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      One year after manufacturers warned that U.S. tariffs posed an existential threat to their businesses, a new KPMG survey finds four in 10 manufacturers have moved production to the U.S. or are considering doing so as they adapt to ongoing trade uncertainty and mounting competitive pressures.

      The survey of 275 manufacturers finds that 57 per cent say they have paused, reduced or cancelled capital expenditure projects due to economic uncertainty and trade and tariff threats, while 42 per cent have scaled back or paused research and development spending. More than half (52 per cent) say they are currently operating in “endurance mode.”

      The findings come as discussions surrounding the Canada-United States-Mexico Agreement (CUSMA) intensify. Government action on overall competitiveness, taxation, regulations and trade will play a critical role in determining whether future manufacturing investment stays in Canada, says Anamika Gadia, Partner and National Leader of Industrial Markets at KPMG Canada.

      “Last year, the conversation was about survival. This year, it’s about endurance,” says Ms. Gadia. “Manufacturers have shown incredible resilience, adapting to tariffs and uncertainty to navigate this period of heightened volatility. But businesses can only operate in endurance mode for so long. Companies can delay investments, absorb higher costs and adjust their operations, but they can’t remain in a holding pattern indefinitely. At some point, uncertainty begins to shape long-term decisions about where investment, production and growth will occur.

      “Sustaining Canada’s manufacturing sector will require businesses to continue investing in productivity, technology and market diversification, while governments work to reduce uncertainty and improve competitiveness. The question now is whether Canada can create the conditions that give manufacturers the confidence to keep building, investing and staying here.”

      Key survey findings

      • 42 per cent say they have already moved production to the U.S. or are considering doing so
        • 29 per cent have moved some or all production
        • 13 per cent have not yet moved production but plan to move some or all; of those considering relocation, 77 per cent expect to move within two years
      • More than half (52 per cent) of manufacturers say they are operating in “endurance mode”
      • 57 per cent have paused, reduced or cancelled capital investment projects (CAPEX)
        • 36 per cent scaled back
        • 12 per cent paused
        • 9 per cent cancelled
      • 42 per cent have paused or reduced research and development (R&D) investment due to economic uncertainty and trade and tariffs
        • 27 per cent scaled back
        • 15 per cent paused

      While most manufacturers (80 per cent) are planning to keep their headquarters in Canada, 11 per cent plan to move their headquarters to the U.S. within the next five years. According to Ms. Gadia, while that percentage may appear small, manufacturing represents more than 10 per cent of Canada's total GDP, so the loss, even of that size, could have a meaningful impact on the economy.

      “The greater risk isn’t where companies are today, but where future investment decisions are being made,” says Ms. Gadia. “Many manufacturers are pausing Canadian investments and reassessing where future growth and production capacity should be located.”

      The survey finds manufacturers remain heavily dependent on the U.S. market, with 61 per cent agreeing their business cannot survive without access to it. Eighty-six per cent of manufacturers export goods outside Canada, and among exporters, 96 per cent say their products are CUSMA-compliant, meaning they are not subject to tariffs.

      “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.

      “The June 3, 2026 White House Executive Order on Strengthening Customs Enforcement creates another reason for companies to consider relocating production to the U.S. Under the Order, foreign-headquartered companies, including Canadian businesses, would need to maintain a minimum level of tangible U.S. assets to import goods under their own name. Otherwise, Canadian exporters may have to depend on U.S. customers to act as importer of record, potentially straining key commercial relationships."

      Among companies that have moved some or all operations to the U.S., the top reasons for moving according to respondents are: avoiding or reducing high import tariffs, ongoing trade uncertainty, lower operating costs, a more favourable tax environment, and the ability to better integrate and optimize supply chains.

      When asked, those planning to move some or all operations to the U.S., what would encourage them to remain and grow their company in Canada, respondents cited:

      • Ensuring certainty around free trade
      • Continuing tariff relief and remissions for imports from the U.S.
      • Lowering corporate taxes
      • Improving cost of living and housing affordability for employees
      • Providing access to cheaper energy
      • Improving access to skilled workers
      Respondents who have moved some or all operations to the U.S.: What were the main reasons for moving?
       
      RankReason
      1
      Avoiding or reducing high import tariffs
      2Ongoing trade uncertainty
      3Lower operating costs
      4A more favourable tax environment
      5Integrating and optimizing supply chains
      Respondents planning to move operations to the U.S.:
      What would encourage your company to remain and grow in Canada?
      RankReason
      1
      Certainty of free trade, continued tariff relief and remissions for imports from the U.S.
      2Lower corporate taxes
      3Improve cost of living and housing affordability for our employees
      4Access to cheaper energy
      5Better access to skilled workforces

      Source: KPMG Canada's Manufacturing Survey

      The findings come as Canada pursues a goal of diversifying trade and doubling exports to markets outside the U.S. by 2035. While manufacturers support that objective, the survey suggests achieving it will require improving Canada’s competitiveness while preserving reliable access to the U.S. market.

      The survey suggests manufacturers are not abandoning Canada, but many are becoming increasingly cautious about placing future investment in Canada.

      “Canada will remain part of the manufacturing equation,” adds Ms. Gadia. “The question is how strong that position will be. While most manufacturers are staying, many are reassessing where future investment, growth and production will occur. The decisions made today will shape Canada’s manufacturing sector for years to come.”

      About the KPMG Canada Manufacturing survey

      KPMG Canada surveyed business owners, C-suite executives and decision makers at 275 Canadian Manufacturing companies between May 11-29, 2026, using the Angus Reid Group’s premier business research panel. Fifty-two per cent of the companies surveyed have annual gross revenue between $10 million and $299.9 million; 20 per cent between $300 million and $999.9 million; 22 per cent have between $1 billion and $20 billion; 6 per cent have revenue above $20 billion. Fifty-seven per cent privately held; 20 per cent subsidiary of a foreign-owned company; 12 per cent publicly traded with headquarters in Canada and 10 per cent owned by private equity. Forty-three per cent have headquarters based in Ontario; 16 per cent in Alberta; 10 per cent in British Columbia; 9 per cent in Quebec; 13 per cent in remaining regions across Canada; 5 per cent in the U.S. and 4 per cent in other countries globally.

      About KPMG in Canada

      KPMG LLP, a limited liability partnership, is a full-service Audit, Tax and Advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, auditing, and tax services to Canadians, inspiring confidence, empowering change, and driving innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs more than 10,000 people in over 40 locations across Canada, serving private- and public-sector clients. KPMG is consistently ranked one of Canada's top employers and one of the best places to work in the country.

      The firm is established under the laws of Ontario and is a member of KPMG's global organization of independent member firms affiliated with KPMG International, a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, see kpmg.com/ca.

      For media inquiries:

      Sonja Cloutier-Bosworth
      National Communications and Media Relations
      KPMG in Canada
      (416) 777-8175
      (416) 528-5324
      scloutierbosworth@kpmg.ca

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