How Ottawa-area businesses may be hurt by Trump’s tariffs

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The vow by U.S. president-elect Donald Trump to smack a 25 per cent tariff on all Canadian imports into the United States represents “an existential threat to Canada’s economic security,” according to David Ross, CEO of Ottawa’s Ross Video.

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“I don’t think Canadians really understand what’s happening. We’re under attack by our closest neighbour. It’s like a pandemic without the pandemic,” Ross said.

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He is hardly a lone voice in the economic wilderness. Just like business leaders and politicians across Canada and Mexico, which Trump has also included in his across-the-board tariff promise, Ross’s primary goal is protecting jobs.

Countless economic experts suggest the tariff plan makes no sense because it would ultimately significantly raise prices in the U.S., and believe Trump could be dangling the tariff scare as a way to negotiate major concessions from Canada and Mexico in other areas. The incoming U.S. president has repeatedly said that a flood of illegal immigration and illicit drugs across his country’s northern and southern borders must be stopped.

What’s the potential impact on the company?

Just the same, Canadian companies must try to prepare for economic chaos.

Ross Video, a live production technology company, employs 500 in Ottawa and another 350 in Iroquois, 70 minutes southeast of the national capital.

All told, the booming business has 1,400 employees worldwide, including 20 research and development outposts in the U.S.

If you’ve watched TV or attended a major-league sports event, chances are Ross equipment has been involved since it’s used by professional franchises and in state-of-the-art stadiums throughout North America.

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The cable-suspended camera systems that provide eyes from the sky into what’s happening on the field or on the ice are Ross products. Many of the world’s business giants, including Google and Amazon, use the materials produced in Ottawa and its backyard.

So, too, do major U.S. broadcast networks, where Trump, ironically, has used Canadian-made products to issue his protectionist messages.

Half of Ross Video’s business is in the U.S.

“That’s $200 million (in revenues) that’s in jeopardy,” said Ross, who was in emergency meetings with the company’s senior officials on Nov. 27, two days after Trump’s trade war tirade landed with a thud north and south of the Canada-U.S. border.

Big picture: Ross would like the company to grow to 2,000 employees and to earn $1 billion in annual revenues by 2030, but the tariff threat is looming like a black cloud in advance of Trump’s official return to the White House. Inauguration Day is Jan. 20.

“There are a few companies in the U.S. that do similar work, but not many,” Ross said. “Most are in Europe and Japan that are not subject to the 25 per cent tariff. We’re at a 25 per cent disadvantage.”

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In terms of standard trade operating practices between Canada and the U.S., Ross remembers a business conversation with his father, John Ross, who founded the company out of his Montreal basement in 1974.

“He was talking before NAFTA (the 1994 trade agreement between Canada, the U.S. and Mexico) and he said, ‘Always add two per cent costs for over the border.’”

A major tariff would also affect smaller businesses with U.S. customers.

That includes Newman Tools, a Stittsville-based industrial and specialty tools distributor founded in 1955.

“With more than 50 per cent of our business in the U.S., it would significantly impact us,” chief operating officer Ivy Perry said.

Could companies move operations to the U.S.?

That’s not a legitimate possibility for Ross.

Again, protecting jobs here is a priority, and logistically it makes no sense.

“We’re only two months away,” Ross said. “If (Trump) says there would be an executive order as president on Day 1, there’s no time to prepare. Building manufacturing operations takes years. You can’t just do it in a month or two. We’re talking about thousands and thousands of different assemblies.”

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The challenge for a smaller-scale operation like Newman Tools would be alerting U.S. clients about the sticker shock of having 25 per cent tacked on to the original purchase price once a product crosses the border.

“It’s going to be a conversation I might have to have on every phone call,” Perry said. “It might result in people trying to find the product locally.”

What are business organizations saying?

Seventy-five per cent of Canadian exports are to the U.S. Naturally, reaction to Trump’s comments from the Ontario Chamber of Commerce was swift and strong.

“Addressing this threat is not just an economic challenge, it must be a national priority,” OCC president and CEO Daniel Tisch said.

The full-court press is on from business leaders demanding that Canadian political leaders fight back against the lofty tariffs being threatened.

“With $3.6 billion in goods and services crossing the border daily — $1 billion to and from Ontario alone — the tariff would have devastating consequences for both countries,” Tisch said.

He added that Ontario was a “critical hub” for manufacturing, agriculture, technology and innovation, pointing out that U.S. consumers relied on products manufactured in the province.

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Products and technology like those produced by Ross Video.

Businesses and jobs on both sides of the border are at stake.

“It would disrupt supply chains, drive up manufacturing costs, reduce exports, erode investor confidence and fuel job losses,” Tisch said.

The Canadian Chamber of Commerce and University of Calgary economics professor Trevor Tombe produced a study saying that a mandatory 25 per cent tariff would cause a recession, reducing the Canadian economy by 2.6 per cent, or approximately $2,000 per person.

It works both ways, though.

Americans would immediately take a hit at the gas pump because 20 per cent of all oil used in that country comes from Canada. The tariffs would be tacked on the price at the gas pump. Patrick DeHaan, who heads petroleum analysis at GasBuddy, told CBS News that prices could rise 30-70 cents per gallon within two days of a 25 per cent tariff being imposed.

A Wall Street Journal report also suggested that the price of a new car would jump by an average of $3,000. The U.S. imports four million cars annually from Mexico and Canada.

Eventually, U.S. grocery prices could also rise.

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“Prices will creep up after the supply chain dries up and (stores) have to sell new stuff for 25 per cent more,” Ross said. “I don’t think Americans understand tariffs.”

What about exceptions?

There is some belief that Trump could relax the 25 per cent tariff on particular industries, including oil, as a negotiating ploy while asking Canada to improve border security.

That, of course, would do nothing to help Ross Video or Newman Tools.

“Maybe they would say they would slap a 25 per cent tariff on everything in Canada, except oil,” Ross said. “My view is that Canada should be saying there should be a 100 export tariff on everything from the U.S.”

What are governments doing to fight back?

After speaking with Trump this week, Prime Minister Justin Trudeau adopted a conciliatory tone, saying it was a “good call,” including “laying out the facts in constructive ways.”

Trudeau and provincial premiers held an emergency meeting on Nov. 27. Despite their political differences on many topics, the aim was to reach consensus on a “Team Canada” approach: speaking as one unified voice against Trump’s tariff pledge.

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“I don’t want to minimize for a moment the gravity of the challenge we now face,” Deputy Prime Minister and Finance Minister Chrystia Freeland said. “Now is not the moment to squabble amongst ourselves.”

Ontario Premier Doug Ford is among those loudly pushing for increased border security to slow down illegal border crossings and the movement of guns and drugs into the U.S. That’s a message that would appeal to Trump and his base.

For what it’s worth, outgoing U.S. president Joe Biden is not a fan of the tariff plan. “It’s a counter-productive thing to do,” Biden said on Nov. 28. “We’re surrounded by the Pacific Ocean, Atlantic Ocean and two allies: Mexico and Canada. The last thing we need to do is screw up those relationships.”

kwarren@postmedia.com

X: Citizenkwarren

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