MONTREAL — As U.S. tariffs on Canadian goods continue to mount, the idea that companies can simply pivot to new supply chains is far from realistic, experts warn.
While Canadian businesses are actively exploring alternative sourcing and export options in light of the 25% tariffs already in place — and more potentially on the way — shifting away from long-established U.S.-Canada trade networks presents serious challenges.
Decades of trade agreements and specialized cross-border partnerships have resulted in deeply integrated supply chains. Breaking free from them isn’t just complex — it’s costly.
“There are many, many industries that can’t just flip a switch,”
— Ulrich Paschen, Business Instructor, Kwantlen Polytechnic University.
The automotive industry serves as a prime example. Canada exports around 1.5 million fully assembled vehicles to the U.S. annually, covering roughly 8–10% of U.S. vehicle consumption. Nearly all of these exports go directly to American markets, according to the Canadian Chamber of Commerce.
Moreover, American automakers aren’t eager to sever ties with Canadian suppliers. Ending contracts could cost up to $500 million per factory due to breakage penalties. In many cases, vehicle parts cross the border multiple times before final assembly.
“The Canada-U.S. trading relationship is highly integrated — built over decades,”
— Pascal Chan, VP of Strategic Policy and Supply Chains, Canadian Chamber of Commerce.
“It’s not easy to just unscramble that egg.”
Even Canadian firms considering relocation to the U.S. face heavy hurdles:
- Facility shutdowns could cost tens of millions
- Labour costs in the U.S. are over 20% higher
- New operations may experience multi-year delays due to permitting, infrastructure, and workforce shortages