‘Drip, drip, drip’ of tariff threats already causing damage, says business group

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This article was published 03/03/2025 (449 days ago), so information in it may no longer be current.

Broad U.S. tariffs on Canadian imports would be devastating if they’re imposed Tuesday, but the “drip, drip, drip” of threats and moving goalposts has already inflicted its share of pain on businesses, said the chief of public policy for the Canadian Chamber of Commerce. 

“It’s really a weaponization of uncertainty,” said Matthew Holmes. 

Across-the-board 25 per cent tariffs on Canadian and Mexican goods — save for a 10 per cent levy on energy — were to come into effect about a month ago. But at the 11th hour, U.S. President Donald Trump announced a month-long reprieve pending the results of border security measures both countries promised to undertake. 

Holmes said every day tariffs can be forestalled is a $3.6-billion win for the Canadian economy. But every day the threats continue to loom, it also erodes what has until now been a beneficial economic alliance. 

“As long as these threats continue … it’s going to damage the investment climate and the trust. And both of those are essential for business.”

Broad tariffs would be the “worst-case scenario,” said Dan Kelly, president of the Canadian Federation of Independent Business. 

The second-worst case scenario, he said, would be the tariff threat continuing to linger. 

“Even if the Trump administration does take a step on tariffs, it’s unlikely to be the last and so this uncertainty is just a real killer of business growth and expansion.”

“This is going to have a general economic effect on absolutely everyone.”

He says some small- and medium-sized businesses have been looking at lining up alternate suppliers to the United States and others have held off on planned expansions. Others have pursued a “hope and prayer” strategy that the tariffs will not be as severe as feared. 

“This is the last thing we need as an economy is to have businesses that could otherwise expand their operations, put the brakes on that because of the uncertainty that we’re sitting in, but that’s where we are,” said Kelly.

Jim Kilpatrick, Deloitte Canada’s leader for global supply chain and network operations, said he’s been telling clients to take the threat of U.S. tariffs seriously since November. 

He said some companies have been rushing to get their goods across the border ahead of tariffs possibly kicking in, and he advises companies to review their contractual obligations if they do cross-border business. Some U.S. customers, which are the importers of record that would actually pay the tariff, are also pre-ordering goods.

“But these type of actions really just buy you time because eventually you’re going to have to resupply and you’ll be hit with a tariff cost and you can’t push years of inventory across the border,” said Kilpatrick. 

Many industries on both sides of the border have long been interwoven, with different components of one product made in each country. For instance, certain automotive parts may cross the border several times before they are put in a completed vehicle. 

“It’s not easy to untangle these highly interconnected supply chains,” said Kilpatrick. 

“And certainly if this is a sticking change in trade practices, it’s going to require a very substantive transformation of how supply chains are designed today.”

Michael McAdoo, a partner and director at Boston Consulting Group who advises on global trade, said businesses have had varied levels of preparedness to the tariff threat. 

There’s the minority in the “wait-and-see crowd,” who have done nothing so far. 

And then there are businesses that have set up full-on tariff command centres, bringing together representatives from all aspects of the company. 

“The best clients are doing a daily standup meeting where they share information, intelligence,” McAdoo said. 

He said some companies are taking a good look at their value chains — where they source and extract material, and the market where the finished product goes. 

Firms with interconnected facilities on either side of the border may now reserve their Canadian one for Canadian customers and do the same in the U.S. 

Many are also looking at the competitive landscape and where they can get an edge, McAdoo said. 

“Are all competitors going to be affected the same, because they’ve all got the same value chain that I do? Or will some competitors be relatively advantaged or disadvantaged versus my own company?”

This report by The Canadian Press was first published March 3, 2025.