In June 2017, Cambridge, Ont.-based Canadian General-Tower Ltd. had seemingly landed on the right side of U.S. President Donald Trump’s “America First” trade war.
The good fortune wouldn’t last. As Washington’s trade war with Beijing heated up, the New Braunfels’ operation was sideswiped by U.S. tariffs on fabric backing, a key raw material imported from Chinese manufacturers. Next, CGT’s factory in Changshu, China, which supplies automakers in that country, was forced to grapple with a deep slump in demand due to an economy partly pulled down by U.S. tariffs.
One year after the U.S. kick-started the trade wars by slapping national security tariffs on steel and aluminum imports, Canadian businesses like CGT continue to be entangled in a global web of trade offensives and retaliations that complicate supply chain management, dampen investment and tie up resources that might otherwise have been put toward business growth.
Richardson also made plans to spend a good part of his afternoon huddled in a hastily arranged meeting of CGT’s logistics and procurement group, strategizing about how to handle suppliers and customers, how to absorb the cost of the levy and whether it could be passed on — all for a tariff threat that was ultimately dropped.
The resulting business environment is “chaotic,” said Sabrina Qu, CGT’s vice-president of global procurement, in an email. “The uncertainty of the issue forces more short-term decisions than long-term .” The consequences of these new barriers: Increased uncertainty, lower investment and weaker trade growth, the organization warned.
“I think it was late last year that Canadian companies went from having to deal with NAFTA negotiations and tariffs to the heavyweight fight between the U.S. and China,” he said. “In general, there’s a reluctance to spend a lot on bricks and mortar when there is so much technological disruption going on, but the trade issues have certainly weighed on top of that.”
“Except for a few family breweries, it’s rare to find a business that endured all that time and survived,” Richardson said. “And much of that success came through exporting. We’ve endured a lot of obstacles and I have to think this is just another.” Such decisions are all part of a global shift toward regionalization, one that Trump’s tariff wars may have hastened, but didn’t start, say researchers at the McKinsey Global Institute. Its study of 23 industries in 43 countries between 1995 and 2017 noted that value chains are increasingly morphing to regional models as companies shift priorities away from cheap labour and toward automation, research and development and maximizing the speed at which their products reach consumers.
What makes Trump’s duties particularly unsettling is not their size — current U.S. average tariff rates of 5.7 per cent on dutiable imports fall well below previous eras, said Doug Irwin, a trade historian at Dartmouth College — but how they are being used.
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