Which Canadian Companies Are Most at Risk of US Tariffs?
A BNN Bloomberg report recently examined which Canadian companies are most at risk of US tariffs, shedding light on the potential impact on various sectors, from manufacturing to natural resources. Given that the United States is Canada’s largest trading partner, any shift in tariff policy can create ripple effects throughout the Canadian economy. Moreover, with ongoing geopolitical changes, companies may need to adjust their strategies faster than ever before.
This article will delve into several key areas, including the types of tariffs imposed, the industries most vulnerable to these new or potential levies, and how firms can adapt through strategies like supply-chain reorganization, diversification, and advocacy. We will also explore how small businesses differ from large corporations when it comes to risk management. Ultimately, understanding the current landscape can help investors, policymakers, and entrepreneurs make more informed decisions about the future.
| Company name | Sub-sector | Revenue impacted by tariffs (US$ mm) | Per cent of revenue from U.S. |
|---|---|---|---|
| Nutrien | Chemicals | $17,656 | 60.8% |
| Enbridge | Energy | $14,978 | 45.5% |
| Magna | Automotive | $10,855 | 25.4% |
| TC Energy | Energy | $6,276 | 52.2% |
| Barrick Gold | Mining | $6,051 | 53.1% |
| Saputo | Food | 5,781 | 45.0% |
| Bausch Health | Healthcare | $5,194 | 59.3% |
| Bombardier | Capital Goods | $5,089 | 63.2% |
| Parkland Corp | Energy | $4,915 | 20.1% |
| Suncor Energy | Energy | $4,860 | 13.1% |
(Source: Syntax Data)
1. Understanding the Tariff Landscape
1.1 Definition of Tariffs
Tariffs are taxes imposed on imported goods as they enter a country’s borders. Governments often use them for various reasons, including protecting domestic industries, retaliating against trading partners, or raising revenue. When the United States enacts new tariffs or tightens existing ones, the cost of importing goods from Canada increases, making Canadian products less competitive in the U.S. market. Consequently, Canadian exporters may face reduced demand or be forced to absorb higher costs themselves, which can erode their profit margins.
1.2 Why the US Market Matters
Canada and the U.S. share one of the largest bilateral trading relationships in the world. In 2024, for instance, trade between the two nations exceeded hundreds of billions of dollars in goods and services. The U.S. remains the top destination for Canadian exports, particularly in industries such as automotive parts, lumber, oil, and agri-food products. Therefore, any significant changes in U.S. tariff policy can affect a wide range of Canadian companies. Moreover, since the U.S. is geographically adjacent, many Canadian businesses have built supply chains that rely heavily on cross-border logistics.
2. Industries Most Vulnerable to US Tariffs
2.1 Automotive and Auto Parts
One of the largest export categories for Canada is automobiles and auto parts. Many Canadian plants are integrated into North American supply chains, producing engines or components destined for assembly lines in Detroit, Michigan, or other U.S. industrial hubs. When the U.S. threatens tariffs on automotive imports, it raises alarm in Canada’s manufacturing heartland—especially in Ontario. A significant tariff on vehicle components could lead to reduced production, layoffs, and decreased investment. Furthermore, automakers might rethink where they locate plants, choosing to shift production to the United States to avoid tariffs altogether.
2.2 Steel and Aluminum
Over the past few years, steel and aluminum have been frequent targets of trade disputes. Canadian producers of these metals face challenges if the U.S. revives or intensifies tariffs. The cost of exporting steel or aluminum to the U.S. can rise sharply, forcing companies either to pass on costs to buyers or absorb them internally. Consequently, profit margins shrink, which can lead to lower share prices and scaled-back operations. Some firms might even consider relocating some parts of their production to the U.S. to bypass the levies.
2.3 Lumber and Forestry
Softwood lumber has been a contentious trade issue between Canada and the U.S. for decades. American producers often claim that Canadian lumber is unfairly subsidized, leading to periodic tariff disputes. While the trade deals occasionally mitigate these tariffs, they can resurface. When tariffs spike, Canadian mills see lower demand from U.S. builders, potentially triggering layoffs in forestry-dependent communities. In addition, lumber companies may struggle to find alternative buyers for surplus wood, since the U.S. market is so large and close. This ongoing risk has pushed some forestry firms to look at markets in Asia and elsewhere.
2.4 Oil and Gas
Although pipelines and energy exports often involve long-term contracts and infrastructure, tariffs on energy products can still disrupt Canadian producers. If the U.S. decided to impose targeted taxes on Canadian crude or refined products, it could hamper the flow of oil across the border. Additionally, regulatory changes or fees that indirectly function like tariffs—for instance, environmental penalties aimed at imported oil—could threaten profitability. In such a scenario, Canadian companies might explore shipping routes to other countries, though building new pipelines or port facilities can be time-consuming and expensive.
2.5 Agri-Food and Fisheries
Agricultural tariffs can have immediate, tangible consequences for farmers and food processors. When dairy, eggs, or meat products become more expensive in the U.S., companies must either eat the added cost or risk losing market share. Farmers often have limited bargaining power when dealing with large wholesalers or grocery chains. As a result, even a small tariff can significantly reduce a farm’s revenue. For coastal areas, seafood exporters like lobster or salmon producers also feel the pinch when tariff rates rise, making Canadian catches pricier for American consumers and retailers.
3. Risk Mitigation Strategies
3.1 Supply-Chain Diversification
When companies rely on a single market, they become vulnerable to geopolitical shifts. Diversifying supply chains and end markets can alleviate this risk. For instance, an auto parts manufacturer in Ontario might look to sell its components not only to U.S. automakers but also to European or Asian brands. Although establishing relationships in new markets can be daunting, it can also secure long-term stability. Moreover, diversification can encourage innovation, as companies strive to meet varying international standards.
3.2 Relocating Production
If tariffs become permanent or increasingly punitive, some Canadian firms may consider relocating manufacturing to the U.S. to avoid import taxes. This approach can maintain access to the American market, but it often means lost jobs and reduced economic activity in Canada. Additionally, relocation isn’t always simple. It may require navigating new labor laws, environmental regulations, and local tax structures. Despite the drawbacks, relocation may be a last resort for companies whose entire business models depend on affordable access to the U.S. market.
3.3 Trade Diplomacy and Lobbying
Canadian companies, along with their U.S. business partners, frequently lobby for exemptions or reduced tariff rates. By demonstrating how tariffs could harm American consumers, eliminate cross-border jobs, or inflate prices, they sometimes convince policymakers to reconsider. Transition words like “furthermore” and “in addition” emphasize the synergy that can result when industries unite. Firms also collaborate with industry associations or chambers of commerce, combining resources to influence decision-makers in Washington. This collective action can lead to limited exemptions or special quota arrangements.
3.4 Hedging and Financial Instruments
For companies that face currency or commodity price fluctuations, financial instruments can help cushion the blow. For instance, a firm might hedge its future sales in the U.S. dollar, ensuring that sudden tariff announcements don’t coincide with unfavorable currency swings. While hedging cannot eliminate the cost of tariffs, it can reduce the overall uncertainty of cross-border business.
4. Small Businesses vs. Large Corporations
Large corporations, such as multinational automakers or forestry giants, often have multiple plants, expansive distribution networks, and significant political influence. As a result, they can adapt more easily to new tariffs. In contrast, small businesses operating on slim margins may struggle to absorb sudden cost increases. They likely have fewer resources to spend on lobbying, hedging, or diversifying into new markets.
In some cases, small businesses band together through industry associations, which offer collective representation. Nonetheless, many entrepreneurs may decide to pivot their product offerings, delay expansion plans, or even shift to the domestic market if cross-border trade becomes too expensive. This uncertainty can hamper innovation and discourage risk-taking, ultimately stunting economic growth.
5. Outlook and Potential Outcomes
Tariff policies can shift rapidly in response to political climates. In an election year, talk of tariff increases might heat up, affecting investor sentiment. Conversely, new trade agreements or diplomatic deals might ease existing tensions. Many Canadian companies adopt a wait-and-see approach, staying vigilant and prepared for rapid policy changes.
Economists also point out that, in the long run, heavy tariffs can harm both the importing and exporting countries. Tariffs disrupt supply chains and often translate into higher prices for consumers. This dynamic can dampen overall demand, leading to decreased business activity. Nevertheless, some protectionist measures remain politically popular, making it likely that tariffs will continue to be used as a bargaining tool in trade negotiations.
6. Key Takeaways
- Multiple Sectors Affected: Manufacturing, steel, aluminum, lumber, oil, gas, and agri-food stand out as most exposed to U.S. tariffs.
- Varying Adaptation Strategies: Companies can diversify supply chains, relocate production, or lobby for exemptions.
- Small vs. Large Businesses: Larger firms may navigate tariffs more readily, while smaller businesses struggle with fewer resources.
- Uncertain Future: Political shifts influence tariff policies, making it critical for Canadian companies to remain flexible and informed.
Read More : How Canadian Companies Are Preparing for Trump’s Tariffs
Conclusion
Determining which Canadian companies are most at risk of US tariffs involves examining not only the types of products exported, but also the broader geopolitical and economic context. Tariff battles can escalate or subside rapidly, leaving companies and investors uncertain. Nonetheless, by diversifying markets, exploring relocation, and engaging in industry-wide lobbying, many Canadian firms stand a better chance of staying competitive. Large corporations tend to have more tools at their disposal, yet smaller enterprises can adapt by focusing on niche products or strategic partnerships. Ultimately, resilience in the face of uncertain trade policies can spell the difference between success and stagnation for Canadian businesses.
