Manitoba firms make cuts, mull moves, cast uneasy eye on future under heavy U.S. steel, aluminum tariffs

Under the looming dark cloud of U.S. tariffs, some Manitoba manufacturers have conducted layoffs, reduced operations, paused growth and planned relocation strategies. Many are also bracing for Canadian retaliation.

“Nobody in manufacturing has the 25 per cent margin to cover those tariffs,” said Marty Friesen, a long-time employee with Diemo Machine Works.

The Okno-based shop saw its profits shrink in 2018, when Donald Trump, then in his first term as U.S. president, placed tariffs on Canadian steel and aluminum.

Diemo wasn’t affected by those levies, Friesen explained. However, the Canadian government’s retaliatory tariffs on U.S. steel hit hard.

Diemo Machine Works imports its steel from the south; specific types it requires aren’t found in Canada. It then makes and exports sub-components for food processing facilities and agricultural manufacturing, among other things, largely to the U.S.

About a year ago, leadership at Diemo considered the possibility of tariffs under a second Trump presidency “very likely.”

“It was pretty easy to see, based on that experience back in 2018, that it was likely that the situation could play itself out again,” Friesen said. “We took our warning.”

So Diemo paused new investments. It didn’t purchase the new machining equipment or robotic welding cell it had planned.

“This feels significantly more uncertain than (2018).”–Marty Friesen, Diemo Machine Works employee

As forecast, Trump on Monday signed executive orders to impose 25 per cent tariffs on all steel and aluminum imports, starting March 12. His administration has said the tariff could be stacked on other levies of Canadian goods.

A sweeping 25 per cent tariff could come in March or later.

Already, Diemo has experienced a slowdown in orders, Friesen said.

He cited a “perfect storm” of election-inspired uncertainty and a general downturn in manufacturing — especially agricultural — due to high interest rates and low commodity prices.

That slowdown has persisted amid the tariff threats, Friesen said. Diemo Machine Works has cut its production by 25 per cent, leading to layoffs. It now employs roughly 100 people.

“This feels significantly more uncertain than (2018),” Friesen said, noting this time, Diemo could be struck by both countries. “Because we’re exporting into the States, we really wouldn’t want to pay reciprocal tariffs on steel.”

Derek Hird, owner of tire manufacturer Evolution Wheel, echoed that stance. His Winnipeg business exports most of its goods to, and imports steel from, America.

“Canadian steel is not an option we’re seriously evaluating,” Hird said, recalling Canadian steel producers raised prices in 2018 as U.S. tariffs unfurled.

He’s been scouting U.S. locations in case a trade war erupts. Twenty-five per cent tariffs would “crush” Evolution Wheel, he told the Free Press earlier this month.

“Right now, we’re in… an evaluating and holding pattern,” Hird said Wednesday. “We don’t necessarily want to make an investment without knowing that we need to and what the (Canadian) government’s response might be.”

Moving south is an increasingly common topic among manufacturers Andrew Firth knows. The chief executive of Yakta, which makes zero-turn lawn mowers in the Rural Municipality of Woodlands, shared concern Canadian companies may leave if tariffs are implemented without government support.

“At the end of the day, we’ve got to remain profitable,” Firth said. “To do that, we have to look at everything.”

Many U.S. departments have been “very aggressive” with incentives to draw manufacturers, Firth relayed. Interest-free loans on equipment and large tax credits are among the lures.

He doesn’t want to leave Canada; there are 240 Canadian employees between Yakta and its sister company Arrowquip, a farm equipment creator. Even so, Firth is hoping for updates from Canadian governments about U.S. negotiations and action plans.

Uncertainty remains the biggest challenge, Hird underscored. He expects Evolution Wheel’s costs to rise “exponentially” if Canada places tariffs of its own.

Export levies on Canadian products Americans rely upon — like hydroelectricity or potash for fertilizer — may be a better path if needed, Hird suggested.

No tariffs at all is the best route, said Terry Shaw, Canadian Manufacturers & Exporters regional vice-president for the Prairies. If U.S. tariffs are imposed, the national association will advocate for retaliatory tariffs to pressure America.

“We are not competing economies, we collaborate,” Shaw stressed. “We build things together.”

Several Manitoba manufacturers shared the same sentiment. Diemo Machine Works, for instance, has two-decade-long relationships with U.S. partners.

“We have found that our American customers are very enjoyable to work with, and they appreciate the service we provide,” Friesen said. “We definitely like working with the Americans.”

Yet the longer a trade war looms, the more it impacts the U.S. market, Shaw noted. Shifts in U.S. demand will impact Canadian workforces, he added.

Nearly one-third of respondents to a January CME survey reported already delaying investments; 22 per cent had frozen hiring. Almost half of the 311 responding businesses, spanning the country, said they’d freeze hiring or lay off workers if tariffs were imposed. Forty-nine per cent intended to shift some production to the U.S. to avoid extra fees.

The Manitoba government struck its U.S. Trade Council last month. The goal of the council, in part, is to highlight the potential impacts of tariffs on local businesses and their resulting decisions, said member Chuck Davidson.

“I think a lot of companies are still holding out hope that we can come to … an understanding that tariffs are not going to be beneficial to either side of the border,” said Davidson, president of the Manitoba Chambers of Commerce.

Some manufacturers increased production in recent weeks to ship larger orders ahead of tariffs, he noted.

“We’ve been doing a lot of work,” Economic Development Minister Jamie Moses said when asked what Manitoba was doing to maintain its manufacturing sector.

Manitoba’s elected officials have met with counterparts across Canada and in the United States to discuss trade, tariffs and internal trade barriers, Moses outlined. The U.S. Trade Council involves a “broad cross-section” of industry, he added.

Manitoba exports roughly $200 million worth of steel to the U.S., according to CME data. It imports about $195 million.

— With files from The Canadian Press

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