A new KPMG survey reveals that four in 10 Canadian manufacturers have already moved production to the United States or are considering doing so, as ongoing trade uncertainty and competitive pressures reshape the industry. The survey of 275 manufacturers shows that 57% have paused, reduced, or cancelled capital expenditure projects, while 42% have scaled back or paused research and development spending.
Survey finds widespread production shifts
According to the survey, 29% of manufacturers have already moved some or all production to the U.S., and an additional 13% plan to do so. Of those considering relocation, 77% expect to move within two years. More than half (52%) of manufacturers say they are currently operating in “endurance mode,” adapting to tariffs and uncertainty but unable to sustain this indefinitely.
“Last year, the conversation was about survival. This year, it’s about endurance,” said Anamika Gadia, Partner and National Leader of Industrial Markets at KPMG Canada. “Manufacturers have shown incredible resilience, adapting to tariffs and uncertainty to navigate this period of heightened volatility. But businesses can only operate in endurance mode for so long.”
Capital investment and R&D impacted
The survey found that 57% of manufacturers have paused, reduced, or cancelled capital investment projects (CAPEX), with 36% scaling back, 12% pausing, and 9% cancelling projects entirely. Additionally, 42% have paused or reduced R&D investment due to economic uncertainty and trade and tariff threats, with 27% scaling back and 15% pausing.
These findings come as discussions surrounding the Canada-United States-Mexico Agreement (CUSMA) intensify. Gadia emphasized that government action on competitiveness, taxation, regulations, and trade will be critical in determining whether future manufacturing investment stays in Canada.
Long-term decisions at stake
“Companies can delay investments, absorb higher costs and adjust their operations, but they can’t remain in a holding pattern indefinitely,” Gadia said. “At some point, uncertainty begins to shape long-term decisions about where investment, production and growth will occur.”
The survey underscores the urgency for Canada to create conditions that give manufacturers confidence to keep building, investing, and staying in the country. “Sustaining Canada’s manufacturing sector will require businesses to continue investing in productivity, technology and market diversification, while governments work to reduce uncertainty and improve competitiveness,” Gadia added.
