Months into the trade war, Canadian manufacturers are struggling.<\/p>\n
They\u2019re losing sales in the crucial U.S. market. They\u2019re laying off staff to keep afloat. And they\u2019re snowed under by reams of paperwork as they try to navigate the complex \u2013 and frequently changing \u2013 tariff policies of the White House.<\/p>\n
Broadly speaking, the Canadian economy has avoided the worst-case scenario from U.S. President Donald Trump\u2019s assault on free trade. Most Canadian goods exports are still entering the U.S. duty-free, thanks to a carve-out tied to the North American trade deal.<\/p>\n
But the United States has also targeted several industries \u2013 including steel, aluminum, automobiles and lumber \u2013 with punishing tariffs as high as 50 per cent, and that spells trouble for Canadian communities that rely on heavy industry and U.S. demand to power growth, notably those in Southern Ontario.<\/p>\n<\/p>\n
If anything, this is just the latest tough chapter for Canadian manufacturing. <\/p>\n
At the turn of this century, the industry accounted for roughly 16 per cent of overall gross domestic product; that\u2019s now down to less than 9 per cent.<\/p>\n
\u201cWhat\u2019s especially notable in recent years is that factory output was drifting lower even before this year\u2019s trade trauma (which has just piled on the pain),\u201d Bank of Montreal chief economist Doug Porter said in a research note this week. \u201cThat was not obviously the case in the U.S. economy, where manufacturing output has been rising and still accounts for just over 10 per cent of GDP.\u201d<\/p>\n
When Mr. Trump ramped up his tariff threats last year, The Globe and Mail spoke with several manufacturers about their plans for potential duties. With tariffs in place, we\u2019ve asked them again for an inside look at their operations \u2013 and the details aren\u2019t pretty.<\/p>\n
Their operations have generally become leaner as they cope with weaker sales, and because they\u2019re geared to selling in the U.S. market, it\u2019s tough \u2013 if not impossible \u2013 to simply ship their goods overseas.<\/p>\n
But crucially, they are still in business. They may be down, but they\u2019re certainly not out.<\/p>\n
Arctic Snowplows<\/p>\n
When Arctic Snowplows ships a $10,000 plow to the U.S., it now comes with an added cost of $500.<\/p>\n
That\u2019s because the London, Ont.-based company, which makes heavy-duty plows for snow clearance, is getting hit with a 50-per-cent duty on the steel content in its finished product. Jim Estill, owner of the nearly six-decade-old company, said U.S. sales are down 40 per cent as a result of Mr. Trump\u2019s protectionist policies.<\/p>\n
\u201cIt\u2019s a huge number for us,\u201d he said.<\/p>\n
American tariffs on steel and aluminum are not only higher now than during Mr. Trump\u2019s first term in the White House, they encompass a broader range of products. That means many Canadian manufacturers that use steel or aluminum as inputs are getting hit by tariffs to varying degrees.<\/p>\n
A year ago, Mr. Estill was unequivocal that Canadian policy makers needed to retaliate against U.S. tariffs. That\u2019s not exactly how things have panned out. Prime Minister Mark Carney has rolled back many of Canada\u2019s countertariffs on the U.S. in a bid to revive trade talks, including charges on American snowplows.<\/p>\n
As a result, Arctic Snowplows faces tariffs when selling to American customers, but its U.S. competitors face no such duties when selling into Canada.<\/p>\n
As a result of Mr. Trump\u2019s protectionist policies, Arctic Snowplows’ U.S. sales are down 40 per cent.<\/p>\n
Nick Iwanyshyn\/The Globe and Mail<\/p>\n
\u201cWe have no advantage in Canada, and we have a disadvantage in the United States,\u201d Mr. Estill said. \u201cI\u2019d like to think that that\u2019s because there\u2019s a bigger picture that I don\u2019t see, and that they\u2019re actually negotiating something. If they\u2019re not, then Trump has won.\u201d<\/p>\n
Arctic is spending less on marketing in the U.S. and focusing its efforts on Canada. That said, Mr. Estill said it\u2019s tough to make up for the loss of U.S. revenue with domestic sales. And despite the push to \u201cbuy Canadian,\u201d nationalistic fervour only runs so deep.<\/p>\n
\u201cWouldn\u2019t you think municipal bids would buy Canadian? Yeah, they buy Canadian \u2013 unless you\u2019re $1 higher,\u201c he said.<\/p>\n
A bigger plan for the Canadian economy is to diversify its trade partners. The Carney government has set a goal of doubling non-U.S. exports to $600-billion annually in a decade, and it\u2019s making billion-dollar investments to enhance trade infrastructure.<\/p>\n
But Mr. Estill said the realities are complicated. There are several hurdles \u2013 language barriers, shipping costs and local regulations \u2013 that make it difficult to simply pivot to other markets.<\/p>\n
\u201cMy cost to sell in Germany is extremely high,\u201d he said. \u201cMy cost to sell in Buffalo \u2013 I can have someone there in an hour and a half.\u201d<\/p>\n
Ultra-Form Manufacturing<\/p>\n
The Trump tariffs are bad for Kacee Vasudeva\u2019s business.<\/p>\n
The 80-year-old entrepreneur owns Ultra-Form Manufacturing, a maker of metal fittings for car components. Mr. Vasudeva was negotiating a US$2-million contract with a U.S. parts maker when Mr. Trump, then on the campaign trail, began threatening to impose tariffs on imported cars and other goods last fall. <\/p>\n
That deal never happened. Mr. Vasudeva then watched Ultra-Form\u2019s sales fall by 40 per cent as Mr. Trump came into office and began imposing tariffs on trade partners, spurning the North American free trade agreement that had fostered an efficient supply chain that crosses two borders. <\/p>\n
Ultra-Form makes couplings used in a car\u2019s cooling, brake and other systems that use fluids. From a factory in northwest Toronto, Ultra-Form\u2019s machinists turn 12-foot bars of steel and aluminum into polished fittings purchased by larger parts makers that sell to carmakers. <\/p>\n
Although auto parts that comply with rules of origin in the United States-Mexico-Canada Agreement are exempt from tariffs, some of Ultra-Form\u2019s parts are subject to 50-per-cent duties based on their steel and aluminum content. Other parts are hit with tariffs in haphazard fashion, because the rules are complex and the duties are tough to calculate, resulting in errors.<\/p>\n
\u201cIt\u2019s hit and miss,\u201d Mr. Vasudeva says. \u201cOnce in a while, they put a duty on it and then we have to fight it. It\u2019s a difficult time now.\u201d<\/p>\n
Open this photo in gallery:<\/a><\/p>\n Ultra-Form\u2019s sales fell as Mr. Trump came into office and began imposing tariffs on their trade partners, disrupting the once-efficient supply chain that crossed two borders.Christopher Katsarov\/The Globe and Mail<\/p>\n The slump forced the company to lay off about half of its 40 employees last spring. Mr. Vasudeva also used a federal work-sharing program that averted further job cuts. \u201cWe are bringing them back slowly,\u201d he says, as sales have recovered a bit and are about 18 per cent less than at this time last year.<\/p>\n Mr. Vasudeva came to Canada from India in 1972 at age 25 with $25 in his pocket. He fixed up an old lathe to make metal sliders and sold them to furniture makers from the trunk of his car. By 1977, he was in the car parts business, turning out large volumes of metal fittings for Detroit\u2019s Big Three automakers. He went on to start several ventures that employed hundreds of people making hand tools, mosquito repellent and bed-bug traps.<\/p>\n His name is on more than 80 Canadian patents, some of which are licensed to global manufacturers.<\/p>\n \u201cSome of them made me a lot of money,\u201d Mr. Vasudeva says of his innovations, seated in a boardroom at his factory. However, \u201cUltra-Form has been a challenge for me.\u201d<\/p>\n To limit his tariff exposure on exports, Mr. Vasudeva buys metal from U.S. suppliers for parts he exports. He sticks with Canadian steel and aluminum for domestic and Mexican products. This is uncomfortable for the devout \u201cBuy Canadian\u201d believer.<\/p>\n \u201cWhat choice do we have?\u201d he says.<\/p>\n