Question Period Note: FedNor U.S. Tariffs Response

Impact of the United States government tariffs on Northern Ontario businesses

• FedNor is focused on increasing productivity and growth for Northern Ontario businesses, ensuring economic vitality and long-term growth, even under difficult economic climates.
• The Agency is closely monitoring the impact of the unjustified and unwarranted tariffs from the U.S. imposed on clients and Northern Ontario businesses.
• FedNor is paying particular attention to single-industry towns and major employers in rural communities, where the economic impacts will be most pronounced.
• Northern Ontario faces specific challenges and vulnerabilities due to limited market diversification potential and lagging productivity, making the region particularly susceptible to tariffs and impacts of trade disputes.
• SMEs across various sectors are increasingly focused on diversification strategies to strengthen resilience. These efforts include expanding supply chain networks to mitigate risk and pursuing new market opportunities both domestically and internationally.
• FedNor has and continues to support the steel industry in Northern Ontario, which is currently impacted by tariffs. Since 2019, FedNor has supported 18 projects representing $20.62 million in authorized assistance to 12 steel manufacturers or fabricators in Northern Ontario. This included support for 7 companies, under the Steel and Aluminum Initiative, in the amount of $2.76 million in response to mitigating the 2018 tariffs.
• FedNor continues to offer its suite of programs and services to support businesses as well as work with provincial and federal partners to ensure Northern Ontario SMEs capitalize on sector strengths and capacities, increase productivity, develop and diversify markets, and scale up businesses.

Unfettered market access has been a hallmark of the Canada-U.S. relationship and has intensified during recent decades of increased globalization, resulting in integrated supply chains and cross-border manufacturing in many sectors.
The tariffs on products from Canada that have been proposed by the U.S. President are expected to have significant adverse effects on the Canadian economy, with analysis from the Canadian Chamber of Commerce estimating that Canada’s gross domestic product (GDP) would shrink by 2.6% as a result of 25% across the board tariffs. Other actions planned by the U.S. administration, such as deregulation and fiscal measures, would also have negative impacts on the competitiveness of Canada’s business landscape and on Canadian businesses, which are already suffering from low productivity levels.
Ontario Premier Ford warned that 25% U.S. tariffs would be a “disaster,” potentially costing Ontario 500,000 jobs across various industries.

Northern Ontario Context
• An estimated 140 manufacturers and fabricators from across Northern Ontario may be impacted by the steel and aluminum tariffs, including those that support primary industries.
• In Sault Ste Marie, Algoma Steel and Tenaris (Algoma Tubes) are major steel or pipe producers that will be heavily impacted by the tariffs. These producers are major employers in the community, with Tenaris employing 790 staff and Algoma Steel supporting 2,700 jobs and over 6,000 pensioners. This does not include secondary employment statistics for the supply and service sector which supports these two companies, which is estimated to be several thousand more.
• In 2023, Goods-Producing Industries accounted for 32% of Northern Ontario’s GDP, with Mining, Construction, and Manufacturing as the top sectors.
• Exports from Northern Ontario totaled $10.1 billion in 2023, down from a record $11.0 billion in 2022. Despite the year-over-year decline, this remains the second-highest export value in over a decade, significantly above pre-pandemic levels and reflective of a strong post-pandemic recovery. However, ongoing tariff threats could undermine this progress.
• Nearly half of Northern Ontario’s residents live in small, dispersed communities, with 38 relying on a single industry for their economy. These communities are located outside urban centres, 28 of which are First Nations reserves.
• Mining, Forestry, and related sectors drive the economy, but businesses face challenges from high costs due to distance, transportation, and the potential impact of tariffs on competitiveness.
• Northern Ontario has over 26,000 SMEs and 71 large enterprises (500+ employees). In 2023, 11.0% of SMEs in Northern Ontario exported goods and services, with 91.9% of these exporters selling to the US.
• Metal minerals, industrial machinery, and forestry products are top exports from Ontario, with significant production in the North.

Trade uncertainty and the threat of tariffs are already impacting business confidence and economic stability in Northern Ontario:
• Even in the absence of new tariffs, ongoing uncertainty is causing firms to delay or reconsider investment plans, limiting growth and job creation across the region.
• U.S. incentives are attracting Canadian companies to relocate, posing a risk to Northern Ontario’s industrial base and local employment.
• Tariffs would disrupt both supply chains and sales, creating barriers for Northern Ontario exporters and import-dependent businesses.
• While some companies may absorb initial costs, most tariff-related expenses will be passed on to consumers, contributing to inflation in local markets.
• Businesses are stockpiling goods in anticipation of rising costs and supply shortages, tying up capital and increasing operational risk.
• Mining companies will face inflationary pressures, as tariffs increase the cost of imported equipment and materials needed for production.
• The forestry sector is especially vulnerable, with devastating impacts anticipated in small towns and First Nations communities where it is a key economic driver.
• Indigenous workers will be disproportionately affected, given their strong representation in high-risk sectors such as forestry, mining, and oil and gas.

• FedNor’s interventions will focus on businesses that are most impacted by this measure, including (but not limited to):
o Manufacturing
o Forestry
o Mining
o Agri -Food
o Aerospace
• FedNor supports trade as a key driver of economic growth, job creation, and global competitiveness for Northern Ontario businesses. Its efforts to develop trade in the region include:
• Supporting sector organizations like MineConnect to enhance access to trade and export services through online tools, training, conferences, and trade missions.
• Funding marquee events such as the Northern Ontario Mining Showcase at PDAC, enabling businesses to connect with international markets and showcase their capabilities.
• Investing in innovation and technology adoption to help trade-oriented businesses scale up, improve productivity, and enter new markets.
• Strengthening the regional trade ecosystem by partnering with third-party organizations that promote export readiness and international competitiveness.
• Providing direct support to businesses for market development and capacity-building projects, while encouraging them to leverage Free Trade Agreements to unlock new opportunities and reduce trade barriers.