The Current - How Canadian businesses are bracing for Trump tariffs

Episode Date: January 27, 2025

Donald Trump says the U.S. doesn’t need Canadian exports — is he right? We look at how interconnected the two economies are, and what businesses on this side of the border are doing to prepare for the U.S. president’s threat of 25 per cent tariffs.

When a body is discovered 10 miles out to sea, it sparks a mind-blowing police investigation. There's a man living in this address in the name of a deceased. He's one of the most wanted men in the world. This isn't really happening. Officers are finding large sums of money. It's a tale of murder, skullduggery and international intrigue. So who really is he? I'm Sam Mullins and this is Sea of Lies from CBC's Uncovered, available now.

This is a CBC Podcast. Hello, I'm Matt Galloway and this is The Current Podcast. Well Donald Trump's message is pretty clear. We don't need them to make our cars and they make a lot of them. We don't need their lumber because we have our own forests, etc., etc. We don't need them to make our cars and they make a lot of them. We don't need their lumber because we have our own forests, etc. etc. We don't need their oil and gas. We have more than anybody. We don't need you Canada. The US president says his country will impose 25% across-the-board tariffs on Canadian goods on the 1st of February.

Canadian businesses are bracing for the impact. In a moment we'll hear from the manager of a fisheries co-op in Cape Breton. But first I'm joined by Etienne Bourme who is the president of Etpo Tool and Die Incorporated in Elmer in Southwest Ontario. Etienne, good morning. Hi, good morning, Matt. How are you this morning? I'm well, thanks. You make auto parts.

How much of your business is made up of exports to the United States? Directly and indirectly, I would say 100%. about 30% of our product gets exported directly. And then in the automotive market sphere, at the end of the day, everything gets exported, whether it's, you know, if we ship to a local customer, in turn, they're exporting to the U S it's interesting to know that the average auto park can cross the border up to eight times with our relationship, working together with our friends in the U S.

And so if a 25% tariff is a tariff, then it's trust seems to know that the average auto park can cross the border up to eight times with our relationship working together with our friends in the US. And so if a 25% tariff were to be imposed on goods across the economic scale, what would that mean for your company? Well it would be devastating Matt. There'd be long-term impacts and there would be short-term impacts. The short-term impacts, perhaps we're seeing the effects of that already a little bit, where you may see people that have US operations, so facilities in Canada that have US operations that might be looking to see if there's some product that should be repositioned. So if it's being made in Canada and being directly exported and staying in the US, then

you'd have to argue that maybe you should try and get ahead of the tariff and move some of that. But it will definitely change the automotive landscape in Ontario as, as our customers would question whether the investment here is necessary or fruitful. So when you say devastating, what does that mean practically? I mean, how many employees, for example, do you have?

So, Epo's been in business since 1958. We're a family run company. This is our only location. So we don't have, we don't have a lot of options for, you know, pivoting to different facilities. And we employ 200 people here, uh, south of London in rural Ontario. And so when things get devastating, would you have to look at perhaps shrinking that workforce? Would there be an increase in the number of employees? people here, uh, south of London in rural Ontario. And so when things get devastating, would you

have to look at perhaps shrinking that workforce? Would there be an impact on how many people in that small community that you'd be able to employ? Well, it's something we'd have to look at and you can never say never. However, we, our family has always felt strongly that we have a commitment to our employees, and that's the commitment you get from a family-run business in a small community.

So we will try everything possible and pivot however we can to make this work so that we can support our employees. So we have 200 people, and that manifests down to 200 mortgages and 200 families with kids and dance and soccer and university. And so we take that corporate responsibility pretty seriously. That was a big sigh before you answered that question though.

I mean, this is weighing on you. Yeah. You know, absolutely. Uh, I think about it, you know, we think about it all day long. We think about it all day long. We think about it all night long. Um, and, and it's, it's unfortunate.

One of those problems where we can't really affect change, right? We're not, we're not at the table. We don't have control over this. Um, even if we were at the table, we don't have control over this. Obviously, obviously this is being mandated by a, by a foreign government. And this is probably one of the risks in business that, uh, that I never thought was legitimate. If you, if we had had this discussion five years

ago or two years ago and you said, well, yeah, but what if in essence, you know, the U S would shut their border to Canadian goods and I'd say, well, that'd be devastating. But yeah, of course that that'll never happen. You heard Donald Trump say that the U S doesn't need Canada to make their cars. Is he right?

I, I would expect that, that there's some truth to that, um, long-term, uh, short-term we still deal with the supply and demand equation. So if you were going to move, you know, everything that we do in Canada and move it tomorrow into the US, there's a lack of skilled trades, there's a lack of people, there's a lack of know-how to be able to support that in the short term. If we would say that that would be a 15-year, 10-year business goal, then I would imagine that could all be developed.

Um, but, but I don't think he's totally right. Right? There, there's a, there's a reason we do trade and there's a reason we do business with each other. And there's- A reason those cars parts go back and forth and back and forth and back and forth across the border. Yeah, absolutely.

There's a reason we each bring value, we each have strengths, um, we each have access to domestic steel supply. You know, if we shut down the Canadian steel supply, the American mills don't have capacity to pick that up immediately. So, so it's a supply and demand equation and those lines cross and they're balanced. What is your plan B?

What plans are you making to offset the pain of these tariffs coming? If, if they do arrive on the 1st of February or anytime after that? Our options are somewhat limited. In the short term, there's not much we can do other than believe that negotiations will take place and a deal will be made.

Can you sell elsewhere? We can. However, it's definitely not as easy. So we export to Europe, we export into Asia a bit, we export it to Mexico. Our export to Mexico strategy wouldn't be particularly effective either because there are gonna be tariffed at that end

coming back into the US. Exporting into Europe, obviously we have, you know, there's transportation logistics and the currently the European economy and the European automotive market is in not very good condition. So there's not a lot of room to pivot there. We could pivot more into domestic supply of other goods, so sort of retract from the export market.

However, that's not necessarily in the best interest of Canada either as you know, export, a country exporting is how you accumulate currency and wealth. So exports are pretty, pretty important to a country. And to a company like yours. Yeah, absolutely. And the thing to keep in mind is that, is that mind is that it's important to everyone, right?

$1.3 trillion of cross border trade annually. This month alone, we'll be just creeping up on $100 billion of cross border trade. We're the number one customer for 34 US states focusing 1.4 million US jobs on Canadian exports. We sell them $350 billion worth of goods. Uh, they sell us just over $400 billion worth of goods. It's a some, as far as all of their trading

relationships between different global entities, the Canadian, the Canadian relationship is most likely the best relationship. We're their biggest customer. It's almost balanced. We provide them oil that they need. We provide them electricity that we need. And we provide them lobster, fish, grains, fertilizer to support their economies. Right? And if we look at this relationship, we're also

balanced in that the standard of livings are equal, the amount that we pay our employees is equal. So we're not a threat. the standard of livings are equal, the amount that we pay our employees is equal. So we're not a threat, we're a partner. We're not the problem, we may be part of the solution. We're going to talk about that lobster and fish right now. Etienne, it's really good to talk to you and I wish you the best of luck.

Thank you. All right. Thank you very much, Matt. Have a great day. And you, Etienne Borm is the president of Etbo Tool and Die Incorporated. He's in Elmer, Ontario. Osborne Burke is general manager of Victoria Co-op Fisheries in Cape Breton. The Co-op buys seafood including lobster, snow crab, halibut from more than 100 inshore commercial fishing vessels

in the area. He's also president of the Nova Scotia Seafood Alliance. He's in Neal's Harbour. Osborne, good morning to you. Good morning, Matt. We just heard about the Tool and Die side of this. How big of an impact would these tariffs mean on your industry? Well, Nova Scotia, generally seafood is about 65% of the seafood that's exported is into the USA. So, certainly has potential for impact. However, the proposed tariff hikes by, as I refer to them, the Mar-a-Lago bully would hurt a lot of lower income Americans to most true higher prices while at the same time helping his higher income people receiving their great tax breaks.

So it would have an impact on both sides, but similar to the auto industry, seafood industry is interconnected and moves back and forth across the borders number of times in a given year. Tell me more about that and for the fishers who rely on your co-op to get their product to the market, what would specifically, what would this mean if 25% comes into play? What would it mean? Well, obviously, longer term, and we're already working that way to some degree, is diversification and looking at other markets. Generally, we're shipping to Asia.

Live lobster in Nova Scotia, 65, 70% of that is going to China. So a significant portion of the market, processed products tend to go in different areas, including the U.S. So yes, it could have a potential impact to our members, but it trickled down to the shore price being lower because of it. We also have long-term relationships with our customers in the U.S., whether it be Maine, Massachusetts, and all points in between. And speaking to those individuals are very concerned or shaking their heads

they can understand what the u.s. administration is doing score average major impact on them as well because they're the ones that are going to pay the tariffs not canada what do you make of of his claim again this is what he said about the auto sector but he goes across the board he doesn't need you in the u.s. doesn't need you that they they can pull their own lobster out of the ocean. Well, we produce about 110 million tons of lobster

in Canada generally, primarily a lot of it out of Nova Scotia. They produce at the best, maybe 45 to 50 million tons. So for the bully of Mar-a-Lago to say that they don't need the seafood industry or don't need anything else is definitely incorrect in that statement. If you look at oil and gas, 4.3 million barrels a day shipping out of the West, that oil that goes to the US is refined into diesel. US oil, they don't have that option, as an example away from seafood. So a lot of the claims being made by the current US administration are basically false, incorrect, inaccurate and shows a clear misunderstanding of what the potential impacts will be across

the border trade. I'm going to let you go, but just very briefly, what do you want to hear from your government in the face of these threats? Well, our government, we've been having discussions provincially and federally, and there's a lot of the industry saying there needs to be some sort of, in the short term, a tariff relief fund that could be funded by countervailing duties placed on US products coming in to Canada. That would help out those people in your industry that might be clobbered by those tariffs.

Yes, and in the long term, the US will suffer because we're going to have more focused efforts on diversification here to reduce our dependency on one country. Osborne, good to talk to you about this. Thank you very much. Thank you. Osborne Burke is general manager of the Victoria Co-op Fisheries in Cape Breton, also president of the Nova Scotia Seafood Alliance. He was in Neal's harbor. In 2017, it felt like drugs were everywhere in the news. So I started a podcast called On Drugs.

We covered a lot of ground over two seasons, but there are still so many more stories to tell. I'm Jeff Turner and I'm back with season three of On Drugs. And this time it's gonna get personal. I don't know who sober Jeff is. I don't even know if I like that guy. On Drugs is available now wherever you get your podcasts. Jim Stanford is an economist, director of the Centre for Future Work. He's with me in studio

this morning. Jim, good to see you. Good morning, Matt. How bad is it going to be for Canadian businesses if these tariffs come into play? Oh, it will be a disaster, no doubt about it. A disaster. Yeah, we will have a recession, we could lose a million jobs. And then the longer run impacts of the change in investment climate, as the Mr. Borm, the auto parts manufacturer was saying,

a companies will just be looking and say, why would I put any investment into Canada? Given that uncertainty, I'll move my operations to the States. That might be the biggest risk. Are there specific, we've heard about a couple, are there specific industries that are most vulnerable here?

Frankly, Matt, we export just about everything to the United States. So, you know, we've heard about oil, we've heard about the auto industry, of course, but other minerals, other agricultural commodities, other industrial materials, and other manufactured goods, parts and assemblies and so on.

The interesting thing is about three quarters of what we sell to the US is not a finished product that shows up on a shelf in Costco or something like that, where Mr. Trump can say, well, our tariff is gonna make them buy an American finished product instead. Three quarters of what we sell to America are inputs to American businesses who use our stuff to manufacture stuff

that they wanna put on the shelf at Costco. So the incredible irony is they're absolutely shooting themselves in the foot in terms of punishing American businesses by making Americans pay more for the Canadian inputs that are so crucial to their business. And that's true across the board of the economy. I want to go back to this phrase.

We've talked about it a couple of times. He says, we don't need you. We don't need your stuff. And so take a look at the auto sector. You and I used to speak many years ago when you worked for the CAW, the Canadian auto workers. He says, Donald Trump, president of the United States says, we don't need their cars.

We can make our own cars. Is he right? Well, in the long run, as Mr. Borm was saying, they could reorient their entire industry to be kind of autarkic and make the stuff for themselves. Absolutely. That sounds like an existential threat to the auto sector. Absolutely. And it's not, you know, think about auto in particular. We're going back to 1965 with the auto pact long before free trade, when we integrated our industry so closely with the Americans. And that's when this whole supply chain arrangement with the parts going back and forth,

and they sell us cars and we sell them cars, it's been enormously beneficial for both countries. But it's a long, a long structural feature of our auto industry. And to suddenly say, no, we're not going to do that anymore. It would take the Americans at least 10 years to reorient their entire auto industry around that. They'd be, they'd have chaos in the meantime, but we'd have chaos as well. What do you think the message is to, just to the last point on the auto sector, what do you think the message when he says that is to, you know,

Ford and GM and what have you, is he trying to say you need to put your plants here in the United States? Enough with the expansion in countries like Canada? He said that explicitly when he spoke to the Davos group, after he made the threats, uh, to Canada, he said basically to companies around the world in any industry dealing with any country, not just Canada.

Uh, if you want to sell in America, come to America, that's more or less what he said. And that's where this threat is already having an impact. He obviously is a bully, the Mar-a-Lago bully, as, uh, as Mr. Burke said, but, uh but he's using the threat of tariffs just to extract concessions and it obviously is happening all over, any concession

on any issue. And in that regard, if his motive is indeed to create deep uncertainty among any industry anywhere in the world, if you want to sell in America, come to America, he's already having an impact. And that's where we're in a, in a very dangerous situation. You wrote in the Toronto Star this weekend that Canada is in big trouble either way, if the tariffs come or they don't come. What do you mean by that?

Optimistically, you know, we've all been trying to peer into Mr. Trump's brain and figure out what he's on about. Uh, optimistically, he's using the tariff threat as leverage to extract concessions on other issues. And, you know, again, we saw over the weekend what he did with Columbia. He obviously is willing to use that hammer on anything. Threatening tariffs if they didn't accept flights of people he wants to deport.

Actually, not just threatening, imposing them. He started the imposition of it because they wouldn't take these locked up migrants on an army plane or an Air Force plane. So even if that is his goal, we're still in trouble because if he gets away with this, he's going to do it again. And again, the longest, the biggest long-term

consequence is the impact on investment location decisions by companies who will say, I have no idea what Mr. Trump's doing next. Therefore I'm putting the investment in America. And that could be his end game. Because, because big companies don't like uncertainty.

Well, obviously not. If you're going to put billions of dollars, think about, again, come back to our auto industry. We're rebuilding the auto industry around an electric-based supply chain with battery plants and components and everything else. Which he also doesn't like. And if you're going to put billions into that and think, wow, who knows what Mr. Trump will do next? So this is where this is a disaster for the

world trading system. And because we are the biggest trading partner, the biggest customer of America, but the biggest seller to America, Canada is particularly vulnerable here, no doubt about it. What do you do about this? I mean, Etienne Bourne talked about how, you know, he has 200 employees in his company and

those are 200 mortgages, 200 families with kids in hockey and soccer and dance and college and university, and the spill off goes on and on. Yes. You've talked about an emergency national response to this beyond the idea of matching tariffs. Right. What is that? Because we've spent a lot of air time in the last

few days talking about the trade policy response. You know, should we go dollar for dollar? Should we target countervailing tariffs? Should we put taxes on some of our critical exports so we get the money instead of the Americans getting the money? And those are all important decisions and we obviously have to be ready with a strong response.

But the impacts through the economy are going to require much more than just a trade policy response. We are going to need emergency assistance to export industries as Mr. Berkley, the seafood guest said, to help them retool and reorient their sales to domestic customers or to other export markets. We're going to need massive support for workers. Uh, I would estimate a million jobs are at risk here and it's not quite as bad as the pandemic

was, but it is in the same ballpark. So we're going to need something like a very significant expansion in access to our employment insurance system to help those people with mortgages and kids and dance and so on. And then ultimately, Matt, we're going to, we're going to have to have a, a retooling of our entire national development strategy for the last

generation. We've said what makes Canada strong? The fact that you can locate here and export to the United States. And no matter what happens now, that isn't valid anymore. So we're going to have to have a different vision of how we build industries, um, to sell to the world, not just America, but also to produce stuff that we use here in Canada.

And this is where I think we're going to have to reorient our whole vision for economic development towards the things that we need right here, whether that's infrastructure or affordable housing or renewable energy or whatever else. Uh, and that will be a fundamental change in how the Canadian economy works. Jim, good to have you here. Thank you very much. Thank you, Matt.

Jim Stanford is an economist, director of the Center for Future Work. If you are one of those people who is involved in industry across this country and you're hearing about these terror threats, what are you making of the threats and what should Canada's response be? You can email

us the current at cbc.ca. For more CBC podcasts, go to cbc.ca slash podcasts.