The Decibel - The companies betting on Canada despite U.S. tariffs

Episode Date: April 22, 2025

Recently, U.S. President Donald Trump’s on-again, off-again tariffs have created an uncertain environment for Canadian businesses, and many are considering shifting investments south of the border. But, for some, tariffs are having the opposite effect – providing opportunity to grow in Canada.Pippa Norman is The Globe’s innovation reporter. She’ll explain how these businesses are expanding at home, and how risky the bet on Canada might be.Questions? Comments? Ideas? Email us at [e-mail] 

So I typically cover innovation in our report on business section. That's Globe reporter Pippa Norman. But the tariffs coverage at the Globe has really been an all hands on deck approach, so a lot of us have been branching out from our beats to kind of help the cause. Over the last few months, the U.S. tariffs have caused economic instability. That's had a negative impact on many Canadian companies. It has been a lot of stories of, you know, fear, companies who are struggling.

However, for some companies, tariffs have had the opposite effect. Throughout that reporting, I started coming across some almost like little nuggets of optimism, companies that were actually doing okay, or even doing pretty great, and the tariffs were actually the reason, or part of the reason for that.

These were small examples of President Trump's tariffs backfiring. Instead of moving their business to the US, some Canadian companies have been doubling down on growing in Canada. Pippa looked into this, along with Globe reporter Irene Gallia. Today, Pippa's on the show to tell us

about how these businesses are expanding domestically and how risky the bet on Canada might be. I'm Maynika Ramen-Wilms, and this is The Decibel from The Globe and Mail. Pippa, thanks so much for joining us. Thanks for having me, Manika. So Pippa, before we get into the specific Canadian businesses that you looked at, can we just talk about the general impact of these tariffs on businesses? Like, what has been the effect of all the changing tariffs from the US on these companies?

Yeah, so whenever somebody has asked me about work lately, I have made the joke that I've never used the word uncertainty more than I have in the past, like two to three months. So, I mean, uncertainty for businesses, for investment, it's just not a nice word. It's kind of the worst word that you want to hear, because it makes making decisions about the future, making investments, making plans for your company incredibly difficult, especially if they include the US right now, which is often hard to avoid for a lot of Canadian

businesses. Yeah, because it's one thing on an individual level. But when we're talking about businesses, I mean, these are massive investments. Like, risk is high. So to be in such an uncertain economic environment, it's really hard to make those decisions, I'd imagine. Yeah, especially for such a prolonged amount of time now.

Like, we really don't know what's coming. And we've seen multiple times that something that we think might be coming doesn't come, or plans change all the time. And it's really not helping anybody who's trying to you know whether you're new whether you're established as a business as an investor it's just not a great time. Yeah so this uncertainty that you talk about is usually kind of a negative impact for companies but let's actually look at some of these Canadian

businesses that are changing their business strategies and maybe for the positive here. So let's start with a company called Oddburger. What did you hear from them? Yeah, so I spoke to James McInnis. He's the CEO of Oddburger. He's an interesting position. He had, for about two years, been planning his company's expansion into the US.

He's based in London, Ontario. And so he'd already sold 60 franchise units in the US. And they're in a capital raise right now that they're planning to use to fund their US expansion. And all of a sudden he decided to put his plans in the US on pause. So he's no longer going to expand to the US right now and instead he's actually going to fast-track a manufacturing facility that he had planned for Southern Ontario and tap into this desire that he's seeing from Canadian grocers and

food distributors for Canadian-made products. Interesting. Okay, so he's redirected the money that was supposed to probably go to the U.S. expansion into Canadian expansion. I know you also looked at a compostable packaging company. Tell me about this one. Yeah, so it's called EcoGuardian. I spoke with Anil Abrol.

He's the CEO of the compostable packaging company. So he was kind of in a nice comfy position in that he already had plans to open his first domestic manufacturing plant in Aurora, Ontario. Before this, he was kind of an importer and distributor, but now he wants to grow his capacity to actually manufacture in Canada. So he had that kind of in the works,

but what he's doing now is he's fast tracking its opening date. It's gonna be open by the end of 2025, and he's planning to open it at full capacity right away instead of kind of half capacity and then building up, which was what his initial plan was. And this is because, again, he's seeing inquiries from major companies in the food and beverage industry who

rely upon takeout packaging, takeout containers, and they're looking for Canadian alternatives. And lastly, I want to ask you about this can company. What's this company and what are they doing? Yeah, so they are a manufacturer of steel food cans, as well as industrial and aerosol cans. I spoke with Eric Vachon. He's the president of Ideal Can.

They're based in Quebec. So his business has been around since 2008. He used to be more, again again of an importer and distributor, but during the COVID-19 pandemic, actually he began manufacturing in Canada. He saw a bit of a heightened need for domestic production during COVID and he's seeing kind of another boost right now.

So again, increased demand from companies who would normally import their cans from the US, they're looking for Canadian alternatives. Currently he's more than doubling his production from about 200 million to 500 million cans per year. He's doing this by increasing the number of shifts from one to two per day, as well as adding a weekend shift. And he's also got a new facility that he's been working on. It was built in 2023. And he currently has three production lines, but he has two more ordered. And he's been working on. It was built in 2023. And he currently has three production lines, but he has two more ordered.

And he's working to build up to capacity for seven production lines. Oh, OK. We're going to talk more about these three companies for sure to understand how they're kind of seizing this moment to their benefit. But I just want to stick on Ideal Can for a second here, because I think this is a really clear example of how

company is directly affected by US tariffs. Because of course, this is a really clear example of how companies directly affected by U.S. tariffs, because of course this is steel product that they've got, right? Trump has slapped 25% tariffs on Canadian steel and aluminum. So just, I guess, help me understand how this is working here, Pippa. How have these steel tariffs actually helped this company in Canada? Pippa Huffman Yeah, so yeah, like you said, steel and aluminum products are facing a 25% tariff on both sides of the US-Canada border right now. So a lot like the auto sector, you know, when I was looking at aluminum cans, it's a very

similar story in that a lot of big Canadian producers of, you know, for example, let's say tin tomatoes, you know, we make a lot of steel and aluminum in Canada, but often we will ship that to the US, and then they will be the ones who make it into a can and then ship it back to us. So again, we have this almost zigzag over the border where these products are crossing the border multiple times, especially geographically,

it often makes sense for big Canadian producers to work with American can producers on the American side just because they might be geographically closer because we have this such higher populations near the border and often the American producers can create higher volumes than maybe a producer in Canada might be able to. And so it I mean ideal can it already exists in Quebec right in Canada it's doing this it's making these cans. And what it's now trying to do is attract the attention

of those bigger producers. Maybe they're making the can, but these tin tomato makers who would normally look to the US for those cans, it's trying to say, hey, we're here, we're Canadian. Maybe instead of going to the US, we can work with you and we can meet your needs because we exist, we're in Canada, and you won't get hit with a tariff if you work with us.

OK. And then what about those other two companies that we talked about, the products that they make, the vegan burgers and the compostable packages? What tariffs would they be hit with at the US border? Yeah, so the tariffs that Odberger and EcoGuardian would be looking out for are kind of those on again, off again, across the board tariffs.

So right now imports to the US from Canada and Mexico are subject to a blanket 25% tariff unless they're compliant with our Continental Free Trade Pack, Uzmaca, or the United States, Mexico, Canada agreement. The new NAFTA it's also called because it's just easier. Exactly. So that exemption, if they're compliant with Uzmaca, it was extended indefinitely on April 2nd. So that's kind of the tariffs that we're looking at for them.

It's also important to note that last year, you know, 38% of Canada's exports to the US were declared Uzmaca compliant. But economists have said that as much as 80% to 90% of those products could be compliant if the proper paperwork was just being consistently filled out by companies. OK. So it sounds like these products maybe

could fall under the free trade agreement, and then they wouldn't be subject to these tariffs. But they would have to go through a whole bunch of paperwork and figure that out. That would be a lot of extra work on their part to get to that point then. Yeah, exactly. And there's still that underlying uncertainty and fear

that we're just like, we never know when things could change. It's on a pause. It hasn't been completely scrapped. Yeah, you go through all that work to fill out all that paperwork and everything, and then you don't need to. It's, yeah, again, it comes back to this uncertainty, as you say. Exactly.

Okay, so let's talk about these three companies and what they're doing here to kind of bet on Canada, Pippa. So in this moment, what is allowing them to bet on Canada? Yeah, I think there's a few things here. So I was joking that these products in this story, they're all kind of unsexy. They're a bit of a hodgepodge of... Yeah, like the steel cans and then the compostable packaging. Yeah, exactly.

But I think what kind of ties them all together is these companies, I guess, specifically, are already based in Canada, and they already have an emphasis on domestic manufacturing. They're also interesting because they are products that we deem necessary in society, maybe not as much the vegan burger,

but the packaging for sure. They're things that we're gonna need no matter what. So they don't need to be made in Canada, but they can be. And additionally, these businesses, most of them either have no reliance or low reliance on the US right now, or there's a couple of them either have no reliance or low reliance on the US right now, or there's a couple examples where they have a reliance on the US or they're in the US, but it can be easily sectioned off.

And then altogether, they're also really just proud of the fact that they're in Canada and they're all here. They're saying, we're here, we're strong, and we're ready for growth. Realistically though, I guess, I wonder how common is it for companies to be in this sweet spot, in this position? Because there must be a lot of companies on the other side of things, right? That Canadian companies that are actually looking at the opposite situation of trying to invest in the US instead? Yeah, so it's important to note that these companies aren't necessarily the overwhelming trend

that we're seeing amidst all of this tariff turmoil. There's a survey by an accounting firm, KPMG, that was done in January, kind of at the onset of Trump's presidency, it found that nearly half of Canadian businesses who were asked said they planned to shift production or investments to the U.S. And we've also been hearing a lot of rumors about pretty big corporations, you know, perhaps carmakers or electronics makers who may not be Canadian.

They often have offices in Canada, but they often operate in both Canada and the US and they have speculated about moving some of their operations to the US owing to the tariffs. But we're also seeing this kind of weird contradiction where, you know, those bigger companies that may be based elsewhere and not necessarily like headquartered in Canada are, that's mostly where we're seeing those rumors come from. But when we have a Canadian company that's headquartered in Canada and might be rumored to be looking at the US, then we're seeing kind of a different reaction. Do we have an example of a company that's been in this position?

Yeah. So in February, we saw this happen with Quebec based transportation and logistics company TFI International. They had announced that they would be moving their headquarters to the US, and they actually then later came out and retracted those plans because of some feedback and some backlash that it got from some of its major Canadian shareholders. And when the reporters on that story spoke to experts, the experts did cite kind of this heightened sense of nationalism that we're seeing in Canada right now as potential for the reason that they got that backlash.

Okay, so Pippa, we've talked about some companies that aren't invested in the U.S., but what about the companies that are, or at least that are, you know, spread out between the Canadian and the U.S. markets? Yeah, so they're also an interesting case. So I spoke with this company called Fear and Technology Group. They are in the aerospace business. They make aerospace parts.

And they have operations in Canada, China, and the US. They are headquartered in Canada. But what they're doing is, and I think this is something that it's a mindset that's shared perhaps by a few different companies in their position, is that they are thinking of their US operations as almost independent of the rest of the world. You know, Brad Bourne, the president of FTG, he brought up this kind of analogy. He said there's a wall being put up and you're either inside the wall or you're outside the

wall and I need to make sure that my operations inside the wall can function independently of my operations outside of the wall. The wall being the tariffs that are being put in place by the US. So he is thinking of his US operations as independent of the rest of his operations, and in particular, anything that is being made in the US by his company that needs to be shipped outside of the US, he's considering moving that. So for example, he told me about a $5 million worth of commercial aerospace product production

that would normally be done in the US and shipped elsewhere that he's now relocating to Toronto, because that product will get shipped to Asia and he doesn't want to have to pay the tariff that might be in place by the US on that product will get shipped to Asia and he doesn't want to have to pay the tariff that might be in place by the US on that product if it was being shipped outside of the US. Okay, so Pippa, we've been looking at some companies, Odberger, Idealcan, EcoGuardian, they're all trying to make it work in Canada.

But let's look at the big picture. How possible is it to actually have robust production manufacturing in Canada here? Yeah, so what we know about manufacturing in Canada is that it's not necessarily growing in step with our population, for example. So according to a December report by the National Bank of Canada,

Canada's per capita manufacturing output has actually contracted by 30% since 2005 relative to our country's population. And when you compare us to the US, the American manufacturing sector has grown by 10% in real terms since 2018, but Canada's sector has actually shrunk by 5% in that same time. So you see that contrast between us and the US. And then taking it one step further, when you compare us to the rest of the G7 countries, so that's the US, Canada, the UK, France, Germany, Italy, and Japan, we have the lowest proportion of our

GDP made up by manufacturing at just 9% in 2024. And those stats are all according to the National Bank, StatsCan, and also the Federal Reserve of St. Louis. I guess I'm wondering again kind of a big picture question here, Pippa, because we've talked about like the, you know, the sentiment to buy Canadian and this push to have things more locally done. How much of an impact would that actually have though? Like, how would Canadians have to change their behavior in order to see that impact? Yeah, so we had a really interesting stat from Pierre Clairot. He's the vice president of research and chief economist at the Business Development

Bank of Canada. So in March, one of our reporters spoke to him and he told us that if every Canadian household redirected $25 a week from foreign products to Canadian ones, it could boost Canada's GDP by 0.7% and create 60,000 jobs. So that's just on the consumer side of things. It's $25 and there's already that potential for impact there. Yeah, so I mean, that actually does sound kind of tangible.

It's not like a massive change to the GDP, but it is something and $25 per household is actually not too much, yeah. Yeah, and that's on the consumer side of tangible. It's not like a massive change to the GDP, but it is something. And $25 per household is actually not too much. Yeah. Yeah. And that's on the consumer side of things. So if you were to relay something like that onto the manufacturing side of things, you know, who knows what the potential is there. Yeah. So do we have some understanding of why that is? Like why some businesses may say it's hard to grow here? Why is that? Yeah. So what we heard kind of overwhelmingly from the experts who we spoke to for this story was that red tape in Canada is a huge barrier to spurring business investment.

So again, according to the National Bank, the number of regulatory requirements in Canada increased by more than a third between 2006 and 2021, which resulted in actually a 9% fall in business investment. And we've also seen a bit of an acknowledgment of this, interestingly enough, in some of the platforms of the people who are running in the federal election right now. For example, both liberal leader Mark Carney

and conservative leader Pierre Poliev have made promises about fast-tracking things like project reviews and regulatory approvals, acknowledging that that red tape is something that factors into Canada's ability to manufacture. Interesting. Of course, there's the other side of it too, that there's obviously reasons for this kind of

red tape or regulations, right? Go through environmental regulations, indigenous rights, labor rights. So there's that side of it, but it sounds like this is an issue though for a lot of businesses when they're making these decisions. Yeah, especially when we have this contrast between Canada and the US. And you know, that's what we're seeing in terms of companies weighing where they should

be investing their time and money. Did you hear from any experts about what could potentially be done to help here, like to convince more companies to invest in Canada? Yeah, we definitely heard a few recommendations. Obviously cutting some of that regulatory red tape would help a lot. I hear that very often. Also potentially delaying some decarbonization targets in exchange for manufacturing sector growth and possibly even investing more in defense were some of the suggestions that

we heard. I'm just curious, increase in investment in defense, how would that help? I think it correlates to you know the manufacturing that would be spurred by that investment. You know if we invested more in defense we would have to up our manufacturing our jobs in that sector. Okay. We are hearing a lot about new trade deals now that the situation with the US is more difficult. Could that actually help create demand for Canadian companies? Yeah I think things like new trade deals between Canada and other countries could help.

I mean, I've seen that kind of on a smaller scale with a lot of the companies and manufacturers I've spoken to have told me how they now have partners in Asia or Europe who they are, either were connected to before through a American distributor or an American company and now are working directly with or their new relationships that they have built after not being able to go to their US distributor or producer. And interestingly enough, most people who have been doing that have told me that they

don't foresee those relationships and partnerships going away if tariffs were no longer a factor or if this trade war was no longer happening because it might just be a better way of doing things for them. Just lastly here Pippa, if we go back to the companies that we've been talking about throughout this this entire conversation, do we know what could the future of their businesses look like? So I think a lot of them are actually pretty optimistic right now. So for example actually last week I got a lot of them are actually pretty optimistic right now. So for example, actually last week I got a call from Ideal Can president Eric Vachon, who we were just kind of following up. And he mentioned that he saw this news article about a Canadian company Sunbright Foods.

They make a lot of things like canned tomatoes, beans. They sell them under brands you might recognize such as Unico and Primo. The news article was about how they were asking the Canadian federal government to reduce its counter tariffs on steel and aluminum because its consumer facing prices were going to have to go up because of those tariffs. But what his argument was and what he was kind of hoping that he might see is that instead of the government reducing its counter tariffs, it could potentially take some of that money that it's getting from those tariffs and invest it in Canadian manufacturers like himself, who could potentially work with Sunbright Foods and supply those cans. He just needs

to be able to grow and have that support in Canada. And then for Aadberger, in his case, he told me that it's not as if they're not going to the US everS. ever. It's just that right now, it makes more sense for him to grow in Canada and focus on Canada. And then when the time is right, and he's grown even more in Canada, maybe he'll go to the U.S., maybe he'll look at that expansion, if things maybe settle down by then. Pipa, this was so great. Thank you for your reporting and for being here.

Yeah, thanks for having me. That's it for today. I'm Maynika Ramon-Wilms. This episode was produced by our intern, Olivia Grandy. Our associate producer is Aja Souter. Our producers are Madeleine White, Michal Stein, and Ali Graham. David Crosby edits the show. Adrian Chung is our senior producer, and Matt Frainer is our managing editor. Thanks so much for listening, and I'll talk to you tomorrow.