MNI INTERVIEW: Canada Factories Suffer From US Tariff Threats

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Mar-24 18:19By: Greg Quinn
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Canadian Manufacturers & Exporters President Dennis Darby told MNI that firms are hesitant even about replacing worn-out equipment while looking for clarity on U.S. tariffs and considering if they will move some production south of the border.

“A chill on investment, that’s the one thing we’ve seen very consistently across Canada, in every sector, whether it’s oil and gas, automotive, EVs, machinery, building, nobody is investing right now,” Darby said on MNI's FedSpeak Podcast. “People are putting a pause on capital and even replacement capital.”

President Donald Trump has said he intends to fix a sweeping 25% tariff on April 2 and while that's a move he intended to make the day he was sworn in he's given little indication of calling it off this time. New Canadian Prime Minister Mark Carney has shunned any quick outreach to the administration, saying talks to resolve the dispute will only happen when Trump shows Canada "respect" and agrees to comprehensive trade discussions.

“If suddenly Canada was faced with an increased cost on all of its exports, you could see this idea of shifting production, shifting suppliers. You won’t see it right away,” Darby said. His group represents more than 2,500 firms and often consults with government officials.

Trump's early tariffs on aluminum and steel are more damaging than ones imposed during his first term because they are being applied more widely to items such as components of office furniture instead of just the raw material, Darby said. “Canadian companies are in some cases having to eat the tariffs, but it hasn't led to a major slowdown yet, but that could be coming,” he said. Tariffs have also led to an immediate inflationary effect, he said. (See: MNI INTERVIEW: Trump Risks North American Recession- NS FinMin)

DUE SOUTH?

The former Proctor & Gamble executive agrees with Canada's dollar-for-dollar retaliation rather than moving to export taxes. Prime Minister Carney is right to observe that given the U.S. economy is so much larger there's a limit to ramping up the dispute, Darby said. (See: MNI: Canada Tariff Retaliation Seen Limited By Domestic Pain)

The desire to re-locate industries like auto production to the U.S. can't be accomplished in the near term, Darby said. “That kind of shift will take months if not years, but it would certainly be disruptive to Canada.”

“It’s not like there’s two million cars of production capacity sitting idle in the U.S. to take up that slack,” he said. 

American customers noticing higher prices and difficulty replacing Canadian goods are the only way Trump will relent, Darby said, citing feedback from his recent trip to meet Washington lawmakers. 

“The reality is we provide about 25% of the lumber, over 25% of their steel, more than half of all the aluminum products, almost all of the potash, the majority of the uranium they need for their military and for civilian uses, and of course forty-odd percent of their oil and gas. Whether the president says it or not, they actually do need Canada.”