
Manufacturers Seek Investment Incentives as Trump Tariffs Loom
Canadian manufacturers are calling on the federal government to introduce investment incentives and tax relief as the looming threat of sweeping U.S. tariffs puts the country’s industrial base at risk.
Canadian Manufacturers & Exporters (CME) President and CEO Dennis Darby has urged the federal government to act swiftly, warning that the new U.S. trade policies could severely disrupt the sector, which contributes $213 billion to Canada’s GDP and supports over 5.29 million jobs.
Darby called on Ottawa to take a proactive approach by introducing incentives that encourage manufacturers to proceed with planned investments and reshore production to Canada. According to a recent survey, almost half (45%) of CME members expect to cancel or delay planned capital investments if Trump’s tariffs proceed.
U.S. President-elect Donald Trump has threatened to invoke tariffs as high as 25% on imports from Canada and Mexico when he takes office on Monday.
Trump has contended that the tariffs are necessary to make up for the effects of illegal immigration and drug smuggling into the U.S.
The Canadian government has vowed to impose widespread retaliatory tariffs on American imports if, as expected, he follows through with his threat.
But Darby opposes such tactics opposes such a move.
“If Canada retaliates, the economic fallout will be even worse, driving up costs for businesses and consumers on both sides of the border,”” he wrote. We recognize that retaliatory tariffs will be necessary to exert pressure on the incoming U.S. administration. However, a full-scale trade war is not an option – Canadian manufacturers, workers, and consumers cannot afford broad-based retaliation that further destabilizes the economy. Retaliatory measures must be strategic, targeted, and enacted in close consultation with industry to minimize collateral damage.”
Ottawa is also considering whether to introduce an export tax on major Canadian commodities such as oil, uranium and potash, the Globe and Mail reported.
The U.S. is Canada’s largest trading partner, with exports to the U.S. accounting for roughly 20% of the northern nation’s GDP. More than 60% of Canadian exports to the U.S. are manufactured goods, leaving the sector particularly vulnerable to tariffs.
“The imminent threat of sweeping U.S. tariffs poses a significant and immediate risk to this critical sector, jeopardizing thousands of businesses and jobs,” Darby stated in a letter addressed to Prime Minister Justin Trudeau and other federal party leaders. “This threat is on top of long-standing challenges facing our economy – chronic productivity issues, skills shortages, and an uncompetitive tax and regulatory environment – that have already weakened investment and growth.”
The recent CME survey highlighted the potential fallout:
- 90% of manufacturers expect significant or severe impacts if tariffs are imposed.
- 30% have already postponed planned investments, while 22% have implemented hiring freezes due to uncertainty.
- Nearly half of manufacturers (48%) anticipate layoffs or hiring freezes, while 49% plan to shift some production to the U.S.
CME is pressing Ottawa to introduce emergency measures, including short-term tariff relief, investment incentives, and tax breaks to help manufacturers weather the storm. The organization has proposed a federal cost-coverage mechanism to offset tariff impacts, along with tax deferrals and expanded work-sharing programs to protect jobs.
“Canada must act decisively to stabilize businesses, protect jobs, and preserve our manufacturing footprint,” Darby wrote.
The industry group is also advocating for long-term reforms, such as a comprehensive tax overhaul, regulatory modernization, and an expansion of domestic procurement policies to prioritize Canadian-made goods in federal contracts.
“Beyond immediate relief, this crisis underscores the urgent need for structural reforms to address deep-rooted weaknesses in Canada’s economy,” Darby wrote. “These reforms must not be viewed solely as a response to tariffs, but as a strategic imperative to unlock Canada’s full productive potential.”
CME is calling on Trudeau to reconvene Parliament if legislation is required to implement short-term measures. Trudeau obtained permission from Governor-General Mary Simon to prorogue Parliament until March 24.
He made the move after announcing his resignation, pending the outcome of a Liberal leadership vote that will be decided March 9.
“Prorogation must not obstruct urgent policies essential to safeguarding Canadian businesses, workers, and families at this critical time,” Darby warned.
Essentially, prorogation ended the Parliamentary session, killing all bills that were en route to becoming laws.
But it remains to be seen whether the government can pass any required legislation whenever Parliament reopens. Opposition parties have threatened to defeat the government through a non-confidence motion that, if passed, would force a general election.
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