Trade-exposed industries in Medicine Hat say they are closely watching a trade dispute between the U.S. and Canada, but are hopeful fallout from tariffs imposed by U.S. President Donald Trump can be limited.--News Photo Collin Gallant
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Major manufacturers based in Medicine Hat, and others who do business in the United States, are closely watching potential trade action between Canada and its North American neighbour.
Tariffs were set to take effect today, though two companies with local facilities and major operations in the U.S., said their logistics networks could absorb some hurt from a promised 25 per cent charge on exports to the U.S.
Those were due to be imposed today, but as late as Friday, conflicting reports from Washington suggested delays, or potential carveouts.
Methanex officials told a conference call with investment firms this week that the company is in the midst of expanding its U.S. production base, and could manage export deliveries between the countries as a workaround to higher costs.
The larger issue is a potential global economic slowdown that could result from trade tensions, even as demand growth is forecast right now.
“For us, the acute business impact is pretty marginal … but it’s something we’ll be following really closely,” Methanex president Rich Sumner said while discussing fourth-quarter financial reports.
“We do have some products flowing from Medicine Hat across the border into the U.S, but we’re talking about a pretty small volume for what we sell in a year (across the business).
“If that cost is difficult to recover, we have ways to manage it within our supply chain, and the flexibility to deliver to customers from a different point potentially at pretty marginal incremental cost.”
The company recently moved to expand its U.S. production base with a new plant in Geismar, La., as well as a recent US$2-billion purchase of competitor OCI Global.
“So now our concern from that perspective, for us, we are now going to be a very big U.S producer, and so we’ll add exports out of the U.S, and we’ll have to really carefully look at potential retaliatory tariffs.”
Economics predict that blanket tariffs could cause the export-reliant Canadian economy to shrink by several percentage points.
The Alberta government, along with federal law enforcement agencies, is promoting work to increase security along the border that stretches nearly 9,000 kilometres, including 300 kilometres between Montana and Alberta.
That’s a demand broadcasted from U.S. President Donald Trump, who has also promised protectionist policies to bolster his domestic manufacturing sectors.
CPKC railroads, which operates in Canada, the U.S. and Mexico, expects domestic deliveries in each country to increase in the near term, potentially offsetting or overshadowing the effect of a cross-border slowdown or added export costs.
“The bottom line is we don’t know,” said CEO Keith Creel, while discussing quarterly results this week. “But what we do know is that in spite of that volatile perhaps uncertain outcome, we still have investment that’s not pulling back, that’s doubling down.”
CPKC vice-president John Brooks pointed to the effect of tariffs during the 2018 NAFTA renegotiations during the first Trump presidency.
“I think the reality was that these supply chains are very complex,” he said. “It’s commodity by commodity, it’s lane by lane, it’s customer by customer. And ultimately what happens, and I think what we saw is there wasn’t a lot of change. It’s hard to change these complexities overnight.”
The Chemistry Industry of Canada represents the petrochemical industry, including CF Industries, and president Greg Moffat called the U.S.-Canada relations in the sector a “balanced partnership.”
Hat-based drone and defence firm Qinetiq belongs to the Canadian Association of Defence and Security Industries, which says a Buy American stance will deal a blow to Canadian manufacturers and increase costs to U.S. defence purchasing.
As well, Canadian defence firms purchase one-third of materials from U.S. suppliers.
Qinetiq provides services and target vehicles to the U.S. military in a decades-old deal that was extended earlier this year.
The firm told the News that U.S. exports make up about only about 10 per cent of the business of the local office of the global defence contractor.
That means work here will continue, but the U.S. executive’s promise to bolster domestic production could hamper expansion plans.
“Through our collaboration with (U.S. based office) QinetiQ US, we are identifying significant export opportunities for both products and services,” reads a statement. “We are currently working to secure better pricing from cross-border suppliers to help offset costs where possible, and exploring domestic supply chain alternatives.”
The Southeast Alberta Chamber of Commerce points to national organization statistics that show $125 billion in trade between the two countries had occurred in the month of January alone.
Almost 360,000 Alberta jobs are dependant on U.S. trade that totalled C$188 billion from the province in 2023.
Almost 70 per cent of that is petroleum, but the total also includes more than $4 billion each in cattle, chemicals, plastics and machinery.
