Eighty-eight percent of Canadian business leaders considered losing their current safeguards under the Canada-US-Mexico Agreement (CUSMA) the most significant risk to their companies, revealed a new KPMG in Canada survey coinciding with the ongoing Canada-US trade discussions.
“Historically, a North American free trade zone has allowed all three countries to act against global supply chain threats and work together in a highly competitive world trading environment,” said Joy Nott, partner, trade and customs, in a press release from KPMG LLP. “However, we could see a situation in which a bilateral agreement with the U.S. replaces CUSMA in 2026 and alters the playing field.”
KPMG’s annual federal budget survey, which gathered insights from 501 Canadian business leaders, determined that 80 percent of respondents would be satisfied with a bilateral agreement with only the US, rather than a trilateral Canada-US-Mexico agreement, given the shifting trade landscape.
Nott noted that most Canadian business leaders polled said they would settle for a Canada-US agreement as a result of the free trade agreement negotiations, even though a trilateral agreement was preferable.
KPMG’s survey showed that 82 percent of respondents thought that US tariffs were here to stay.
“The full effect of U.S. tariffs is only beginning to make its way through the economy now,” said Lachlan Wolfers, KPMG Law’s national leader. “In the initial phase, affected businesses chose to absorb the tariffs, whereas going forward we are expecting to see more businesses pass on the tariff costs through to end consumers.”
He stressed that most of Canada’s businesses have moved products into the US ahead of the new tariff measures, utilized ‘foreign trade zones,’ or adopted other short-term measures to adapt to trade disruption.
“Although about half of survey respondents have been exploring new markets overseas, many businesses are yet to take longer-term measures such as establishing new trade corridors or shifting production activities to the U.S.,” Wolfers added in KPMG’s press release.
Survey results
KPMG’s survey found that, among Canadian business leaders polled:
- Over 90 percent expressed that a negative outcome in the negotiations with the US would be the most significant risk to Canada’s economic future
- 93 percent believed that unpredictable US policies and the expenses of accessing the US market were some of Canada’s most urgent economic issues
- 88 percent have experienced more moderate effects of the US tariffs than expected
- 84 percent expected to pay some amount of US tariffs even if their goods fell under a future continental trade agreement
- 82 percent reported that the loss of the $800 duty-free exemption on shipments to the US – also known as the de minimis exemption – lessened their sales and profits, while others called the cost of accessing new overseas markets prohibitive
- 80 percent thought that Canada’s retaliatory tariffs against the US ended up hurting their businesses
- 75 percent halted new investments, considering the trade uncertainty
- 73 percent could not afford legal, jurisdictional knowledge, regulatory, travel, transportation, and supplier costs, as well as other additional costs of venturing new markets
- Most claimed that US tariffs have made their businesses less competitive