Canadian businesses are still trying to adjust to the impacts of targeted Canadian tariffs as the trade war continues into its second year. Manufacturers in almost every industry, but particularly steel and lumber, are experiencing crushing operational hardships. These challenges have led to a wave of production cuts, mass layoffs, and rising import penetration.
Daniel Drapeau, CEO of Miralis, emphasized the dire situation for many companies, stating that most members of the Canada Wood Products Alliance have had to significantly reduce their operations. The current tariffs have introduced a previously unknown level of uncertainty, making the prospect for recovery all the more difficult to all businesses that depend on U.S. markets.
“We’re still under this threat of adding 50 per cent.” – Daniel Drapeau
Our Canadian steel industry has had a rough go of it. 22 mills have permanently closed since 2022, and 50 other mills are on short time or operating at reduced capacity. Trade press reports confirm a sharp decline in Canadian steel exports to the U.S. In December, on a year-over-year basis, these exports collapsed by 50 percent. The impact extends far past just steel. As a result, since the start of 2017, the softwood lumber sector has been hit by crippling duties, causing production to plummet by over 25 percent.
As RBC’s senior economist Claire Fan recently noted, the impact of these tariffs is particularly concentrated on a few key sectors. Metal production, lumber, and automobiles are already one of the hardest hit industries. She pointed out the common occurrence of manufacturers regularly running at only 50 percent capacity. This is hardly enough for them to maintain operations.
“The manufacturers in Canada are running at maybe 50 percent of their capacity, which is the strict minimum to stay alive.” – Claire Fan
Drapeau called attention to the cascading impact of such tariffs on jobs. To date, hundreds of jobs have been lost and thousands more are currently enrolled in work-share programs. He cautioned that unless there were solutions offered in short order, thousands more would lose their jobs in the months and years ahead.
“Hundreds of jobs have been lost, and thousands are in work-share, and there will be more unfortunately in the next months or years if we can’t find solutions.” – Daniel Drapeau
Despite their struggles, other companies have pulled out the stops to minimize layoffs, taking advantage of government initiatives such as work-share programs. The Canada Wood Products Alliance has collaborated with domestic wood flooring and furniture manufacturers. Together, they’re addressing the double-edged sword of fading exports and rising tide of imports.
As businesses look for ways to adapt, Drapeau reported that Miralis has invested $43 million since 2022 to build two new plants equipped with advanced automation technology to enhance productivity. Even with these significant investments, the company is today operating far below capacity because of the still-ongoing trade disruptions.
Catherine Cobden, President and CEO of the Canadian Steel Producers Association, cautioned against overreacting to the new restrictions. She cautioned that it’s too soon to truly assess their effects. On March 13, the federal government revealed that it is considering an application from the Canada Wood Products Alliance. They have promised to bring in safeguard measures to protect vulnerable Canadian industries from continued injury.
“They, frankly, have had a significant impact on the Canadian industry. Thousands of jobs lost, loss of production and a significant drop in our shipments to the United States. A very, very challenging year.” – Daniel Drapeau
The unpredictability of U.S. trade policy has resulted in a much less favorable investment outlook for impacted industries. Fan emphasized that this is highly discouraging to the new investments Canada needs, and worsens the country’s already poor productivity problems.
“There’s not going to be a huge amount of new investment flowing into these sectors, just because the outlook a decade ahead is perhaps not that optimistic.” – Claire Fan
As Canadian businesses navigate these turbulent waters, they remain hopeful for a resolution that could restore market access and stimulate growth. Drapeau was glowing about the resilience of his industry, saying they were all prepared to grow after fighting back from a series of self-inflicted crises.
“We were ready to grow after all those crises.” – Daniel Drapeau
