Markets 
As Canada’s economy continues to grapple with U.S. tariffs, a recent survey found the majority of Canadian large and mid-sized businesses have adjusted prices because of those additional costs.
The KPMG National Business and Trade Outlook survey was released Wednesday, with 359 business leaders and decision makers from the Angus Reid Forum participating. Those participants represented companies with annual revenues ranging from $10 million to $20 billion.
Two-thirds (66 per cent) of those business leaders said they have made pricing adjustments to account for some or all of the added costs associated with tariffs, while 39 per cent said they made no changes associated with tariffs.
When a business faces higher costs, including from tariffs and other duties, it faces a difficult decision to absorb those extra costs, which can eat into profits, reduce costs elsewhere to offset some or all of the hit, or raise prices for customers.
The KPMG survey shows 35 per cent of all businesses passed along some tariff-related costs to customers, while 31 per cent passed along the full tariff-related cost. Fifteen per cent of businesses said they found other ways to reduce costs.
“Many Canadian businesses were adopting an initial approach of absorbing some of the tariffs and obviously seeing how things played out. The longer-term suggestion is it moves to closer to 80 per cent is passed on through to consumers,” says Lachlan Wolfers, national leader for KPMG Law.
Get daily National news
Get daily Canada news delivered to your inbox so you’ll never miss the day’s top stories.
“I think we’re going to see that for a period of time, although obviously governments, both here and the U.S., is very focused on managing inflation in the economy.”
Tariffs are duties or fees paid by businesses for goods and services they are importing from other countries.
Tariffs currently in place include U.S. sectoral tariffs on Canadian steel and aluminum, softwood lumber, automobiles and auto parts, buses, furniture and semiconductors.
The survey was conducted from June 25 to July 13, which was before the United States announced it would be implementing new 50 per cent tariffs on Canadian dairy, alcohol, motor vehicles, cosmetics, and other goods on Aug. 19.
“Canadian businesses were looking at this a little bit more from a longer-term perspective,” Wolfers says.
“My concern, if you carried out a survey right now, you are looking at staring down the barrel at potential 50 per cent tariffs and a deadline for negotiations with the U.S. that could skew the results to a more shorter-term perspective.”
About three-quarters (72 per cent) of businesses participating in the KPMG survey export goods or services internationally, and 79 per cent of those exporting businesses say what they are shipping outside of Canada is CUSMA-compliant.
Many of the products targeted by the new tariffs had previously crossed the Canada-U.S. border duty-free under the terms of the current Canada-United States-Mexico Agreement (CUSMA).
Nearly half (49 per cent) of businesses surveyed by KMPG say the current CUSMA is critical to their business operations.
At the same time, a large portion of businesses are focused more on international markets beyond the U.S. to export their goods and services.
Thirty-three per cent say they plan to expand to new markets within the next one to three years, while 26 per cent of businesses identifying as exporters say they are exploring more markets where Canada has a trade deal.
“From a Canadian business perspective, I think we’re moving from a position, hopefully, from tariff turmoil to managed uncertainty,” Wolfers says.
“And that managed uncertainty will certainly exist up until the end of the current U.S. administration, at the very least.”
Read the full article here
