Trade uncertainty is beginning to influence long-term decisions across Canada’s manufacturing sector, with many companies now looking south of the border as they plan their next phase of growth.
According to a new KPMG Canada survey, 42% of Canadian manufacturers have either moved part of their production to the United States or are seriously considering doing so. Among those exploring the move, more than three-quarters expect to relocate production within the next two years.
For Anamika Gadia, Partner and National Leader of Industrial Markets at KPMG Canada, the findings show that businesses are moving beyond short-term responses to tariffs and are starting to make strategic, long-term investment decisions.
She said manufacturers have spent the past year adapting to an unpredictable trade environment, but many no longer want to wait for greater clarity around future trade policies before deciding where to invest.
The survey, conducted between May 11 and May 29, gathered responses from 275 business owners, executives and senior decision-makers in Canada’s manufacturing industry through Angus Reid’s business research panel.
The results come shortly after U.S. Trade Representative Jamieson Greer announced that the Canada-United States-Mexico Agreement (CUSMA) would not be renewed in its current form, although the agreement will remain in force while negotiations continue.
Although CUSMA continues to protect many Canadian exports from broad U.S. tariffs, several sectors—including steel, aluminum, automotive manufacturing and cabinetry—remain subject to separate trade measures introduced by the United States.
Gadia believes the industry’s concerns extend well beyond tariffs alone.
She says manufacturers are looking for stronger signals that Canada remains an attractive place to invest. Among the priorities identified by businesses are reducing interprovincial trade barriers, providing greater certainty around trade policy, lowering corporate taxes, improving access to financing and ensuring more affordable energy.
The survey also revealed that many companies have already begun pulling back on investment plans. Fifty-seven per cent said they have paused, reduced or cancelled capital projects.
Of those businesses, 36% reported scaling back planned investments, 12% have temporarily paused projects and 9% have cancelled investments altogether.
According to Gadia, some of that delayed investment may ultimately be redirected toward expanding operations in the United States rather than remaining in Canada.
Despite these concerns, most manufacturers still intend to keep their head offices in Canada. Eighty per cent of respondents said they expect to maintain their headquarters domestically, although 11% indicated they plan to relocate their head office to the U.S. within the next five years.
KPMG warns that if those relocations become more widespread, the impact could be significant for Canada’s economy. Manufacturing currently accounts for around 10% of the country’s gross domestic product, making the sector a key driver of investment, employment and economic growth.
