The Buy Canadian movement may be more than a reactionary fad amid U.S. tariffs. The increased awareness of domestic options for individuals and businesses could shift behaviours in the long run.
Demand for Canadian-made products is on the rise amid elevated trade tensions—and it is an increase that can be sustained.
This moment provides a unique window of opportunity for businesses to expand across Canada. Households are flocking to purchase locally sourced items, businesses and various levels of government are pursuing Canadian vendors for procurement projects and interprovincial trade barriers are being rapidly removed.
In addition to the surge in domestic demand, there are also opportunities for Canadian businesses to further expand into international markets such as the European Union, Britain, Japan and South Korea.
As emotions run high, it remains vital to look at the big picture. There are industries whose supply chains are simply too intertwined, where untangling them would be akin to trying to unscramble an omelette.
Even if all Canadians prioritize Canadian-made goods and services, it won’t completely offset the economic toll of tariffs. Therefore, Canadian businesses will still need to rely on exports to the U.S. and other countries for growth.
While trade uncertainty presents monumental challenges, it is also an opportunity for Canadian businesses to de-risk and diversify their customers and suppliers—a sombre lesson from the COVID-19 pandemic that rings even truer today.
Where it works
Nowhere is the shift in consumer behaviour more obvious than in consumer products, particularly when it comes to everyday groceries items with direct Canadian-made substitutes.
Groceries are an area where households have direct control over the origin of products they buy and can change their shopping habits quickly as households buy groceries more frequently compared to purchases of durable goods.
Many Canadian consumers have recently switched to Canadian-grown fruits and vegetables—as well as domestically produced items like canned foods and snacks—instead of U.S.-made products. As spring and summer arrive, the list of Canadian produce that can meet domestic demand will expand.
Alcohol is an even clearer example. Most provinces have gone as far as removing U.S. beer, wine and spirits from shelves. This move is intentional and practical as there are readily available Canadian products to take their place and Canadian companies can quickly step up to meet the increase in demand.
Ease of substitution is a feature of most U.S. items targeted in Canada’s first round of retaliatory tariffs. U.S.-made counterparts would become more costly—further nudging Canadian consumers toward domestic products.
Some Canadian companies in the business-to-business (B2B) space are reconsidering their contracts and pivoting towards domestic suppliers. These efforts to de-risk are driven by the desire to support the local economy and reduce vulnerability to tariffs.
The Buy Canadian movement’s influence is evident in services as well, especially in travel and tourism. There have been widespread trip cancellations by Canadians to the U.S. for March, April and beyond. Airlines are reducing flights to the U.S. to adjust to lower demand.
In February, the number of return trips to Canada made by Canadian residents fell below 1.2 million, a figure not seen since early 2022 when strict COVID-19 travel guidelines were still in place.
And where it doesn’t
It’s not always possible to make the switch to Canadian-made products and services given the degree of integration in the today’s global economy.
The auto industry is an example where choosing an entirely Canadian-made car would be impossible, as certain car parts are only made in Canada and others only in the U.S. or Mexico.
At other times, there are limited or no Canadian alternatives, such as certain tropical produce and services such as search engines.
There are also instances where the Canadian industry is cost-prohibitive and is unlikely to ever meet the domestic demand.
For example, most textiles and clothing are manufactured in Asia at a fraction of the cost due to streamlined supply chains, decades of specialization and lower labour costs. As a result, the Buy Canadian strategy will likely have a limited impact on clothing.
Putting things into perspective
While a renewed focus on Canadian goods and services has tremendous emotional appeal, residents and businesses must recognize its limitations and remain cognizant of the broader economic landscape.
This is especially true if U.S. demand for Canadian goods sharply drops, as the U.S. has roughly ten times the population of Canada and many times the purchasing power. The U.S. market accounts for nearly one-third of the world’s total consumer goods purchases while comprising roughly five per cent of the world’s population.
At the same time, Canada will continue to benefit from open trade as a player in the global market—including the imports of products and services that are not practical to be produced domestically.
Strategic investment
Businesses should leverage the Buy Canadian movement to expand nationally into provinces and municipalities where they might not have current presence to fill the demand gap.
Consumer sentiment also means that provincial governments are now more open to work together. The federal government has already eliminated half of the interprovincial trade barriers this year, and more could be removed to facilitate free trade within Canada.
For instance, a recent agreement means Ontario consumers will soon be able to buy B.C. wine locally. This is timely as U.S.-made alcoholic products have been removed from shelves in most provinces and territories.
As Canada shapes up to expand trade deals with international allies, businesses should explore these opportunities to diversify and grow their markets abroad.
Investment in productivity and talent are imperative at this juncture. Investing in labour productivity, machinery and infrastructure will help address Canada’s decades-long productivity slug and make Canadian businesses more competitive. It will also help retain high-value talent within Canada, which is crucial for sustained growth.
The full influence of the Buy Canadian strategy has yet to be felt. Even in a scenario where tariffs are lifted and tensions ease, non-tariff measures such as prioritization of Canadian vendors in municipal projects may stay in place. If consumers build the habit of shopping Canadian, that habit might stick—which will aid business successes in the long run.
The takeaway
In every crisis lies an opportunity. The Buy Canadian phenomenon is a wake-up call for businesses to bolster their competitiveness, economic resilience and security.
It is inevitable that tariffs and trade tensions bring pain across all sectors. By leveraging the shift in consumer preferences and implementing strategic investments, Canadian businesses can blunt the economic impact to a degree while establishing strategies for future growth.
Read RSM Canada’s latest analysis in The Real Economy Canada and subscribe for more updates.
