Most Canadian Businesses Plan Shift to Tariff-Free Countries: KPMG Tariffs Survey
A recent survey by KPMG in Canada reveals that the majority of Canadian businesses are taking proactive steps to mitigate the impact of tariffs imposed by the United States. Despite a 30-day pause on tariffs on Canadian goods announced by U.S. President Donald Trump, nearly two-thirds (65%) of Canadian businesses have already taken preemptive action to prepare for tariffs.
The survey, which polled 250 business leaders across Canada, highlights a growing trend of diversification in response to trade uncertainties. A significant 88% of respondents have either diverted or are considering diverting goods to countries not affected by tariffs. This includes reconfiguring supply chains to redirect U.S.-destined exports to third-party countries, with 44% already implementing this strategy and another 44% exploring the option.
Additionally, more than half (57%) of respondents are taking steps to move production out of China due to U.S. tariffs on Chinese goods and concerns about alleged forced labor. This shift underscores the broader impact of trade tensions on global supply chains, with 63% of businesses stating that U.S. tariffs on Chinese goods will negatively affect their operations.
The survey also points to a widespread recognition of the need for supply chain resilience. A staggering 83% of respondents believe they need to make their supply chains more resilient to adapt to the current trade environment. This sentiment is further reinforced by concerns about broader trade tensions, with 79% of businesses expecting the U.S. to impose tariffs on the European Union in the near future.
Alain Sawaya, National Leader of KPMG in Canada’s Supply Chain practice, emphasizes the challenges posed by tariff uncertainties. “The uncertainty caused by potential tariffs on Canadian goods and newly-imposed tariffs on China has made it very difficult for Canadian companies to plan, operate, and stay competitive,” he notes. Sawaya also highlights the vulnerability of industries dependent on suppliers and customers, such as manufacturing, which face increased costs, delayed shipments, and disrupted production schedules.
Smaller suppliers, in particular, may struggle to absorb added costs, leading to a heightened risk of insolvency. As Canadian businesses navigate this complex trade landscape, the survey underscores the importance of resilience and adaptability in supply chain management.
Diversification of Supply Chains and Long-Term Implications
As Canadian businesses navigate the complexities of tariff uncertainties, they are increasingly adopting strategic measures to diversify their supply chains. The survey reveals that 44% of respondents have already reconfigured their supply chains to redirect exports destined for the U.S. to other countries, while another 44% are actively exploring this option. This strategic shift not only helps in avoiding immediate tariff impacts but also sets the stage for long-term resilience.
The decision to move production out of China, as indicated by 57% of respondents, is driven by multiple factors. Beyond the immediate tariff concerns, companies are also responding to allegations of forced labor, prompting a more ethical and sustainable approach to sourcing. This shift is part of a broader trend towards responsible supply chain management, which is increasingly important for maintaining a competitive edge in global markets.
Alain Sawaya, National Leader of KPMG in Canada’s Supply Chain practice, further elaborates on the challenges companies face. He notes that while diversifying supply chains offers a path to mitigation, it also presents significant operational challenges. Companies must invest in new relationships, infrastructure, and processes, which can be particularly daunting for smaller entities with limited resources. This underscores the need for strategic planning and investment in supply chain agility.
The survey also highlights the broader trade environment, with 79% of respondents anticipating U.S. tariffs on the European Union. This expectation suggests a growing belief that trade tensions are not isolated to current disputes but may expand, affecting more regions. As a result, businesses are compelled to adopt a proactive stance, continuously monitoring global trade dynamics and adjusting their strategies accordingly.
In conclusion, the KPMG survey paints a picture of a business landscape in flux, where adaptability and resilience are paramount. As companies diversify their supply chains and explore new markets, they are not only addressing current challenges but also positioning themselves to thrive in an uncertain future. The focus on ethical practices and long-term sustainability further emphasizes the evolving nature of global trade, where resilience and adaptability are key to maintaining competitiveness.
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