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Trade Uncertainty Pushes Canadian Manufacturing Investment Toward the U.S., Finds KPMG Survey

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One year after warning that US tariffs threatened their viability, Canadian manufacturers remain cautious amid persistent trade uncertainty, according to a new KPMG survey published on Tuesday.

Four in 10 Canadian manufacturers have either moved production to the United States. or are considering doing so, while 57% have delayed or cancelled capital spending and 42% have scaled back research and development, KPMG said.

The survey of 275 manufacturers finds that more than half, or 52%, say they are operating in "endurance mode."

Although 80% plan to keep their headquarters in Canada, 11% expect to relocate to the U.S. within five years, added KPMG. While that percentage may appear small, manufacturing represents more than 10% of Canada's total gross domestic product, so the loss, even of that size, could have a meaningful impact on the economy, stated Anamika Gadia, Partner and National Leader of Industrial Markets at KPMG Canada.

While firms are not abandoning Canada, ongoing trade uncertainty is prompting many to favor future investment in the United States over domestic expansion, KPMG pointed out.

"While tariffs are an obvious factor, Canadian manufacturers are making long-term decisions about where to locate based on a broader assessment of where they are most likely to have a competitive advantage," says Joy Nott, Partner, Trade and Customs at KPMG Canada.

Among firms that have shifted some or all operations to the United States, the main reasons cited are avoiding import tariffs, ongoing trade uncertainty, lower operating costs, a more favorable tax environment and better supply chain integration, according to KPMG.

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