Canadian companies shift their focus from the US to other markets as Trump tariffs take effect

A pharmaceutical manufacturer is searching for new partners in Asia. Steel component makers with long-standing clients in the United States are warning their customers that they can expect higher prices. A company that makes mascots for school or sporting events is lowering their prices to avoid losing American customers. The tariff war and repeated threats by President Donald Trump to annex Canada are upending decades-old trade relations between North American neighbors and forcing many small-scale Canadian manufacturers to review their long-term strategies. Mark Carney will meet with President Trump at the White House next Tuesday. Carney led the Liberal Party to victory in the last month's election by campaigning against Trump. He has said repeatedly that the old relationship between the United States and Canada is over. According to interviews conducted with over a dozen businesses, advisors and trade lawyers, the U.S.'s unpredictable policy and the uncertainty in doing business with it will continue even if a new agreement is reached with Canada.

Mike Chisholm runs a Canadian export consultancy.

He said, "Banks, owners, and private equity funds all want stability." "They will just be very, extremely careful."

Canada, which historically relied on U.S. export markets for 75%, was among the first countries to be hit by Trump's new tariffs.

Trump justified the tariffs by claiming that Canada was responsible for the fentanyl coming into the U.S., even though data showed less than 1% all seizures came from Canada. Trump imposed 25% tariffs on all imports of steel and aluminum into the U.S. in March. He then added another 25% to cars and parts which did not comply with North American free-trade agreements. However, he stopped short on imposing a wide reciprocal tariff against some countries.

Experts said that adding reciprocal duties on Canada would have sparked bankruptcy in the manufacturing industry.

According to government statistics, the manufacturing sector exports 42% of its production into the U.S. and 41% rely on U.S. imported goods. Carney's Office declined to comment on the impact tariffs.

Kush Desai, a White House spokesperson, said when asked for comment: "Canadian businesses won't need to worry about tariffs at all once Canada becomes our beloved 51st State."

Alan Urmeneta said that PNP Pharmaceuticals is a contract manufacturer in British Columbia. In response to Trump's tariffs, the company has been trying to find new customers in Asia.

Urmeneta stated, "We now venture into other markets as it is clear that we must pivot." He refused to name specific countries.

LabelPak Printing Inc. in British Columbia, which distributes packaging products from Asia and is not currently subject to tariffs, may focus exclusively on the Canadian marketplace, gradually reducing its 15% sales from the U.S.

Ken Gallie, founder of the company, stated that "if he (Trump), gets angry... and decides... to throw a 50 percent tariff on Canadian products... it will really put us out from the market." "We will put more focus on the Canadian business." Companies and industry associations say that while some Canadian firms have lost confidence, those who are dependent on the U.S. marketplace cannot replace it entirely, particularly smaller companies.

Canada's economy has a size less than one tenth of that of its neighbor, and shipping overseas can be expensive.

Chisholm says that some of the businesses he advises have set up offices in Europe and Asia and hired sales agents to try and reduce their U.S. operations. Many people are asking themselves, "Where can I do business?"

DIFFICULT CONVERSATIONS

Executives from other companies have reported that they are having difficult discussions with U.S. clients.

James White, CEO at Wellmaster, a company that makes steel components for the energy and water sectors, said: "We're talking to these companies and telling them their government chose to make them pay more."

Joyce Banda is the CEO of Concept Factory Inc. in Ontario, which makes mascot costumes and mascots for school or sporting events. She said that she lowered her prices to avoid tariffs, to retain U.S. clients. She said that she will have to take the loss, even though Trump has not imposed reciprocal tariffs.

Natalie Gaudreault is the owner of Fusion TG in Montreal, a distributor of tool steel. Trump's tariffs have been a double whammy for her business.

Her company imports from China almost 70% of its steel requirements, and then molds the steel to customer specifications before supplying it to roll formers and tool and die makers. Her sales to the U.S. are a fifth of what she does. Trump then imposed a 25% tariff. She estimates that with other taxes her products entering the U.S. would more than double their cost.

"I will not absorb the costs." "I have to charge them," she said. She added that her sales had dropped by a third during the first quarter.

Some firms have taken the unusual step of trying reopening contracts with clients. This includes clauses about sharing tariff costs. This complicates business relationships, according to Clifford Sosnow. He is a partner at the law firm Fasken and the chair of its international trade and investments group.

He said that such negotiations were like a hot knife cutting through butter. It doesn't work unless it causes damage. (Reporting and editing by Caroline Stauffer, Suzanne Goldenberg, and Promit Mukherjee)

(source: Reuters)