A new KPMG survey reveals more than four in 10 (42%) manufacturers have moved their production from Canada to the US or are considering doing so.The survey included the responses of 275 manufacturers.Of those surveyed, 57% said they have already paused, reduced, or canceled capital investments into Canada.According to KPMG Canada's statement, this comes at a very critical time when Canada-United States-Mexico Agreement (CUSMA) discussions are heating up following the July 1 renewal deadline, which came and went.Now, the US has opted for the review process under the deal, which will occur annually until the deal's expiry 10 years from now.."Government action on overall competitiveness, taxation, regulations, and trade will play a critical role in determining whether future manufacturing investment stays in Canada," stated Anamika Gadia, Partner and National Leader of Industrial Markets for KPMG Canada.Respondents' top-ranked reason for leaving Canada and moving their operations to the US was to avoid or reduce high import tariffs.When respondents were asked what would make them keep the operations in the country if they were considering leaving, their number one response was if there was "certainty of free trade, continued tariff relief and remissions for imports from the US."The second, they said would be if Canada lowered its corporate taxes..A significant amount of manufacturers, 61%, agreed their business could not survive without access to the US market.Of manufacturers with operations within Canada, 86% export goods outside of the country, while 96% claimed their products were CUSMA compliant, and not subject to tariffs."While tariffs are an obvious factor, Canadian manufacturers are making long-term decisions about where to locate based on a broader assessment of where they are most likely to have a competitive advantage," said Joy Nott, Partner, Trade and Customs at KPMG Canada.Nott added the June 3 White House Executive Order on Strengthening Customs Enforcement creates another barrier for Canadian and other foreign businesses wishing to import their goods to the US..Under the order, Canadian and other foreign businesses must "maintain a minimum level of tangible US assets to import goods under their own name."Without this, Canadian exporters would have to depend on US buyers to act as importers, which could "strain key commercial relationships."This could lead Canadian manufacturers to "consider relocating production to the US."Of all the manufacturers surveyed 36% stated they had scaled back their operations, 12% had paused, and 9% had cancelled their operations in Canada altogether.As the Food Professor, Dr. Sylvain Charlebois, who runs the Agri-Food Analytics Lab at Dalhousie University, wrote on X, "If this trend spreads to food manufacturing, we should all be concerned.""Once investment leaves, it rarely comes back."
