Canadian businesses are facing a level of uncertainty never before seen. According to the Canadian Federation of Independent Business (CFIB), there has been an unprecedented drop in positive outlooks from entrepreneurs. In March, the CFIB’s most recent sentiment check plummeted. As recently as 2021, it had still been an abysmal 53, falling to 25 in 2023, an all-time low! This drop reflects a deepening concern over the new tariffs set to take effect, days ago announced by U.S. President Donald Trump. No country will be spared from its wrath, including our friendly neighbor to the north, Canada.
The anticipated tariff announcement, set to be revealed on Wednesday, has already caused major disruption amongst the Canadian business community. Companies are tired of waiting and are doing what’s necessary to protect themselves before the axe drops. More than a few are dramatically increasing advertising budgets to showcase their Canadian-ness, hoping to build brand loyalty while the future remains cloudy. Moreover, businesses are looking to deepen their supplier base as they set up contingencies for future supply chain disruptions.
The economic impact of this tariff threat is starting to show itself. Tuesday, IHS Markit S&P Global Canada’s most current manufacturing activity barometer flashed red like never before in March. This spell was exacerbated by a decline that took place in February. Manufacturers are announcing new weaker forward order intake and lower production contractors. All of this is resulting in an economic nervousness and caution strikes at companies. Most are shying away from offering sales projections, and for good reason — the unchartered waters represented by the tariffs is a primary driver.
The impact of tariffs is being felt acutely across various sectors. Steel workers at the ArcelorMittal Dofasco steel plant in Hamilton, Ontario, have taken a huge hit. They’re still trying to adjust to the increased tariffs on steel and aluminum first jack-knifed on March 12. Similarly, Sheertex, a maker of pantyhose, has made drastic cuts by laying off 40 percent of its workforce due to concerns over tariff impacts.
Airlines have begun adapting their operations in response to the new economic realities. They’re reducing schedule to the US as fewer Canadians are travelling south, with many seeing it as a hostile place. The effects of this shift speak to the larger implications the tariff threat has had on consumer behavior and business strategy.
Now, even industry experts are sounding an alarm about the broader economic landscape. Andrew DiCapua, principal economist at the Canadian Chamber of Commerce, sounded alarm bells over the increased demand spike this year. He worries too that it might just set things up for an even sharper slide down the road. He stressed the need for businesses to prepare for reduced demand ahead of the tariffs’ impact.
Charmaine Goddeeris, a private consultant, has been fielding calls from spooked clients to the point of being overwhelmed. She pointed out that a lot of Canadian businesses simply aren’t well-educated on their customs obligations. She mentioned that Canadian businesses do not have a solid view of customs processes. Moreover, they often find it difficult to know what their customs responsibilities are.
Many other companies are making immediate moves in anticipation of the tariff threat to set up shop in the U.S. Goddeeris advised against knee-jerk reactions. I get it, my clients are not alone—there’s a huge knee-jerk reaction right now. So naturally, they made an instant decision to start-base in the US. They just don’t want to look at anything other than,” she told us. She continued, those who act prematurely on such decisions usually run into unforeseen consequences. They’re usually taken aback by the low-cost of setting up shop in the U.S. The bureaucratic obstacles also blindsided them. It’s a little more complicated than, say, you know, getting a storefront to lease and putting up an open sign.”
While the potential scope of the upcoming tariffs is still unknown, they could have devastating ripple effects throughout many sectors. The auto sector and other goods exempted under the North America Free Trade Agreement (NAFTA) will lose those benefits. These changes will take place alongside the introduction of new, markedly improved measures.
