US, Canadian Importers and Exporters ‘Decidedly Glum’ Over Future Prospects for North American Trade

Exporters and importers across the United States and Canada are “weary” and “decidedly glum” in the face of continued political pressures that threaten the future of cross-border trade, according to new research.

Livingston International’s recently released trade dynamics report painted a picture of faltering faith in the future of North American trade, with one-quarter of Canadian exporters saying they’re not confident in the stability of relations moving forward. An additional 40 percent said they were only somewhat confident in the possibility of future stability.

On a less glum note, three-quarters of U.S. respondents and 62 percent of Canadians believe the trade environment will see improvement within the next two years, while around 20 percent believe it will take a bit longer, in the range of three to four years.

By that point, President Donald Trump will have left the White House for the final time, and a new leader will become responsible for repairing frayed trade ties or negotiating a new framework for future trade dynamics.

As it stands, only 34 percent of U.S. businesses and 28 percent of Canadian ones said the U.S.-Mexico-Canada Agreement (USMCA), which Trump brokered to replace the North American Free Trade Agreement (NAFTA), makes them feel confident about the stability of North American trade over the next five years.

As Livingston analysts pointed out, free trade has been “an integral aspect of supply chain integration and regional interdependence for two generations,” so flagging reliance on the system that facilitates it is significant.

Notably, 43 percent of U.S. respondents and 29 percent of Canadians said Washington’s July decision not to renew the USMCA actually positively affected their confidence in the future of trade between North American neighbors, perhaps because of the fraught review process and the tensions that have arisen over the past year. As such, a decisive majority (77 percent) of U.S. firms and 67 percent of Canadian ones said they planned to pause investments in North American supply chain until more certainty can be gained about the trade pact’s future.

As it stands, the U.S.-Canada trade war has already had a marked impact on operations. More than three-quarters of U.S. businesses and 77 percent of Canadian firms said they’ve seen serious hurdles when it comes to compliance with the mercurial tariff policies, and almost two-thirds of respondents in both countries have had to pass cost increases along to consumers.

With the USMCA’s future uncertain—it now enters a yearly review process that will terminate in 2036—firms on both sides of the border are evaluating their options and diversifying operations to guard against further disruption. A whopping 84 percent of U.S. importers and 91 percent of Canadian importers are exploring new sourcing locales, but according to analysts, “no individual country in Asia has the same level of attractiveness as those closer to home.”

Of course, Asian supply chains are a natural alternative for many of these companies to consider, with 84 percent across both countries saying they’re looking into the region. Canadian firms favor China, while U.S. firms, faced with high duties on China-made goods, are more partial to Vietnam.

Ninety percent of U.S. importers and 75 percent of Canadian importers will still use North American suppliers outside of their own countries, but they plan to add domestic, in-country suppliers as a backup.

A little over 50 percent of exporters in both countries are considering Europe and the United Kingdom for new sales ventures, and Central and South America, too, are gaining ground with half of Canadian respondents and nearly half (47 percent) of U.S. firms.

“It’s critical to note that importers and exporters are not abandoning the North American market,” analysts wrote. “Rather, they are increasingly seeing the continent as one component of a broader global supply chain that is allowing them to de-risk through export-market and supplier diversification.”