Have a little compassion for business owners caught in Trump's crosshairs.
Like me, I suspect you are getting a little fatigued with all the talk of Trump and tariffs. But one more for me on why you shouldn’t be too harsh on business owners caught up in this mess.
Someone DMed me recently suggesting that we should boycott any firm that sets up in the US in response to the tariffs. They were indignant and it seems they felt betrayed by Canadian firms that had built successful businesses here and then moved to the states.
Let me tell you a story. It’s fictional but there are thousands of variations in real life.
Let’s say there is a family-owned company based in Toronto that manufacturers vehicle door handles. They have been in the business 40 years. They sell a million units per year at an average of 45 bucks a pop for a tidy $45 million in revenue. They run the business well and get 8-12% profit per year. As a result, they have a nice house in Mississauga, a boat parked at the marina, a cottage in Muskoka and their kids in private school.
They are integrated into the North American supply chain and sell 80% of their product into the United States.
Along comes Trump. He says “yeah, I’m told we generate about as much GDP per capita from auto manufacturing as Canada but I want more. I want it all and so here is a 25% tariff for you to absorb. You can either pay me the tax or move here.”
What is the door handle company to do? Yes, they have taken advantage of the Canadian dollar to be a little cheaper than their competition in the US. Yes, they resisted a takeover by a larger US-based auto parts manufacturing firm that might have been able to cut production costs by 20%. But what do they do now?
It is clear this company is likely out of business or sold for scrap in the near term. Some government programming could try and bridge the gap but 25% is just too high a hurdle. Either they move to the US or go out of business.
Should we feel betrayed because this Canadian firm had to make a move to survive?
I don’t think so. Yes, for some firms there could be opportunities to develop new markets but for many that is just a pipe dream.
Don’t be too harsh on the business owners who have to make a hard but necessary business decision.
As I have told you before, there have been many companies already moving to or expanding in the US in recent years. I can give you a dozen examples from right here in Atlantic Canada all well before the tariffs. For a variety of business reasons – increased costs, lack of workers, etc. they felt they had to make the move. Even within Canada. Moncton used to have a thriving non-alcoholic beverage manufacturing sector including the production of the containers and the filling of the containers. There were several hundred people employed. Now it is almost all gone to the Toronto region.
Communities and provinces need to decide if they want certain industries or not. I’m not saying they should provide structural financial subsidies to keep firms here but governments have a lot of control over the business environment including the talent pipeline, energy costs, taxes and regulation. If you don’t want food production, then just make sure employers can’t find staff locally. It won’t be long before those jobs are in central Canada or beyond.
Finally, I think we do need to double down on natural resources. The big angry man in Washington can’t take that away from us (at least I hope). Minerals, agriculture, aquaculture, forestry (where there are sustainable opportunities we don’t want to deprive future generations of forestry benefits). Even natural gas. Lots of people don’t like it but all the gas we use right now comes up from an increasingly hostile partner south of the border. Let’s put wind turbines on every hill on the Crown land/industrial freehold land and use that green power do build new industries. They can’t take away our wind.
And let’s have a little compassion for the hundreds of business owners right here in our region that are facing a generational challenge that could bring down everything they have built over many years.
I get the feeling for the person in financial pain, but you’re talking about someone who is avoiding pain at the cost of everyone else around them. The capital they have is like a milk box for the school yard bully. Canadas goal should be tariff de-escalation this means more US pain, less US gain.
Boycotts and shame are tools that reinforce a solid front. Retool, trade elsewhere, use intermediaries (and all the typical go-arounds) to tariffs. Plan and fight with the right goal in mind, rather than following the simplest course to pain avoidance.
We’re under economic attack - If our country were under physical attack (by anyone), defectors getting that treatment (or worse) would be a sign of a spirit of resistance. Indeed, the threat of shame and worse punishment is the policy of state resolve. Under attack from, say, a chaotic dictator, Canadians would expect the physically able on our side to put themselves at risk to stop an incursion even if the numbers were against us. They’d be proud of those who held up like those in Ukraine are in a similar scenario. This is an economic war with a different type of hero and coward.
Capital flight to US is bad trade policy winning and defectors are those without spirit and deserving of punishment. Have sympathy for those who fight on your behalf, not join the other side.