A trade war with the US would require pandemic-level support as jobs are lost
A trade war with the United States is never going to be welcomed, but with President Trump seemingly determined to impose tariffs on Canada, business leaders are up for the fight.
A new report from KPMG in Canada reveals that eight in 10 business leaders who took part want a targeted, dollar-for-dollar retaliatory response and believe that policymakers "must stand firm in protecting Canada's sovereignty and values.”
They are willing to accept some short-term pain for the business as long as it means a better outcome with a fair deal for Canada that protects the country's trade-based economy, independence and sovereignty.
With the spectre of a trade war in the months ahead, 80% of respondents are now bracing for a recession. Eighty-eight per cent of the companies surveyed export or sell to the US and 81% say their business will be impacted by US tariffs.
"Our poll findings reveal that Canadian business leaders believe Canada must stand firm even if it means being caught in the crossfire," says Benjie Thomas, Chief Executive Officer and Senior Partner, KPMG in Canada. "Nine in 10 business leaders across the country want the federal and provincial governments to take immediate steps to eliminate inter-provincial trade barriers, reform the tax system, provide incentives to onshore, and encourage Canadians to 'Buy Canadian' – in short, they want a stronger, more resilient country."
Tariffs will not only hit businesses but the wider economy and 56% of respondents indicated that they would need to lay-off employees with 80% suggesting that the government will need a pandemic-level response to support workers who lose their jobs.
Action supported by the majority of poll participants include restricting exports of oil, electricity, and mineral to the US, along with strengthening Canadian border controls in response to the US administration’s concerns about illegal migration and drugs.
Acting now
Companies are not waiting around to see what might happen, most are taking pre-emptive action, while urging greater action from provincial and federal governments.
This includes shipping goods or products to the US before Trump’s inauguration and 48% plan to shift their investments to the US and set up operations or production south of the border. While 72% will pass costs on to their customers through increased prices, 62% will try to offset costs in other ways.
"No matter when or if U.S. tariffs or tax cuts take effect, now is the time to be proactive and understand your exposure and develop mitigation strategies," said Lucy Iacovelli, Canadian managing partner, Tax and Legal, KPMG in Canada. "Our poll findings also show that businesses are making it quite clear that they will also require tax reform to stay competitive."
