FILE PHOTO: A car hauler drives towards the Ambassador Bridge to Detroit, Michigan from Windsor, Ontario, Canada, March 4, 2025. REUTERS/Rebecca Cook/File Photo/File Photo© Thomson Reuters
By Promit Mukherjee
OTTAWA (Reuters) -A manufacturer of capsules and tablets for the pharmaceuticals industry is scouting Asia for new partners. A steel component maker, with a client base in the United States stretching back 35 years, is telling customers to expect to pay higher prices. Another company, that produces mascot costumes for sporting or school events, is lowering its prices so as not to lose American customers.
FILE PHOTO: Canada's Prime Minister Mark Carney holds his first press conference since forming government in Ottawa, Ontario, Canada May 2, 2025. REUTERS/Blair Gable/File Photo© Thomson Reuters
President Donald Trump's tariff war - and his repeated threats to annex Canada - are upending decades of close trade ties between the two North American neighbors, and prompting many small-scale Canadian manufacturing firms to revise their long-term business strategies.
FILE PHOTO: Unifor union members give the elbows up sign during a 'Save Canadian Jobs' rally in Windsor, Ontario, Canada, April 26, 2025. REUTERS/Rebecca Cook/File Photo© Thomson Reuters
Prime Minister Mark Carney, who led the Liberal party to victory last month by campaigning to stand up to Trump, is scheduled to meet the U.S. President at the White House on Tuesday. He has repeatedly said the old relationship with the United States is over.
Even if the U.S. forges a new trade agreement with Canada, Trump's erratic policy and the uncertainty of doing business with the U.S. will persist, according to interviews with more than a dozen companies, advisors, trade lawyers and associations.
"If you are a smart, savvy business person, you are not going to jump right back into another arrangement where you are totally reliant on a U.S. partner," said Mike Chisholm, who runs a consultancy for Canadian exporters.
"Owners want stability, banks want stability, private equity funds want stability," he said. "They are just going to be very, very careful."
Canada, which has historically depended on U.S. markets for 75% of its exports, was one of the first countries hit by Trump's tariffs.
Trump has justified the tariffs as a way to hold Canada accountable for fentanyl entering the U.S. - although data shows less than 1% of all seizures come from across the Canadian border.
In March, Trump imposed a 25% tariff on all steel and aluminum imports coming into the U.S. and then slapped another 25% tariff on cars and parts that did not comply with a North American free trade agreement, although he stopped short of a broad reciprocal tariff imposed on some countries in early April.
Related video: Duty free shops fear Trump’s trade war will force them out of business (cbc.ca)Experts have said that adding reciprocal tariffs on Canada would have spiked bankruptcies in the manufacturing sector.
The manufacturing sector ships 42% of its output into the U.S and 41% of its roughly 1.7 million workers rely on U.S. imports, according to government figures.
Carney's office declined to provide fresh comment on the impact of tariffs.
When asked for comment, White House spokesman Kush Desai said: "Canadian companies won't have to worry at all about tariffs when Canada becomes our cherished 51st state."
'WE NEED TO PIVOT'
PNP Pharmaceuticals, a contract manufacturer for drug makers in British Columbia, responded to Trump's tariff moves by trying to find customers in Asia, Alan Urmeneta, Partnership Sourcing Manager, said in an interview.
"We are now venturing into other markets as we see that we need to pivot," Urmeneta said. He declined to identify specific countries.
While it does not currently face tariffs, LabelPak Printing Inc., a British Columbia-based distributor of packaging products sourced from Asia, is considering focusing exclusively on the Canadian market and gradually reducing the 15% in sales that come from the U.S.
"If he (Trump) gets mad ... and decides to throw a 50% tariff on Canadian goods... it's going to really put us out of the market," Ken Gallie, the company's founder, said. "We are going to put more emphasis on the Canadian business."
While some Canadian companies have lost trust, those reliant on the U.S. market cannot entirely replace it, especially smaller firms, companies and industry associations have said.
Canada's economy is less than a tenth the size of its neighbor and shipping overseas is costly.
Chisholm, the consultant, says some of the companies he advises are setting up offices and hiring sales agents in Europe and Asia to try to reduce their operations in the U.S.
"There are markets all over the world that we have free-trade agreements with. Where can I do business is what many are thinking," he said.
DIFFICULT CONVERSATIONS
Other companies are having difficult conversations with U.S. customers, several executives told Reuters.
"We are talking to these businesses and telling them, unfortunately, their government has chosen to have them pay more," James White, CEO of Wellmaster, which makes steel components used in the energy and water supply sectors.
Joyce Banda, CEO of Ontario-based Concept Factory Inc., which creates mascot costumes for sporting or school events, said she dropped her prices in anticipation of tariffs to try to keep U.S. customers. Now she is going to have to bear that loss even after Trump held off on imposing reciprocal tariffs, she said.
For Natalie Gaudreault, owner of Fusion TG, a tool steel distributor, Trump's tariffs piled up as a double whammy on her Montreal-based business.
Her company imports almost 70% of all its steel requirement from China, molds it to customers' specifications and supplies it to tool and die makers and roll formers. A fifth of her sales are to the U.S.
She was first hit by 25% tariffs that Canada imposed on China in October. Then came Trump's 25% tariff. With other taxes, she estimates her products going into the U.S. will more than double in cost.
"I am not going to absorb the cost. I have to charge it to them," she said, adding that her sales shrunk by a third in the first quarter.
Meanwhile, some firms are taking the rare step of trying to re-open contracts with clients, including clauses on sharing tariff costs, complicating business relations, said Clifford Sosnow, partner and chair of the international trade and investment group at law firm Fasken.
"It's a hot knife through butter," he said of such negotiations. "It doesn't work without creating damage."
(Reporting by Promit Mukherjee; Editing by Caroline Stauffer and Suzanne Goldenberg)
Canada's trade deficit narrows more than expected in March
FILE PHOTO: A drone view shows shipping containers and transport trucks at the Port of Montreal in Montreal, Quebec, Canada April 14, 2025. REUTERS/Carlos Osorio/File photo© Thomson Reuters
By Promit Mukherjee
OTTAWA (Reuters) -Canada's trade deficit narrowed to C$506 million ($366.34 million) in March, beating expectations as imports fell at a faster rate than the drop in exports, data showed on Tuesday.
Imports of goods dropped 1.5% in March, driven by a 2.9% slump in imports from the United States after Canada imposed retaliatory tariffs on its neighbor following President Donald Trump's 25% tariff on Canadian steel and aluminum from March 12.
Exports to the United States also dropped by 6.6% but was almost compensated by an increase in exports to the rest of the world, Statistics Canada said.
Analysts polled by Reuters had estimated that the total trade deficit would widen to C$1.56 billion in March, up from a revised C$1.41 billion in February.
Trump's tariff threats at the end of last year and the beginning of this year pushed Canadian firms to advance supplies south of the border, boosting trade surpluses in December and January. But as tariffs took hold, shipments to the United States have been squeezed.
The United States is Canada's biggest trading partner and Trump's tariffs have hurt trade, investments and jobs on both sides of the border.
Canadian Prime Minister Mark Carney will meet with Trump on Tuesday to start talks on a comprehensive trade and security deal, which experts have said could eventually lead to reducing the burden of tariffs on Canada.
Economists and analysts have said that as the impact of tariffs flow through the economy, growth would take a hit. This is already evident in investment and hiring intentions of companies and consumer spending.
The Bank of Canada has said that it would act quickly and decisively if the economy takes a sharp hit, with money markets now estimating almost a 52% chance of a rate cut of 25 basis points in June.
The Canadian dollar was up 0.18% to trade at 1.3801 to the U.S. dollar, or 72.46 U.S. cents. Bond yields for the government's two-year bonds were down 0.5 basis points to 2.557%.
Canada's overall exports for March came in at C$69.9 billion, down from C$70.04 billion in February, led by the United States. This was the second month in a row when exports fell.
"Despite the two consecutive monthly declines, export levels remained relatively high in March, posting a 10.2% increase compared with the same month a year earlier," Statscan said, adding that lower prices primarily led to the drop.
In volume terms, exports were up 1.8% in March, it said.
However, imports fell in both value and volume terms.
They dropped for the first time in five months, with the largest contributors being metal and non-metallic mineral products by 15.8% and energy products by 18.8%. In volume terms, total imports edged down 0.1% in March.
Imports in March were at C$70.40 billion, down from C$71.44 billion.
(Reporting by Promit Mukherjee; Editing by Dale Smith and Mark Porter)
FILE PHOTO: A drone view shows shipping containers and transport trucks at the Port of Montreal in Montreal, Quebec, Canada April 14, 2025. REUTERS/Carlos Osorio/File photo© Thomson Reuters
By Promit Mukherjee
OTTAWA (Reuters) -Canada's trade deficit narrowed to C$506 million ($366.34 million) in March, beating expectations as imports fell at a faster rate than the drop in exports, data showed on Tuesday.
Imports of goods dropped 1.5% in March, driven by a 2.9% slump in imports from the United States after Canada imposed retaliatory tariffs on its neighbor following President Donald Trump's 25% tariff on Canadian steel and aluminum from March 12.
Exports to the United States also dropped by 6.6% but was almost compensated by an increase in exports to the rest of the world, Statistics Canada said.
Analysts polled by Reuters had estimated that the total trade deficit would widen to C$1.56 billion in March, up from a revised C$1.41 billion in February.
Trump's tariff threats at the end of last year and the beginning of this year pushed Canadian firms to advance supplies south of the border, boosting trade surpluses in December and January. But as tariffs took hold, shipments to the United States have been squeezed.
The United States is Canada's biggest trading partner and Trump's tariffs have hurt trade, investments and jobs on both sides of the border.
Canadian Prime Minister Mark Carney will meet with Trump on Tuesday to start talks on a comprehensive trade and security deal, which experts have said could eventually lead to reducing the burden of tariffs on Canada.
Economists and analysts have said that as the impact of tariffs flow through the economy, growth would take a hit. This is already evident in investment and hiring intentions of companies and consumer spending.
The Bank of Canada has said that it would act quickly and decisively if the economy takes a sharp hit, with money markets now estimating almost a 52% chance of a rate cut of 25 basis points in June.
The Canadian dollar was up 0.18% to trade at 1.3801 to the U.S. dollar, or 72.46 U.S. cents. Bond yields for the government's two-year bonds were down 0.5 basis points to 2.557%.
Canada's overall exports for March came in at C$69.9 billion, down from C$70.04 billion in February, led by the United States. This was the second month in a row when exports fell.
"Despite the two consecutive monthly declines, export levels remained relatively high in March, posting a 10.2% increase compared with the same month a year earlier," Statscan said, adding that lower prices primarily led to the drop.
In volume terms, exports were up 1.8% in March, it said.
However, imports fell in both value and volume terms.
They dropped for the first time in five months, with the largest contributors being metal and non-metallic mineral products by 15.8% and energy products by 18.8%. In volume terms, total imports edged down 0.1% in March.
Imports in March were at C$70.40 billion, down from C$71.44 billion.
(Reporting by Promit Mukherjee; Editing by Dale Smith and Mark Porter)
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