"Taken together, size does not change the direction of travel, but it does influence the pace."

"Larger, more globally integrated firms are responding earlier and at greater scale, while smaller firms remain earlier in the cycle."

"This highlights both the potential scale of the shift and the likelihood that similar patterns may emerge across other sectors."

KPMG Canada 

 

"While most manufacturers are staying, many are reassessing where future investment, growth and production will occur. The decisions made today will shape Canada's manufacturing sector for years to come."

"Businesses can only operate in endurance mode for so long."

"At some point, uncertainty begins to shape long-term decisions about where investment, production and growth will occur."

"[While Canadian manufacturing still has a part to play in North America], the question is how strong that position will be." 

Anamika Gadia, KPMG Canada partner/national leader, industrial markets

Trade uncertainty is prompting more Canadian manufacturers to shift production to the U.S. and delay investments in Canada, a new survey finds. Photo by Peter Power

 

Ongoing and worsening trade uncertainty with Canada's largest trading partner across the long 'undefended' border with the United States is creating an atmosphere of economic destabilization in Canada the likes of which have never in anyone's living memory ever before been seen. The situation has led a growing number of Canadian manufacturers to move their enterprises or to plan to move a portion of their production to the U.S. A majority, responding to a recent survey, plan to restrain themselves in their Canadian investments.

 

This is a scenario seen before in a much more prolonged manner when China in the process of becoming the manufacturing behemoth it now is, began flooding the international market with consumer goods to be sold at prices that appealed hugely to the purchasing public throughout Europe and North America. Cheaper goods, widely available, because of cheap Chinese labour and government support (subsidies) eventually convinced manufacturers throughout the Western world that since they were unable to match the pricing and wide range of Chinese-produced goods, it was best to fold their manufacturing and submit to the inevitable.

 

Under this volatile administration with a president who believes himself an expert on deal-making, and who has been accusing all countries globally that have or were doing business with the United States of taking 'advantage' of the most powerful economic force on the planet, and he wasn't going to take it any longer, so here's tariffs for you, and you, and you, the world is reeling. Try that on for size. And as much as global manufacturing had been altered by the world's premier production manufacturing in China, the world economy was far more immediately and deeply beleaguered and beggared by the new Trump-led upending of world trade alliances.

 

According to the 2026 KPMG Canada manufacturing poll, four in ten (42 percent) of Canadian companies have latterly adjusted their horizons by shifting or planning to shift production to the United States, 29 percent of whom had already taken the plunge in banking on the move to further their bottom line. Another 13 percent plan to do likewise, while 77 percent of that group anticipate committing within two years  under the operating environment as it is at present. 

 

Mandel Ngan/AFP via Getty Images

 

"I love Canada [but I'm] not going to bend."

"The United States can't subsidize a country for $200 billion a year, We don't need their cars. We don't need their energy. We don't need their lumber. We don't need anything that they give."

"We do it because we want to be helpful. But it comes a point when you just can't do that."

"[Canada, a longtime ally, would be much better off without tariffs -- as part of the U.S.]"

"[Not to use military force against Canada, only] economic force."

"That would really be something [taking control of Canada]."

"You get rid of that artificially drawn line, and you take a look at what that looks like. And it would also be much better for national security. They’re great, but we’re spending hundreds of billions here to protect it [subsidies include substantial military support while the United States loses out through trade deficits]."

U.S. President Donald Trump  

The majority (49 percent) represent businesses with over $300 million in gross revenue, mostly having made the move in full or in part. A third (34 percent) of companies generating less than $300 million have or are planning to move, leaving a mere fifth (20 percent) which have as yet chosen to take no action. "Higher margins when producing and selling within the U.S. than when exporting from Canada", reported a third (32 percent) of respondents, attesting to "stronger margins on international sales from the U.S."

 

Lower operating costs in some states, more favourable tax environment and easier supply chains when customers are already in the U.S. are cited by some firms choosing to migrate south -- outside of the tariffs issue. When queried what circumstances could alleviate the situation to the point where owners would prefer to remain in Canada, corporate executives and decision-makers representing 275 companies polled responded that certainty around free trade, continued tariff relief, lower corporate taxes, cheaper energy, better access to skilled workers and lower housing costs for workers. 

 

 The survey revealed capital investment projects have been "paused, reduced or cancelled" by 57 percent of firms, with 42 percent operating similarly with respect to their research and development.          Roughly half of those polled stated they were focused on weathering the economic tempests driven largely by U.S. President Donald Trump and his trade policies. The poll revealed as well that 61 percent felt they would be unable to remain in business lacking access to the U.S. market. Almost all (96 percent) stated their products qualified for tariff-free treatment under the Canada-U.S.-Mexico Agreement. An Agreement that is now lacking stability given the U.S. refusal to renegotiate.

 

U.S. President Donald Trump (left) and Prime Minister Mark Carney (right) attend a work lunch as part of the G7 summit, in Evian, France, June 16, 2026. Photo by Evelyn Hockstein / POOL / AFP /Getty Images

 

"While tariffs are an obvious factor, Canadian manufacturers are making long-term decisions about where to locate based on a broader assessment of where they are most likely to have a competitive advantage."

"Otherwise, Canadian exporters may have to depend on U.S. customers to act as importer of record, potentially straining key commercial relationships."

Joy Nott, KPMG Canada partner, trade and customs 

Over to You, Donald J. Trump!

"[New data on fentanyl seizures] largely reinforce previous understanding that most IMF [illegally manufactured fentanyl] enters the U.S. from the south. These data call into question tariffs and other policies and policy justifications that treat the threat from the northern border as comparably severe."

"Counties along the Mexican border account for only 2.35 percent of the U.S. population; but in 2023-24, they hosted about 40 percent of the nation-wide quantity of fentanyl appearing in large seizures, for both powder and pills."

"By contrast, counties in the lower 48 states that border Canada account for 3.1 percent of the U.S. population but only 1.2 percent of the powder and just 0.5 percent of the pills obtained in large seizures." 

Manhattan Institute report 

 

"The basic punch line of this study is that seizures of fentanyl in the United States are disproportionately at borders; no surprise. It's mostly produced internationally and then shipped in."

"But the vast majority of that is on the borders of Mexico, not on the borders with Canada." 

"It's what I expected [to see]."

Jon Caulkins, report co-author. H. Guyford Stever University professor of operations research and public policy, Carnegie Mellon University Heinz College, Pittsburgh 

 

 

A new report published by the Manhattan Institute verifies a fact already known to Canadian authorities. A fact that U.S. border and customs officials have long had knowledge of. That the claims of the Canadian border representing a threat to the United States through the smuggling of large amounts of fentanyl across the border are quite simply false. It is, in fact, the border between Mexico and the United States where the vast bulk of fentanyl emanates from.

 

U.S. President Donald Trump's repeated assertions accusing Canada equally with Mexico of threatening the lives of Americans by channeling the drug fentanyl into the United States largely forms the basis of his punishing tariffs imposed on Mexican and Canadian exports to the United States. Mr. Trump has tied the imposition of steep tariffs to the grievance of fentanyl flooding across its North American borders to threaten the United States.

 

President Donald Trump answers questions while departing the White House with first lady Melania Trump on July 11, 2025 in Washington, DC. Photo by Win McNamee /Getty Images

 

Such concerns, according to the report's authors, Jon Caulkins and Bishu Giri, are completely unfounded, at least in the case of Canada. They could as well, they posit, undermine the ability of the US. to prioritize tightening the country's border with Mexico. The report focused on "large" seizures of fentanyl, defined as over a kilogram of power, or more than 1,00 pills -- that would reflect wholesale trafficking as opposed to smuggling for personal use.

 

Their finding was that officials made more large seizures in U.S. counties along the northern and southern borders when compared to the rest of the country, pointing out that it was in the south that far more seizures were made. Cross-border drug flows, according to Mr. Caulkins, often mirror where seizures occur, and data point to an uncontroversial finding; "not terribly complicated or subtle". 

 

On the other hand the report found that some counties in Alaska could be portals from Canada to the broader Alaska market "although those quantities are much too small to be of consequence beyond Alaska". Of the 26 seizures in Alaska bordering Canada "triple what would be expected based on those counties' population", yet small in comparison to the rest of the Alaska market.  

"Maybe Alaska does get its fentanyl from Canada, because there's not necessarily a large presence of Mexican drug trafficking organizations in Alaska, and you can't easily drive from Mexico to Alaska without crossing several international borders."

"I didn't know that was coming, and by all means, maybe U.S. and Canadian authorities can put a few more inspectors on those ferries or whatever."

"But that's not going to move the needle for the country, but it might be useful, right locally."

Jon Caulkins former drug police researcher 

As far as President Trump is concerned, having frequently cited the 9,000-kilometre U.S.-Canada border as a threat to national security and a vulnerability that cartels and smugglers exploit, the way he sees it is that Canada is entirely culpable. That belief is his cudgel to justify  the imposition of high tariffs on Canadian goods entering the United States. For its part, the Manhattan Institute report suggested it might be more useful for the U.S. to direct a more intense focus to the southern border should it wish to reduce the fentanyl flow.

 

Fentanyl is extremely potent and incredibly dangerous. Just 2 milligrams – the size of a few grains of sand – can lead to an overdose. CBP is committed to stopping the flow of fentanyl and the devastation it is wreaking on American lives and communities.  U.S. Customs and Border Protection

 

"Counties along the Canadian border are not an important part of this story."

"Whatever the merits or drawbacks of tariffs on imports -- such actions cannot be justified as part of a pragmatic and data-informed response to the threat of fentanyl to the United States."

Manhattan Institute report