Meanwhile, a push to domesticate production beyond a basic level and churn out finished goods—a struggle for Canadian companies since Confederation—would take time, investment and possibly government support.
“While the steel may be produced in Canada, it has to go to the U.S. to be turned into a structural element that is then used in the construction of a building in Canada,” said Jesus Ballesteros, manufacturing industry leader for consulting firm BDO Canada.
“Raw aluminum gets sent down to the U.S. It’s processed into sheets or potentially even the finished cans, and then those cans then get shipped back to Canada to be used for beer or other drinks,” he continued. “That’s where we get caught in the tariffs … Now, can Canadian industry move in that direction?”
Canada’s vast geography, smaller population also pose challenges
Limited supply chain flexibility extends far beyond the production lines and blast furnaces of heavy industry. Canada’s vast geography and small population relative to the U.S. amount to hurdles for enterprises looking to bolster their domestic market, while most countries beyond the U.S. seem out of reach to many players.
“If we are not delivering to the States, we are sort of an island. Things need to go on long voyages from Canada to reach customers that are not in North America,” said Paschen.
Companies will be loathe to make major changes to their supply chains unless they think hefty tariffs are here for the long haul, he said.
Some experts have called for a shift to swaths of the economy, such as speeding up the transition to electric vehicle production, tearing down interprovincial trade barriers and wrangling more direct investment and involvement from government.
“Subsidies probably aren’t gonna cut it,” said Stuart Trew, director of the trade and investment research project at the Canadian Centre for Policy Alternatives. “Sometimes some kind of additional co-ordination like a state role, where you decide what kinds of steel you’re going to be making and for what purposes, for example, is necessary.”
