Building resilience in the face of trade disruption
The recent trade landscape has been significantly impacted by tariffs between the U.S. and Canada, impacting over 80% of businesses. Tariffs, which are taxes imposed on imported goods, serve various purposes, including protecting local industries and influencing trade balances. They can encourage consumers to buy domestic products by making imports more expensive, but they may also lead to higher prices for consumers and provoke retaliatory measures from other countries, resulting in trade disputes.
KPMG is committed to supporting the Canadian business community during this period of uncertainty. By proactively strengthening resilience and adapting to the changing environment, Canadian businesses can foster growth and stability in the face of disruption.
80% of business leaders say they will be impacted by U.S. tariffs
Latest developments
- March 26, 2025: U.S. imposes 25% tariffs on all foreign-made cars and light trucks, set to take effect on April 3, 2025.
- March 12, 2025: U.S. 25% tariffs on steel and aluminum are now in effect.
Canada is the top supplier of both steel and aluminum to the U.S., therefore these tariffs will be a significant source of disruption for producers in Ontario and Quebec, and the automotive, construction, manufacturing, defense and aerospace industries.
In response, Canada has implemented retaliatory tariffs, targeting $12.6 billion in steel products and $3 billion in aluminum products. The counter-tariffs will also apply to other products, including computers, sports equipment and cast iron goods. - March 6, 2025: U.S. administration pauses tariffs on Canada until April 2, covering only exempt goods that fall under the Canada-US-Mexico trade agreement (CUSMA).
- March 4, 2025: U.S. tariffs are in effect, imposing a 25% levy on Canadian goods, excluding energy products that are subject to a 10% tariff.
In response, Canada imposes a 25% tariff on $155 billion worth of American goods. The provincial governments have also implemented other non-tariff countermeasures.
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Fostering a stronger, more resilient country
The uncertainty around U.S. trade policy has had Canadian companies rushing to find ways to mitigate their risk and tariff-proof their organization. While it varies by company and industry, mitigation strategies include identifying areas to optimize and streamline operations, forming partnerships to open up new markets, diversifying supply chains, divesting non-core activities, exploring foreign-exchange hedging opportunities, incorporating tariff and transfer pricing plans, seeking exemptions, and securing subsidies or taking advantage of tax incentives.
We interviewed 602 Canadian business leaders to understand their reactions and responses to the tariff threats posed by U.S. President Donald Trump. Our research finds that most leaders want the federal and provincial governments to take immediate steps to eliminate inter-provincial trade barriers, reform the tax system, provide incentives to onshore and encourage Canadians to “Buy Canadian.” 1
76% are undertaking a strategic review of their operations due to the trade uncertainty
84% say the elimination of interprovincial trade barriers will be “extremely or very” important to the survival of their business in a trade war with the U.S.
31% say they could redirect 11-to-25 per cent of their sales to markets in Canada
- 67 per cent say a weak Canadian dollar will partially or fully offset the negative impact of tariffs, 10 per cent say it will put them in a net positive position, 17 per cent it would not help them, and 6 per cent are unsure
- 78 per cent say they need to build resiliency into their supply chains (e.g., alternative sources, implementing technology to predict disruptions, optimize logistics, etc.)
- 86 per cent want Canada to move an increased volume of oil and gas (West to East pipelines) to reduce reliance on moving oil and gas from the U.S. to Eastern Canada
Implementing a proactive trade strategy
In the current environment, it is highly important to proactively assess current business strategies, structures and supply chains to mitigate risk and build resiliency.
A comprehensive approach to your trade strategy
KPMG Tax, Legal and Advisory leaders can help provide comprehensive support on tariffs and key considerations for navigating the path ahead.
Optimize supply chains, mitigate impact and recover applicable tariffs
Assess structures and policies to reduce tariff liabilities
Enhance resiliency to enable business continuity
Evaluate and manage enterprise risks and compliance obligations
Evaluate contracts and partnerships to understand obligations
Optimize capital and strategic restructuring to endure challenges
Manage productivity, risk, and change in the short through long term
Have a question for our team of professionals?
As Canada pulls together to address these uncertain times, KPMG teams can help equip you with the insights you need to make informed decisions on what’s best for your business. Contact us today.
Events
Watch
The tariff impact: Insights from Canadian businesses on building resilience
Feb 25, 2025 | KPMG in Canada
Watch
Navigating cross-functional tariff complexities
Feb 12, 2025 | KPMG International
Watch
Navigating the new administration’s key trade policies
Feb 6, 2025 | KPMG U.S. webcast
Watch
U.S. Tariffs: Urgent implications for businesses in British Columbia
Feb 5, 2025 | KPMG in Canada
Watch
Inbound distribution in the US in 2025: The year of tariffs and Amount B
Feb 4, 2025 | KPMG U.S. webcast
Watch
The tariff impact: Navigating cross-functional tariff complexities
Jan 28, 2025 | KPMG in Canada
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About the KPMG in Canada Tariffs Survey
KPMG in Canada surveyed 602 Canadian business leaders between February 13 and February 28 on Sago's premier business panel, using Methodify's online research platform. Eighty-nine per cent export to the U.S. and 80 per cent said they will be impacted by U.S. tariffs. Annual revenue breakdown: 26 per cent, between $500 million and $1 billion, 26 per cent, between $100 million and $500 million, 19 per cent, between $50 million and $100 million, 16 per cent, between $10 million and $50 million, and 13 per cent, more than $1 billion. No companies under $10 million in annual revenue were surveyed.
