Most business leaders back government action to protect Canada’s economy, even if it leads to hardship
A new survey by KPMG in Canada finds that nine in 10 Canadian business leaders “wholeheartedly believe” the federal and provincial governments must stand firm in protecting Canada’s sovereignty and values.
The majority support retaliatory tariffs against the US, even if it negatively affects their business, with over eight in 10 advocating for a targeted, dollar-for-dollar response. Support for these measures is strong across the country, particularly in Alberta, Quebec, and Ontario.
KPMG’s survey of 250 business leaders highlights a growing demand for government intervention.
Benjie Thomas, chief executive officer and senior partner at KPMG in Canada, states that Canadian business leaders believe the country must maintain a firm stance, even if it means facing economic repercussions.
The survey finds that 90 percent of business leaders want federal and provincial governments to eliminate inter-provincial trade barriers, reform the tax system, provide incentives to onshore manufacturing, and encourage Canadians to ‘Buy Canadian’ to strengthen domestic resilience.
While concerns over a potential trade war grow, 80 percent of respondents are preparing or bracing for a recession. At the same time, 81 percent are willing to endure short-term economic pain if it ensures a fair trade deal that protects Canada’s economy, independence, and sovereignty.
The Bank of Canada’s 2019 analysis estimated that a 25 percent US tariff on imports from Canada and other countries, combined with retaliatory tariffs, could reduce global GDP by 3 percent and cut Canada’s GDP by 6 percent.
The bank is set to release a new analysis today on the potential impact of tariffs.
The prospect of US-imposed tariffs has significant consequences for Canadian employment, with more than half of business leaders stating they would be forced to lay off employees if tariffs are implemented.
Meanwhile, 80 percent of respondents believe the federal government should support affected workers with pandemic-style income aid. However, there is concern about inflationary pressures, as 79 percent worry that increased fiscal spending to fund such measures could drive up inflation.
Many business leaders have already taken pre-emptive steps to mitigate the impact of trade restrictions.
Nearly two-thirds shipped goods to the US before President Donald Trump’s inauguration, while 48 percent are planning to shift investments and establish production south of the border to lower costs and maintain access to the American market.
According to Lucy Iacovelli, Canadian managing partner, Tax and Legal at KPMG in Canada, the new US administration’s economic and trade policies are creating ripple effects in Canada and beyond.
She notes that businesses are recognizing the need to prepare for trade disruptions and higher costs, as well as to develop strategies to build resilience.
For many business leaders, the threat of tariffs is a wake-up call to improve productivity in Canada. The survey finds that 86 percent acknowledge this, though 70 percent say a trade war would force them to delay investments in technology.
Similarly, 71 percent are putting capital spending plans on hold until there is greater clarity on trade relations.
Uncertainty over tariffs is also affecting business expansion, with 58 percent delaying merger and acquisition plans for at least six months, while 60 percent are considering acquisitions in the US to ensure continued access to the market.
Beyond trade, business leaders support leveraging Canada’s natural resources as a bargaining tool. The survey shows that 57 percent support halting oil exports to the US, 60 percent back stopping electricity exports, and 61 percent favour suspending critical mineral exports.
These positions vary by region, with Ontario, Quebec, and British Columbia showing the strongest support for such measures.
Concerns over national security and defence spending are also prevalent.
The survey indicates that 89 percent of business leaders support strengthening Canadian border security in response to US concerns, while 85 percent back increased investment in the Canadian military and Arctic defence, aligning with US and NATO priorities.
