Uncertainty in the U.S? Business as usual for Canadian SMEs

Keep calm and trade on.

That’s how Peterborough’s Steelworks Design is approaching ongoing reports about increased trade protectionism and overall economic uncertainty in the United States.

“Right now, it’s business as usual. The rhetoric in the U.S. is spin – effective spin – and it’s worrisome that it’s getting into everyone’s mindset,” says Rhonda Barnet, Vice- President of Finance of the Ontario-based company. “However, the uncertainty in the U.S. right now makes it clear we need a long-term investment strategy.”

Establishing a presence south of the border could make things easier, as well as show an increased commitment to U.S. customers. But recent events have created ‘a hurry up and wait’ scenario for Steelworks. That extends to Mexico, a market they were considering for investment.

“That’s very much on hold until we get more clarity. The reality is that you have to deliver product (to Mexico) by truck through the country, so it could get complicated.”

“From a Canadian SME perspective, I will wait for clarity (with the current situation) before making any major investments. But, I think it’s prudent for all SMEs to start planning now.”

Renegotiation is the “art of the deal” for America’s new President Donald Trump. Since his administration took office January 20, the President has followed through on campaign promises to alter the U.S. trade landscape by signing executive orders to back out of the Trans Pacific Partnership (TPP) deal, as well as renegotiate the North American Free Trade Agreement, (NAFTA).

The result is a wave of uncertainty for business, both large and small, on both sides of the 49th parallel. However, the beacon of certainty for Canadian companies is the fact that Canada and the U.S. share the most unique and largest bilateral relationship in the globe with two-way trade accounting for $690 billion or $2.4 billion each day.

Canada is the U.S.’s largest customer, purchasing US$338 billion in goods and services last year. That means that Canadians buy more from the U.S. than any other nation including all of the 28 – soon to be 27 – countries in the European Union. For 35 states south of the border, we are the top export destination.

Those are statistics that can’t be overlooked, says Barnet, who is also Chair of Canadian Manufacturers & Exporters (CME), Canada’s leading trade and industry association.

“Canada and the U.S. have an integrated supply chain and both benefit from working together to advance our economies,” she adds. “Our job now is to educate both governments on the reality that the sum of the parts is greater than the whole when comes to Canada/U.S. trade. Both countries will go farther, faster, working together to revitalize the manufacturing sector and build world-class products.”

Being world class is the business mantra of Barnet’s 27-employee company that she operates with husband, Don. Designing and manufacturing highly engineered products for clients including GE, Kubota, Siemens, Rolls Royce, the company’s export strategy is based on going global through its customers’ supply chains. The U.S. is Steelworks largest market, accounting for 50 per cent of total sales.

“About 75 per cent of our inputs are Canadian labour and custom parts,” says Barnet. “So, we are less concerned about supply chains and more concerned about access to the market. So far, none of our customers have expressed concerns because manufacturers are bound by internal purchasing rules that dictate they buy equipment based on price and quality. That’s given us a strong footing in many American facilities.”

Bogden Markiel, CEO of Barrie’s DV Systems, a manufacturer of high-performance air compressors has made strategic investments in the U.S., specifically a factory in North Carolina.

“It looked like a good decision early last year,” he says. Now, he echoes Barnet’s comments about waiting to see where the dust settles before making any other investment decisions south of the border.

The east coast of Newfoundland may be more than 3,000 kilometres from Ontario’s industrial heartland, but the feelings about recent events are similar.

With the majority of customers in the U.S., Lorne Janes, President of Paradise, Newfoundland’s Continental Marblecast, says now is not the time to panic.

“Yes, these are interesting times, but for us, it’s business as usual,” says Janes, who operates the engineered composite company that manufactures countertops in a facility outside of St. John’s. “We don’t have time for the ‘what ifs’, we need to focus on the what now.”

And that for Janes is continuing to push product out the door to his U.S. customers.

“My customers are curious as to what the administration’s next tweet may reveal,” he says. “But I haven’t heard of any real concerns yet.”