Majority of Canadian businesses say they can outlast a US trade war

According to a recent KPMG in Canada survey, 67 percent of Canadian business leaders say they can endure a trade war lasting more than a year and remain firm in their stance against US tariffs.

Despite economic uncertainty, 86 percent continue to support retaliatory tariffs—unchanged from the previous month’s findings.

The uncertainty around US trade policy has forced Canadian businesses to re-evaluate their operations, with 76 percent conducting strategic reviews to mitigate risks.

Companies are exploring ways to streamline operations, diversify supply chains, seek exemptions, and leverage tax incentives. Many are also considering foreign-exchange hedging and tariff-adjusted pricing strategies.

Timothy Prince, Canadian managing partner for Clients and Markets at KPMG in Canada, noted that while businesses are determined to protect Canada’s interests, the duration and scale of tariffs will determine their ability to adapt.

He emphasized that companies are already taking measures to maintain stability, but they expect governments to take bold action to eliminate interprovincial barriers, build a national energy corridor, and revamp the tax system to strengthen their competitiveness.

A significant majority of business leaders believe that diversifying energy export markets is crucial.

According to the survey, 86 percent support expanding pipeline and infrastructure projects to reduce reliance on US routes for oil and gas transportation to Eastern Canada.

Meanwhile, 88 percent say political leaders must demonstrate “strong and determined” action to improve domestic trade.

Interprovincial trade barriers remain a key concern, with 84 percent stating that their removal is “extremely or very important” to their survival in a trade war.

Another 85 percent want these barriers eliminated as soon as possible, with nearly a third (31 percent) saying they could redirect 11 to 25 percent of their sales to Canadian markets.

A separate KPMG consumer poll reinforces this sentiment, showing that 96 percent of Canadians support removing interprovincial trade barriers, while 91 percent believe the trade war has strengthened the case for maintaining Canada’s dairy, eggs, and poultry supply management system.

Business impact: layoffs, production cuts, and financial strain

The prolonged nature of US tariffs on Canadian steel and aluminum under the previous US administration, which lasted nearly a year, has raised concerns about financial stability.

While 67 percent of business leaders believe they can withstand another year of tariffs, 30 percent anticipate significant profit losses, and 3 percent say they would not survive.

Many businesses are already adjusting operations.

Half of the surveyed companies report reductions in production and workforce, while 28 percent anticipate further layoffs within four to six months if tariffs persist. By next year, 50 percent expect headcount reductions in Canada.

Tammy Brown, national industry leader for Industrial Markets at KPMG in Canada, emphasized the need for businesses to enhance their resilience.

She said companies must assess supply chain vulnerabilities, evaluate cash flow impacts, and plan for shifting trade dynamics.

KPMG is working with clients to develop scenario plans that will help businesses build flexibility into their supply chains and navigate uncertainties.

Shifting operations: US expansion and alternative markets

The weak Canadian dollar is providing some relief, with 67 percent of businesses stating it will partially or fully offset tariff-related losses.

Another 10 percent believe the exchange rate will put them in a net positive position. However, 17 percent say it will not help, and 6 percent remain uncertain.

Relocating operations is also under consideration. While 62 percent of businesses say they would shift production to the US if tariffs are imposed, this marks a cautious increase from 48 percent in the previous survey.

Lachlan Wolfers, national leader of KPMG Law in Canada, cautioned that relocation requires careful evaluation of regulatory, tax, and supply chain complexities.

Businesses are also looking to expand into non-US markets. Nearly half (46 percent) report having three to five alternative markets, while 27 percent have one or two.

However, 52 percent say shifting business outside North America will be difficult in the short and medium term.

Additional survey insights:

• 50 percent of companies are already cutting production or laying off employees due to tariffs.
• 28 percent anticipate workforce reductions within four to six months.
• 50 percent expect to reduce their Canadian workforce in the next year.
• 77 percent are assessing acquisition or divestiture opportunities.
• 78 percent are improving supply chain resilience.
• 62 percent would consider relocating production to the US.
• 51 percent have cancelled business travel to the US.
• 98 percent are concerned about pricing and margin management.
• 95 percent worry about supply chain risks and rising input costs.
• 74 percent believe tariffs will limit their ability to reinvest in growth.