A new KPMG survey shows most large and mid sized Canadian companies have already changed their prices to cope with United States tariffs, and the share of costs passed to consumers is expected to climb.
The KPMG National Business and Trade Outlook surveyed 359 business leaders from the Angus Reid Forum representing companies with annual revenues between $10 million and $20 billion. Two thirds of respondents said they have made pricing adjustments to cover some or all of the added tariff costs. Of those, 35 per cent passed a portion of the cost to customers while 31 per cent passed the full amount. Only 15 per cent said they found other ways to reduce expenses.
Cost absorption giving way to pass through
Lachlan Wolfers, national leader for KPMG Law, said many firms initially absorbed tariffs to see how the trade dispute would evolve. He expects the pass through rate to move closer to 80 per cent over time, though both governments remain focused on containing inflation.
The survey was conducted from June 25 to July 13, before Washington announced 50 per cent tariffs on Canadian dairy, alcohol, motor vehicles, cosmetics and other goods set to take effect August 19. Wolfers warned that a survey taken today would likely reflect a more short term, crisis driven mindset.
Export reliance and CUSMA compliance
Seventy two per cent of respondents export internationally. Among exporters, 79 per cent say their shipments comply with the Canada United States Mexico Agreement (CUSMA). Nearly half of all businesses surveyed said the current CUSMA is critical to their operations.
Many products targeted by the new tariffs previously crossed the border duty free under CUSMA. At the same time, 33 per cent of businesses plan to expand into new markets within three years, and 26 per cent of exporters are actively exploring markets where Canada has a trade agreement.
Wolfers described the outlook as a shift from tariff turmoil to managed uncertainty that will persist at least until the end of the current U.S. administration.
Based on reporting by Global News.