Given the uncertainty surrounding US trade policy, Canada’s business leaders are seeking a bold response from governments and considering strategies to protect their organizations from tariffs and to mitigate their risk, KPMG in Canada said in a recent press release.
“While they will do what they must to ride this out, they expect governments to take bold action to eliminate interprovincial barriers, build a national energy-agnostic corridor, reduce red tape, and revamp the tax system to improve their ability to compete,” said Timothy Prince, Canadian managing partner for clients and markets of KPMG in Canada, in a press release.
KPMG in Canada reported that, among respondents to its survey completed last week:
- 88 percent preferred a “strong and determined” political will at all government levels to finally open up trade within the country
- 86 percent supported retaliatory tariffs against the US
- 83 percent said that Canada should have a targeted, dollar-for-dollar retaliatory response
“The business community remains unwavering in its commitment to stand up for Canada,” Prince said in the press release. “The size of the tariffs and the length of time tariffs remain in place will impact their ability to weather the coming storm.”
Among those surveyed by KPMG in Canada:
- 76 percent were responding to the trade uncertainty with a strategic review of their operations
- 67 percent believed that they could bear with a trade war lasting over a year
The “trade uncertainty has created a new sense of urgency,” said Tammy Brown, national industry leader for industrial markets of KPMG in Canada, in the press release.
“Already the uncertainty is prompting companies to examine every facet of their business to understand their options, with three-quarters already undertaking a strategic review of their operations,” Prince said in the press release.
Possible mitigation strategies – which differ depending on the industry and organization – include finding ways to optimize and streamline operations and building partnerships to open new markets, according to the press release.
These strategies also include developing tariff and transfer pricing plans, diversifying supply chains, ceasing non-core activities, applying for subsidies, utilizing tax incentives, and seeking exemptions and foreign exchange hedging opportunities, the press release added.
“It's imperative that companies future-proof their operations, take a hard look at their supply chains to find key concentration risks and vulnerabilities, evaluate how tariffs will impact their costs, cash flow, and liquidity and how much they're able to absorb or pass on to their customers,” Brown said in the press release.
Tariff survey findings
As per the press release from KPMG in Canada, the survey also revealed:
- 86 percent of respondents wanted increased pipelines and infrastructure from West and East coast regions producing oil and gas for export to non-US markets to diversify energy export markets
- 86 percent called for Canada to move a higher volume of oil and gas via the West to East pipelines to lessen reliance on moving oil and gas from the US to Eastern Canada
- 85 percent sought to eliminate the interprovincial trade barriers as soon as possible
- 84 percent believed that removing these barriers would be “extremely or very important” to ensure the survival of their business amid a tariff war with the US
- 51 percent operated businesses in industrial manufacturing and energy and natural resources, two industries expected to be most impacted by US import duties
- 31 percent felt that they could redirect 11–25 percent of their sales to Canadian markets
“While shifting operations to the US is one way to mitigate tariffs, the economics must be carefully examined,” said Lachlan Wolfers, national leader of KPMG Law in Canada and global head of indirect tax in KPMG, in the press release.
“There are many factors to consider, including navigating employment and environment regulations, building new supplier and customer relationships, and managing US and Canadian tax complexities,” Wolfers added in the press release.
The press release said that this survey was its second last month covering Canadian business leaders. KPMG received over 600 opinions in the survey. The respondents primarily came from mid-sized and large companies across the country and industry sectors.