Canadian firms reconsider U.S. relationships

Summary

Marketplace Morning Report
Episode: Canadian Firms Reconsider U.S. Relationships
Release Date: March 28, 2025

---

Introduction: A Shift in Canada-U.S. Relations

In this episode of the Marketplace Morning Report, host Luke Wilson delves into the evolving dynamics between Canada and the United States amidst rising trade tensions. The discussion centers around Canadian firms reassessing their reliance on the U.S. market following the imposition of tariffs by the Trump administration on cars and car parts.

Canada's Strategic Repositioning

Canadian Prime Minister Mark Carney has declared that the traditional relationship with the United States, characterized by deep economic integration and robust security collaborations, is undergoing a significant transformation. Speaking shortly after President Trump's introduction of tariffs, Carney emphasized Canada's intent to diminish its dependency on the U.S., signaling a strategic pivot toward greater economic self-sufficiency.

David Brancaccio highlights Carney's stance:

"The old relationship we had with the United States, based on deepening integration of our economies and tight security and military cooperations, is over. What exactly the United States does next is unclear. But what is clear is that we as Canadians have agency. We are masters in our own home. We can control our destiny."
(01:27)

Reshoring: Opportunities and Challenges for Canadian Businesses

The term "reshoring" has gained traction among Canadian businesses as they navigate the uncertainties posed by U.S. tariffs. Joanna Goodman, owner of Toronto-based bedding retailer Oli Fine Linens, exemplifies the dilemma faced by many firms. With 20% of her inventory comprising American brands, Goodman contemplates whether to maintain these imports or shift operations back to Canada.

Joanna Goodman shares her predicament:

"I'm not just going to box them up and put them aside. So, yeah, the question is, will I reorder?"
(02:38)

Despite the rhetoric around reshoring, empirical data suggests limited immediate action. Only slightly over 4% of Canadian businesses surveyed in 2023 intend to relocate their supply chain activities to Canada. Economist Randall Bartlett provides context, indicating that future reshoring efforts are likely to concentrate on key industries where Canada holds a comparative advantage.

Randall Bartlett explains:

"Maybe in processing steel and aluminum, you may see more upstream manufacturing to support sectors like mining that need highly specialized equipment that uses certain types of steel that's generally imported from the United States. ... A lot of that I think will come back to Canada's comparative advantages, which are very much tied historically to the natural resource sector in Canada."
(03:12)

Sector-Specific Insights: From Soybeans to Automotive

Goodman points to Canada's substantial soybean production as an area ripe for increased domestic processing. Randall Bartlett concurs, noting the untapped potential in value-added manufacturing:

"But what we don't do enough of is processing those value added ingredients, such as in our case, soybeans, into more valuable ingredients here at home."
(03:45)

An example of this trend is Graham Markham's New Protein International, which is establishing Canada's first soybean protein manufacturing plant near the U.S. border. This move underscores the potential for job creation and innovation through domestic processing.

However, reshoring is not without its hurdles. The highly integrated auto industry presents significant challenges, with Bartlett remarking on the difficulty of manufacturing cars with entirely Canadian content:

"It's going to be very difficult for Canada to start building cars which are 100% Canadian content. Some countries are better at producing some things than other countries are. And it makes more sense to focus on those things that you're good at instead of spreading the productive capacity around to areas where you're not very good at producing things."
(04:45)

Navigating Uncertainty Amidst Changing Policies

Joanna Goodman expresses a cautious approach, waiting for clarity before making pivotal business decisions:

"The US government's rapidly changing policies on tariffs... they're gone. Let's see how it all unfolds. And then we'll start making decisions."
(05:16)

This sentiment reflects a broader trend among Canadian businesses, which are currently in a holding pattern, assessing the long-term implications of U.S. trade policies before committing to reshoring or other strategic shifts.

Global Context and Additional Highlights

Beyond the Canada-U.S. narrative, the episode touches on other significant global events. Chinese President Xi Jinping's efforts to attract foreign investment and promote free trade were discussed, alongside the devastating 7.7 magnitude earthquake in Myanmar, which had repercussions extending into China and Thailand. Additionally, the episode highlights Ubisoft's substantial investment by Tencent and an intriguing study from British surgeons linking the decline in swallowed coins among children to the rise of card payments.

---

This comprehensive episode provides valuable insights into the strategic recalibrations Canadian firms are undertaking in response to shifting U.S. trade policies. Through expert analysis and real-world examples, listeners gain a nuanced understanding of the opportunities and challenges inherent in reshoring and economic diversification.

Transcript

[Intuit Sponsor]

This is a message from sponsor Intuit. TurboTax Taxes was getting frustrated by your forms. Now Taxes is uploading your forms with a snap. And a TurboTax expert will do your taxes for you. One who's backed by the latest tech which cross checks millions of data points for absolute accuracy. All of which makes it easy for you to get the most money back, guaranteed. Get an Expert now on TurboTax.com, only available with TurboTax Live full service. See guarantee [e-mail] guarantees.

[David Brancaccio]

Hi, it's David Brancaccio. Marketplace's March fundraiser is ending on Friday at midnight and we need your help. We can't afford to fall short of this goal. Every dollar you give comes back to you in the form of trustworthy, grounded journalism that helps you understand the economy. We're in this together. Whether it's your first time donating or you're a longtime Marketplace investor, please help us [e-mail] donate and thank you.

[Luke Wilson]

Canada's prime minister says his country's old relationship with the US Is over. Live from the BBC World Service, this is the Marketplace Morning Report. I'm Luke Wilson in for Liana Byrne. Good morning. The Canadian Prime Minister, Mark Carney, says the United States is no longer a reliable partner. Speaking after President Trump announced tariffs on all imports of cars and car parts, Mr. Carney said Canada will need to dramatically reduce its reliance on the US.

[David Brancaccio]

The old relationship we had with the United States, based on deepening integration of our economies and tight security and military cooperations, is over. What exactly the United States does next is unclear. But what is clear is that we as Canadians have agency. We are masters in our own home. We can control our destiny.

[Luke Wilson]

A phrase that's increasingly common on Canadian shelves in response to President Trump's tariffs is made in Canada. It's left some firms with business in the US Facing a choice choice ride out the uncertainty or bring their operations back home. Known as reshoring. From Toronto, here's the BBC's Sam Grouet.

[Joanna Goodman]

In the Toronto store of bedding retailer Oli Fine Linens, owner Joanna Goodman is weighing up what's best for the business. As U.S. canada trade tensions mount.

[Intuit Sponsor]

The products that we do bring in from the U.S. i would say, like, let's say it's about 20% of our entire offering. You see how much inventory we have on the shelves. So even 20% of our offering, it's quite a lot.

[Joanna Goodman]

Her giant warehouse is home to elegantly made up beds and mannequins in silk pajamas. Nearly all of it is made in Canada.

[Intuit Sponsor]

But I have a lot of inventory here of American brands that I've had relationships with for 20 years. I'm not just going to box them up and put them aside. So, yeah, the question is, will I reorder?

[Joanna Goodman]

Despite talk of reshoring so far, it's hard to tell if there's been any action. Just over 4% of Canadian businesses surveyed in 2023 said they intend to relocate SUPP supply chain activities to Canada. A Statistics Canada survey suggested. Economist Randall Bartlett thinks whatever we do see will be focused on key industries.

[Randall Bartlett]

Maybe in processing steel and aluminum, you may see more upstream manufacturing to support sectors like mining that need highly specialized equipment that uses certain types of steel that's generally imported from the United States. Maybe we'll have more of that production here in Canada. A lot of that I think will come back to Canada's comparative advantages, which are very much tied historically to the natural resource sector in Canada.

[Joanna Goodman]

In southwest Ontario, one of those is soybeans, of which Canada is among the largest producers in the world.

[Randall Bartlett]

But what we don't do enough of is processing those value added ingredients, such as in our case, soybeans, into more valuable ingredients here at home.

[Joanna Goodman]

In Canada, Graham Markham's firm, New Protein International, is constructing Canada's first soybean protein manufacturing plant just miles from the U.S. border.

[Randall Bartlett]

We had envisaged that being a larger part of our future customer mix than what it may end up being. The opportunity to stop exporting, the job creation and the value creation and the innovation and the export base that can all be gained by processing things further domestically. There is a case for that.

[Joanna Goodman]

Despite the potential benefits of reshoring from lower carbon emissions to a boost to small businesses, building up production and supply chains has major hurdles. The highly integrated auto industry, for example, would take years to establish, says Randall Bartlett.

[Randall Bartlett]

It's going to be very difficult for Canada to start building cars which are 100% Canadian content. Some countries are better at producing some things than other countries are. And it makes more sense to focus on those things that you're good at instead of spreading the productive capacity capacity around to areas where you're not very good at producing things.

[Intuit Sponsor]

So this is the warehouse back at.

[Joanna Goodman]

Only Fine Linens in Toronto hanging over all of this, the US government's rapidly changing policies on tariffs.

[Intuit Sponsor]

I mean these tariffs could be gone to every day you look at the news and it's like tomorrow, today they're gone. Let's see how it all unfolds. And then you know we'll start making decisions.

[Joanna Goodman]

Like many Canadian businesses, Joanna Goodman is waiting for the dust to settle before deciding where to buy, where to sell and what made in Canada really means for the future. From Toronto, I'm the BBC Sam Gruay for Marketplace.

[Luke Wilson]

The Chinese leader Xi Jinping has met global business leaders in Beijing, promoting his country as a destination for foreign investment and pledging to boost free trade. President Xi also addressed the growing trade war with the United States. We have always believed that the stable, healthy and sustainable development of China U. S Relations is in the fundamental interests of the two peoples. The essence of China U. S Economic and trade relations is mutually beneficial and win win and economic and trade frictions should be properly resolved through equal dialogue and consultation. Chinese President Xi Jinping staying in the region and China's neighbor Myanmar has been struck by a powerful 7.7 magnitude earthquake, with strong tremors extending into China and Thailand. A state of emergency has been declared in the Thai capital Bangk, and all afternoon trading has been suspended on the main stock exchange. Lindell Marquell is in the city.

[Lindell Marquell]

I felt the room swaying. I was working from home. I'm only on the first floor of my building, so I came downstairs. Everyone was coming out of the building. The pool on our ground floor was spilling water out of the sides. But once we got out the front of the building, we could see all around us, all the other kind of buildings swaying still. There's also one building which is over 38 floors high. There's a sort of very thin bridge that connects two buildings and we've now seen that that's been destroyed.

[Luke Wilson]

Lindell Marquell in Bangkok. Let's do the numbers. And French video game maker Ubisoft is up more than 7.5% after a $1.25 billion investment by the Chinese technology giant Tencent. The new subsidiary will run some of Ubisoft's biggest franchises, including Assassin's Creed. Surgeons in Britain say the switch from cash to card payments may have had an unintended benefit. A fall in of children needing operations to remove swallowed coins. More details from the BBC's Michelle Roberts.

[Lindell Marquell]

The analysis, published in the Annals of the Royal College of Surgeons of England Journal, found far fewer children were now needing hospital procedures to remove objects from their throats, noses and airways. The study looked for objects removed from babies and children aged up to 14 in NHS data from 2000 to 2022 and saw a decline that began in around 2012, which, according UK Payments Market Survey, is when cards began overtaking cash payments in the past coins have accounted for more than 75% of swallowed foreign bodies in children under the age of six.

[Luke Wilson]

Michelle Roberts there. I'm Luke Wilson with the Marketplace Morning Report from the BBC World Service.

[Lindell Marquell]

If there's one thing we know about social media, it's that misinformation is everywhere, especially when it comes to personal financing. Financially Inclined from Marketplace is a podcast you can trust to help you get serious about your money so you can build a life you've always dreamed of. I'm the host, Janelie Espinal, and each week I ask experts important money questions, like how to negotiate job offers, how to choose a college that you can afford, and how to talk about money with friends and family. Listen to Financially Inclined Wherever you get your podcast.