Importers and exporters in the United States and Canada are increasingly concerned about the future of North American trade amid continued political pressure and uncertainty surrounding the region’s trade framework, according to research from Livingston International.
The report found that one-quarter of Canadian exporters were not confident in the stability of trade relations going forward, while a further 40 percent described themselves as only somewhat confident. Despite that uncertainty, 75 percent of U.S. respondents and 62 percent of Canadian respondents expected the trade environment to improve within two years. About 20 percent in both countries believed improvement would take three to four years.
Confidence in the United States-Mexico-Canada Agreement is also limited. Only 34 percent of U.S. businesses and 28 percent of Canadian businesses said the agreement made them confident about the stability of North American trade over the next five years.
The report said 43 percent of U.S. respondents and 29 percent of Canadian respondents viewed Washington’s July decision not to renew the agreement positively for the future of regional trade. At the same time, 77 percent of U.S. companies and 67 percent of Canadian companies said they planned to delay investment in North American supply chains until there is greater clarity about the agreement’s future.
tariff policies have already affected business operations. More than three-quarters of U.S. companies and 77 percent of Canadian firms reported serious compliance challenges, while almost two-thirds of respondents in both countries said they had passed higher costs on to consumers.
With the agreement entering an annual review process that is scheduled to end in 2036, companies are assessing alternatives and diversifying their operations. New sourcing locations are being considered by 84 percent of U.S. importers and 91 percent of Canadian importers. Livingston analysts noted that no single Asian country offers the same appeal as sourcing options closer to North America.
Asian supply chains are nevertheless under consideration by 84 percent of respondents across both countries. Canadian companies are more inclined toward China, while U.S. companies are showing greater interest in Vietnam because of high duties on Chinese-made goods.
North American suppliers will remain part of many companies’ strategies. Some 90 percent of U.S. importers and 75 percent of Canadian importers said they would continue using suppliers elsewhere in North America while also adding domestic suppliers as a backup.
Exporters are also looking beyond the region for new customers. Just over half of exporters in both countries are considering Europe and the United Kingdom, while Central and South America are being evaluated by half of Canadian respondents and 47 percent of U.S. firms.
Livingston analysts said companies are not abandoning the North American market. Instead, they increasingly view it as one part of a wider global supply chain, using diversification of suppliers and export markets to reduce risk.
Sources: WWD.