Tariff Threats Prompt Canadian Firms to Consider U.S. Relocation

TORONTO, Canada – As trade tensions escalate with the United States, many Canadian companies are weighing the possibility of relocating operations south of the border. This comes in response to anticipated tariffs that could impose a 25 percent levy on Canadian goods, potentially altering the landscape of cross-border trade.

Last week, TFI International, a Montreal-based trucking and logistics firm, faced backlash after announcing it plans to change its legal domicile to the U.S. The company cited its growing American shareholder base and that 70 percent of its operations currently exist in the U.S. However, this announcement garnered criticism from significant shareholders like the Caisse de dépôt et placement du Québec (CDPQ), which voiced its support for maintaining Quebec’s interests.

CDPQ spokesperson Kate Monfette stated, “We will express our dissatisfaction. Quebec’s interests are always at the heart of our priorities as a shareholder.” During a conference call with analysts, TFI CEO Alain Bedard defended the move, insisting operations in Canada would continue unaffected if the shift proceeds.

“We’re not moving people from Canada to the U.S.,” Bedard asserted. “We’re not doing that. We’re not stupid,” reassuring investors that their Canadian presence would remain intact.

Richard Powers, a professor at the University of Toronto’s Rotman School of Management, commented on the situation, noting, “This is just one company, but it does demonstrate the frustration and disruption that is currently going on. I suspect many firms are doing the numbers and trying to determine if a move makes sense financially.”

A survey conducted in January by KPMG Canada revealed that nearly half of Canadian business leaders are contemplating relocating investments or production to the U.S. to adapt to potential tariffs. Yet, according to Lachlan Wolfers, a tax partner at KPMG, tangible evidence of companies acting on these plans is still lacking. “I think the threat of tariffs has got Canadian companies exploring and investigating potential shifts in operations from Canada to the U.S., but I’m yet to see a lot of tangible evidence of companies actually doing it at this stage,” Wolfers noted.

He highlighted that companies face complexities in moving operations, such as establishing new legal entities, and the financial implications of setting up production in a new country. “It’s very difficult to make long-lasting investment decisions on the basis of the information that we know right now,” Wolfers added.

Moreover, Canadian companies must consider their relationships with local labor and whether they might face legal issues if tariffs are rescinded by future U.S. administrations.

Some sectors, particularly the automotive industry, are on alert for further developments. Automaker General Motors has paused retooling its assembly plant in Brampton, Ontario, raising concerns about over 2,000 jobs amid ongoing trade uncertainties. GMO CFO Paul Jacobson mentioned there might be a need to consider moving plants depending on the permanence of tariffs, yet did not specify if those discussions involve Canadian factories.

Swamy Kotagiri, CEO of Magna International, a Canadian manufacturer, shared similar sentiments, stating some customers are exploring production shifts to avoid tariffs. He remarked, “We’re looking at that and we’ll continue to look at that. But this is not a switch that can be turned on and off in the short term, so I believe this (the tariffs) is going to be disruptive.”

Experts advise caution as Canadian firms navigate these uncertain waters. Richard Leblanc, a governance professor at York University, warned that reactively relocating could expose companies to litigation risks and damage reputations, particularly if they have government support requiring them to maintain operational commitments within Canada.

As tensions mount, local leaders such as Toronto Mayor Olivia Chow are organizing teams to address the economic risks posed by U.S. policy shifts. Chow’s action plan focuses on supporting vulnerable sectors and holding discussions with experts to create strategies that prioritize local businesses.

“Hardworking Torontonians are wondering if their livelihood is going to be at stake,” Chow said, emphasizing the urgency of crafting a comprehensive response.