In the midst of a trade war and threats to Canadian sovereignty, businesses and government are searching for the silver linings in dark economic clouds.
In recent months, U.S. President Donald Trump has threatened, delayed, imposed and paused tariffs, and has threatened even higher tariffs on Canadian and Mexican goods exported to the U.S., all while threatening Canada’s sovereignty and claiming neighbouring nations are not doing enough to secure their borders against fentanyl and illegal immigration into the U.S.
The result is a full-on trade war between Canada and the U.S. despite the Canada-United States-Mexico Agreement – negotiated, signed and lauded by Trump as one of the best agreements ever – that has been in effect since July 2020.
Canada has imposed retaliatory tariffs on U.S. goods, with provinces taking additional action. Ontario temporarily slapped a 25-per cent surcharge on electricity exported to the U.S. and B.C. has removed U.S. liquor from store shelves and excluded Tesla vehicles from electric vehicle purchase rebates.
Anticipating the trade war, local businesses and governments have come up with strategies around how to deal with a destabilized economic landscape.
Tod Gilbert, president of VMAC, which manufactures vehicle-mounted air compressors in Nanaimo and does much of its business over the border, said last month that tariffs could have a significant impact.
“The challenge is that this just brings so much uncertainty,” he said. “If we knew what exactly was going to happen then we could plan [for] that, but how it’s been going is that it’s changing by the hour and that’s something business definitely doesn’t like.”
Gilbert said VMAC came into the situation in a “strong position” and can afford to be patient and see what transpires, how governments and customers respond, and what sort of business support programs become available.
To create a buffer in advance of the tariffs, VMAC shipped product into the U.S. and is following lessons learned from the COVID-19 pandemic when, Gilbert said, the company managed to avoid reducing its workforce with help from government support programs and, post-pandemic, emerged a stronger company.
Nanaimo-Ladysmith MP Lisa Barron said the government needs a plan to support workers in the bigger industries, to stand firm against the U.S. and, if necessary, use Canada’s natural resources, especially minerals the U.S. needs, as leverage in the trade war.
“If there’s anything that can unify Canadians, from what I’m hearing, it’s the threat of us becoming the 51st state,” she said. “I’ve had people from across party lines [say] this is something that unites us. People are saying we are not a 51st state … and are talking about the things that makes us different from the United States.”
She stressed the importance of looking for ways to keep resources in Canada for domestic manufacturing of products and working with global partners.
“We are well-known as Canadians to be friendly and open to talking with our partners,” Barron said. “There’s many benefits to working across the globe with other countries and not taking the approach that Trump is taking.”
In trade disputes, Gilbert said, it’s the “headline industries” – oil, gas, auto parts, dairy and softwood lumber – that are the major negotiation levers.
“What’s different this time, and I see as a significant risk and threat, is this approach of broad-based tariffs, and that impacts the thousands of small and medium-size businesses, which actually make up a very large portion of total exports, but it’s the small businesses that don’t have the staff and influence to negotiate for their specific … export code," he said. "Air compressors are not going to be on Trump’s major negotiation table … Looking at VMAC, we’ve got about 200 families that are directly supported, but then there’s the thousands that are indirectly impacted.”
Gilbert is an advisory board member with Canadian Manufacturers and Exporters and said the organization's data suggests potential impacts of a trade war are significant. Something Canadian manufacturers like VMAC can do is put more emphasis on overseas markets.
“We can and have. We ship globally. We ship to Europe, Africa, Australia, New Zealand, we’ve started to ship to Japan, but the challenge is these are long-term swings and that’s both a positive and a negative…" Gilbert said. "We’ve got 300 dealers across the U.S. and those customers also can’t pivot hour by hour. They’ve got truck builds planned a month or a year into the future … We respond to what the actual response is and I don’t imagine tariffs go on and then the next day business goes to zero.”
Colin Stansfield, CEO of Nanaimo Prosperity Corporation, said tariff uncertainty has operational and emotional impacts on business.
“Emotionally there’s not much one can do other than brace for a leadership in the United States right now that’s going to continue to make things uncertain for working with them as a trade partner,” he said.
Operationally, an atmosphere of uncertainty has made planning difficult, but businesses have looked for ways to mitigate challenges, for example by stockpiling certain U.S. goods ahead of retaliatory tariffs. Stansfield also recommended communication with American clients.
“The real brunt of tariffs are borne by the purchasing customer, so those costs of any goods being shipped right now down to the United Stated are probably elevated for those customers, so what does that mean for your clientele?” he said. “Talking to clients, always done proactively, is the best approach.”
Provincial, regional and municipal governments can shift procurement priorities too.
“There are massive amounts of money that are spent every year by municipal and provincial governments and there are real opportunities to then be able to seek out new suppliers to make sure that money is staying local and doing its best to offset any losses from other markets,” Stansfield said.
“Nanaimo has a history of that … that started as the coastal communities social procurement initiative that became the B.C. social procurement initiative and is now being continued by organizations such as Buy Social Canada that enable local governments to … ensure money is going to locally owned companies, or that are creating new training and employment opportunities.”
Canadian businesses are going to have to learn to pivot faster in a less stable economic environment, he added.
“And that’s a challenge when, again, you’re dealing with a foreign government doing its best to leave you unsettled,” Stansfield said. “Yes, you want to be able to move in an expeditious manner, but you also want to make sure that you’re not losing sight of larger aims at the same time.”
Nanaimo Prosperity Corporation works with partners like the Greater Nanaimo Chamber of Commerce to help companies distill information about resources available to support them, mitigate tariff threats, and help them find local alternatives to imported goods, which, Stansfield said, can lead to long-term change.
“It's that idea of never letting a crisis go to waste,” he said. “That shift toward conscious capitalism where consumers prioritize ethical, sustainable communities-based businesses over just finding the cheapest option … There’s opportunity that comes with a rise in patriotism. When you see that rise in popular sentiment, when people perhaps are feeling disconnected from global systems, the ability to empower them and instill some agency in them, perhaps, lets you just move more quickly along that path towards making sure that we think about where and how we spend our money.”
