U.S. President Donald Trump\u2019s administration starts its second year on Monday. (Credit: The Associated Press\/Ryan Sun) <\/p>\n
Canadian companies were scrambling a year ago to understand the implications of what was shaping up to be one of the biggest economic upheavals since the Second World War. They rushed to hire consultants and lawyers and understand the intricacies of global trade and the potentially crushing economic impact of new United States tariffs.<\/a><\/p>\n Some, such as steelmakers<\/a> and auto manufacturers<\/a>, were the first to be upended. Others, like furniture makers, are just starting to feel the sting. Still others have managed to thrive, taking advantage of the situation to bulk up in Canada and abroad.<\/p>\n Though there was once hope the tariffs could be quickly negotiated away, the levies are being grudgingly accepted as part of a new normal as U.S. President Donald Trump\u2019s administration starts its second year on Tuesday.<\/p>\n \u201cWe just can\u2019t hope that he\u2019s going to wake up one day and tweet, \u2018Just kidding,\u2019\u201d said Luke Elias, president of Muskoka Cabinet Co. in Ottawa, whose $4.7-billion industry was hit with a 25 per cent tariff by the U.S. in October. \u201cThe only hope we have is that our government helps us by acknowledging and doing something about their concerns.\u201d<\/p>\n Businesses aren\u2019t panicking, but they aren\u2019t betting big either<\/p>\n Patrick Gill, Canadian Chamber of Commerce<\/p>\n The fresh tariff \u2014 along with a threat to double it \u2014 was a crushing blow to cabinet makers since some that export as much as 80 per cent of their product to the U.S. were forced to lay off employees, said Elias, who is also vice-president of the Canadian Kitchen Cabinet Association.<\/p>\n For a wide swathe of Canadian businesses, the chief concern as they head into Trump\u2019s second year is the renegotiation of the Canada-U.S.-Mexico Agreement (CUSMA)<\/a>, which has insulated many from tariffs they would have otherwise faced on exports to the U.S.<\/p>\n The legal status of the tariffs has been challenged, but even if the U.S. Supreme Court strikes down the justification used to impose them, many believe Trump will dream up a way to replace them.<\/p>\n \u201cBusinesses aren\u2019t panicking, but they aren\u2019t betting big either,\u201d Patrick Gill, vice-president of the business data lab at the Canadian Chamber of Commerce, said.<\/p>\n He said capital spending isn\u2019t collapsing, but it\u2019s cautious and selective, while hiring has softened rather than turned into widespread layoffs, with the most caution at trade-exposed firms, especially manufacturers, but the ongoing uncertainty is weighing on investment and expansion decisions across the board.<\/p>\n \u201cPessimism about the next 12 months is now at its highest point in several years,\u201d he said. \u201cIn that environment, firms are holding back on major expansion and taking a clear wait-and-see approach as they look for more clarity on U.S. trade policy and demand conditions.\u201d<\/p>\n Clifford Sosnow, chair of the international trade and investment group at Fasken Martineau DuMoulin LLP, said the companies his law firm deals with are keenly aware that it isn\u2019t easy to detach from the U.S. as a major trading partner, so they\u2019re focused on ensuring they are as insulated as possible from tariff shocks, such as through the wording on new contracts with buyers and suppliers.<\/p>\n \u201cOur clients don\u2019t want to be caught flat-footed with (the) next tariff costs, issues that weren\u2019t covered in many of their contracts when the tariff uncertainties first appeared,\u201d he said. \u201cThere is a recognition that the U.S. is not going away as a prime market. They are trying to de-risk the uncertainty.\u201d<\/p>\n David Paterson, Ontario\u2019s trade representative in Washington, D.C., said he\u2019s been impressed by the adjustments some businesses have been able to make, often without layoffs or other obvious signs of stress.<\/p>\n \u201cTariffs are having an impact, (but) companies are incredibly smart and resilient at finding ways to either find new markets or figuring out how to maintain production,\u201d he said.<\/p>\n Still, he said it\u2019s difficult to plan and pivot when the Trump administration is continuing to consider whether to place products from semiconductors to pharmaceuticals into tariff territory. And companies such as furniture makers and snowmobile manufacturers that were not affected by the first wave of tariffs on steel and other raw materials have since been pulled into the trade war.<\/p>\n \u201cIt\u2019s a very simplistic thing to say that Canada has the exemption for everything except auto, steel and aluminum. But when you start to figure out the derivative impact \u2026 that is one of the challenges,\u201d Paterson said. \u201cAnd it\u2019s not just in Ontario; it\u2019s Manitoba, Saskatchewan (and the) Eastern provinces.\u201d<\/p>\n Canadian cabinet makers were among those blindsided when their wares were hit with tariffs in October. A year ago, their biggest concern was a shortage of skilled labour. Even though Trump\u2019s threat to double the tariff imposed in October didn\u2019t materialize this month, the reprieve did little to ease their uncertainty about how to move forward.<\/p>\n \u201cThese are big swings and (it\u2019s) difficult for anyone to plan,\u201d said Sandra Wood, executive director of the Canadian Kitchen Cabinet Association, whose members export around $600-million worth of goods to the U.S. each year.<\/p>\n Prime Minister Mark Carney speaks during a press conference in Mexico City in September, where he met with Mexico President Claudia Sheinbaum. The trade agreement between the two countries and the U.S. comes up for review this year. <\/p>\n