Two-thirds can weather a trade war that lasts more than a year: KPMG in Canada Business Survey

United in fighting U.S. tariffs, Canadian business leaders evaluate mitigation strategies while urging governments to take bold action

TORONTO, March 4, 2025 /CNW/ - Canadian business leaders remain steadfastly united in fighting U.S. tariffs with two-thirds (67 per cent) saying they can weather a trade war that lasts more than a year, finds a new survey by KPMG in Canada taken last week. Over eight in 10 (86 per cent) continue to support retaliatory tariffs against the U.S. – the same sentiment held a month ago when KPMG first surveyed corporate Canada on their tariff response.

The uncertainty around U.S. trade policy has had Canadian companies rushing to find ways to mitigate their risk and tariff-proof their organization. While it varies by company and industry, mitigation strategies include identifying areas to optimize and streamline operations, forming partnerships to open up new markets, diversifying supply chains, divesting non-core activities, exploring foreign-exchange hedging opportunities, incorporating tariff and transfer pricing plans, seeking exemptions, and securing subsidies or taking advantage of tax incentives.  

"The business community remains unwavering in its commitment to stand up for Canada," says Timothy Prince, the Canadian Managing Partner for Clients and Markets, KPMG in Canada. "The size of the tariffs and the length of time tariffs remain in place will impact their ability to weather the coming storm. 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."

"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. As many as 86 per cent say it's time to diversify energy export markets with increased pipelines and infrastructure in Western and Eastern Canada, and reduce our reliance on having to move oil and gas to Eastern Canada through the U.S."

Nearly nine in 10 (88 per cent) want "strong and determined" political will at all levels of government to finally open up trade within Canada. As many as 84 per cent say the elimination of interprovincial barriers will be "extremely or very important" to the survival of their business in a trade war with the U.S. and want the barriers removed as quickly as possible. Almost a third (31 per cent) say they could redirect 11-to-25 per cent of their sales to markets in Canada.

As many as 96 per cent of Canadians in a separate KPMG consumer poll want interprovincial barriers removed and 91 per cent say the trade war has convinced them that Canada needs to maintain its dairy, eggs, and poultry "supply management" system.

This is KPMG's second survey of business leaders in a month. Completed last week, the survey captures the opinions of 602 business leaders from primarily mid-sized and large companies across Canada and industry sectors. Just over half (51 per cent) run companies in two industries that are expected to be hit the hardest by U.S. import duties: industrial manufacturing, and energy and natural resources.

Key Survey Findings:

• 67 per cent of 602 Canadian business leaders say they can withstand a tariff war that lasts more than one year
• 86 per cent believe Canada should fight U.S. tariffs with retaliatory tariffs
  • This is a consistent view across the country, 89 per cent in Ontario, 85 per cent in Quebec, 80 per cent in B.C., and 83 per cent in Alberta
• 83 per cent want Canada's countermeasures to be a targeted, dollar-for-dollar retaliatory response
• 86 per cent say it's time for increased pipelines and infrastructure from oil and gas-producing regions in the West and East coasts for export to non-U.S. markets to diversify energy export markets
• 86 per cent want Canada to move an increased volume of oil and gas (West to East pipelines) to reduce reliance on moving oil and gas from the U.S. to Eastern Canada
• 88 per cent want "strong and determined" political will at all levels of government to finally open up trade within Canada
• 84 per cent say the elimination of interprovincial trade barriers will be "extremely or very" important to the survival of their business in a trade war with the U.S.
• 85 per cent want interprovincial trade barriers eliminated as quickly as possible
• 76 per cent are undertaking a strategic review of their operations due to the trade uncertainty
  • 80 per cent of industrial manufacturing companies, including 87 per cent in the food processing sector and 82 per cent in the automotive industry
• 31 per cent say they could redirect 11-to-25 per cent of their sales to markets in Canada

Outlasting tariffs

Tariffs during the first Trump administration on Canadian steel and aluminum lasted almost a year. While two-thirds (67 per cent) of business leaders say their company can withstand a tariff war that lasts more than one year, 30 per cent say their company will face "significant profit losses" if a tariff war lasts more than one year, and the remaining 3 per cent say their companies will go out of business if it lasts beyond one year.

Half say they are already reducing production and/or laying off employees in anticipation of tariffs, and more than a quarter (28 per cent) will start reducing headcount and production four-to-six months into a tariff war. By this time next year, half (50 per cent) expect their headcount to decrease in Canada, highlighting the need for businesses to accelerate mitigation efforts and governments to move quickly to lift economic growth, says Mr. Prince.

"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," says Tammy Brown, National Industry Leader for Industrial Markets, KPMG in Canada. "We are working with our clients to develop scenario plans to map potential trade policy changes and impacts on their organizations. This will help build resiliency and flexibility in their supply chains to react quickly and effectively as the landscape changes. And while many were already focused on optimizing their operations, this trade uncertainty has created a new sense of urgency."  

With most already undertaking a strategic review of their operations, 77 per cent will identify potential acquisition or divestiture opportunities as part of their mitigation strategy and 78 per cent admit they need to build resiliency into their supply chains, the survey shows.

The weak Canadian dollar against its U.S. counterpart will partially or fully offset the negative impact of tariffs for two-thirds (67 per cent) of respondents, the survey finds. Another 10 per cent say the low Canadian dollar will put them in a net positive position, that is, they will make more money than they will lose from tariffs.

Heading south or finding alternative markets

More than six in 10 (62 per cent) would consider shifting some of their production activities to the U.S. as a mitigation tactic if tariffs are imposed. In a KPMG survey a month ago, 48 per cent said they "plan to shift investments or production to the U.S."

"While shifting operations to the U.S. is one way to mitigate tariffs, the economics must be carefully examined," says Lachlan Wolfers, National Leader of KPMG Law in Canada and KPMG's Global Head of Indirect Tax. "There are many factors to consider, including navigating employment and environment regulations, building new supplier and customer relationships, and managing U.S. and Canadian tax complexities. Relocation tends to be the much less common, ultimate response right now, but these decisions should always be made with a longer-term investment horizon."

Business leaders are also looking abroad for new markets. About half (46 per cent) say they have three to five alternative markets for their products other than the U.S. and 27 per cent have one or two alternative markets. But half (52 per cent) say it will be challenging for them to shift business to another jurisdiction in the short- and medium-term.

Other Survey Highlights:

• 67 per cent say a weak Canadian dollar will partially or fully offset the negative impact of tariffs, 10 per cent say it will put them in a net positive position, 17 per cent say it would not help them, and 6 per cent are unsure
• Half (50 per cent) are already reducing production and/or laying off employees in anticipation of tariffs
• 28 per cent will start reducing headcount and production four-to-six months into a tariff war
• 50 per cent expect their headcount to decrease in Canada over the next year, 21 per cent expect it will remain the same, and 28 per cent expect to grow their workforce
• 77 per cent will undertake a strategic review to identify acquisition or divestiture opportunities
• 78 per cent say they need to build resiliency into their supply chains (e.g., alternative sources, implementing technology to predict disruptions, optimize logistics, etc.)
• 62 per cent would consider shifting production to the U.S. as a mitigation tactic if tariffs are imposed
• 46 per cent say they have three to five alternative markets for their products other than the U.S., 27 per cent have one or two alternative markets
• 52 per cent say it would be challenging for them to shift business to another jurisdiction in the short- and medium-term
• Half (51 per cent) have cancelled business travel to the U.S.
• 96 per cent are concerned about how tariffs are paid, collected, and how to get goods physically across the border
• 98 per cent are concerned about managing prices and margins with customers
• 95 per cent are concerned about their supply chain (both upstream and downstream risks and higher input costs)
• 74 per cent say if tariffs are imposed, it will limit their ability to reinvest in growth

About the KPMG in Canada Tariffs Survey

KPMG in Canada surveyed 602 Canadian business leaders between February 13 and February 28 on Sago's premier business panel, using Methodify's online research platform. Eighty-nine per cent export to the U.S. and 80 per cent said they will be impacted by U.S. tariffs. Annual revenue breakdown: 26 per cent, between $500 million and $1 billion, 26 per cent, between $100 million and $500 million, 19 per cent, between $50 million and $100 million, 16 per cent, between $10 million and $50 million, and 13 per cent, more than $1 billion. No companies under $10 million in annual revenue were surveyed.

About KPMG in Canada

KPMG LLP, a limited liability partnership, is a full-service Audit, Tax and Advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, auditing, and tax services to Canadians, inspiring confidence, empowering change, and driving innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs more than 10,000 people in over 40 locations across Canada, serving private- and public-sector clients. KPMG is consistently ranked one of Canada's top employers and one of the best places to work in the country.

The firm is established under the laws of Ontario and is a member of KPMG's global organization of independent member firms affiliated with KPMG International, a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, see kpmg.com/ca.

For media inquiries:

Caroline Van Hasselt
National Communications and Media Relations
KPMG in Canada
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[email protected]

Nancy White
National Communications and Media Relations
KPMG in Canada
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[email protected]

SOURCE KPMG LLP