A growing number of Canadian-based businesses are relocating to the United States, driven by trade uncertainty and competitive pressure. A recent study found that 40% of manufacturers in Canada have moved production south of the border or are considering doing so.
The study revealed that manufacturers are adapting to tariffs and uncertainty, but can only operate in "endurance mode" for so long. Companies can delay investments, absorb higher costs, and adjust their operations, but they cannot remain in a holding pattern indefinitely.
The top reasons for the exodus to the U.S. include avoiding high import tariffs, ongoing trade uncertainty, lower operating costs, and a more favorable tax environment. These factors are driving long-term decisions about where investment, production, and growth will occur.
To encourage manufacturers to stay in Canada, respondents cited the need for certainty around free trade, tariff relief, and lower corporate taxes. Improving the cost of living and housing affordability for employees, as well as access to skilled workers, were also identified as key factors.
Canadian manufacturers remain heavily dependent on the U.S. market, with 61% agreeing that their business cannot survive without access to it. The majority of manufacturers export goods outside of Canada, with 96% of exporters saying their products are compliant with trade agreements.
The survey found that economic uncertainty, trade, and tariff threats have led 57% of manufacturers to pause, reduce, or cancel capital expenditure projects. Additionally, 42% have scaled back or paused research and development spending, with 52% currently operating in "endurance mode."
Sustaining Canada's manufacturing sector will require businesses to continue investing in productivity, technology, and market diversification. Governments will also need to work to reduce uncertainty and improve competitiveness to give manufacturers the confidence to stay in Canada.
While 80% of Canadian manufacturers plan to keep their headquarters in Canada, 11% plan to move their headquarters to the U.S. within the next five years. The study warns that the greater risk lies not in where companies are today, but in where future investment decisions are being made.
