Study says 40% of Canadian businesses looking to relocate to U.S.
· Toronto Sun
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The exodus to the U.S. continues for some Canadian-based businesses.
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A new study by KPMG found that 40% or manufacturers in Canada have moved production south of the border or are considering the idea as they adapt to trade uncertainty and competitive pressure.
“Manufacturers have shown incredible resilience, adapting to tariffs and uncertainty to navigate this period of heightened volatility,” said Anamika Gadia, Partner and National Leader of Industrial Markets at KPMG Canada.
“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.”
Some of the top reasons for the exodus to the U.S. include avoiding or reducing high import tariffs, ongoing trade uncertainty, lower operating costs and a more favourable tax environment.
Those same companies were asked what would encourage them to stay in Canada. The respondents said 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, and improved access to skilled workers could help change their plans.
On Canada Day, the Trump administration said the U.S. would not join Canada and Mexico in extending the free trade deal for another 16 years. The agreement remains in effect for 10 years while the three sides either negotiate changes or decide to withdraw from the pact.
Heavily dependent
The survey says that Canadian manufacturers remain heavily dependent on the U.S. market, with 61% agreeing their business cannot survive without access to it. Eighty-six per cent of manufacturers export goods outside Canada, and among exporters, 96% 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.
A survey of 275 manufacturers finds that 57% say they have paused, reduced or cancelled capital expenditure projects due to economic uncertainty, trade and tariff threats, while 42% have scaled back or paused research and development spending. Fifty-two per cent say they are currently operating in “endurance mode.”
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“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,” Gadia said. “The question now is whether Canada can create the conditions that give manufacturers the confidence to keep building, investing and staying here.”
The study also noted that 80% of Canadian manufacturers plan to keep their headquarters in Canada. However, 11% plan to move their headquarters to the U.S. within the next five years.
“The greater risk isn’t where companies are today, but where future investment decisions are being made,” Gadia said. “Many manufacturers are pausing Canadian investments and reassessing where future growth and production capacity should be located.”