Amid tariff war with the U.S., Manitoba manufacturers feel the squeeze

As thetrade war heats up between Canada and the United States, companies in Manitoba with supply chains that cross the international border are struggling to adapt to new tariffs.

Canada's largest manufacturer of fire engines says it has already increased prices by oneper cent on all new trucks to compensate for losses resulting from U.S.tariffs and expectedcounter-measures by Canada.

"Any time there's any type of price increase, whether it be on the raw material, whether it be on the freight, dutyall those costs are passed along to the customers," said Sandy Skrumeda, vice-president in charge of finances at Fort Garry Fire Trucks in Winnipeg.

The federal government will announce on Friday which goods from this list will be subject to tariffs when they enter Canada from the U.S.

The measures are in response totariffs on Canadian steel and aluminum announced by the United StatesMay 31.

Fort Garry makes between 100-125 custom-built fire trucks a year for municipalities across Canada, in the United States and overseas. They cost between $200,000 and $1 million.

The fire trucks are nearly70 per centmade from U.S. parts, many of which Skrumedasaid could get hit with duties including aluminum ladders and steel manifolds.

After the company learned Canada was considering hitting back with its own tariffs,Skrumedasaid Fort Garry's purchasing department began looking for alternativesuppliers.

Unfortunately, she said, the list of alternatives came up short.

Fort Garry has spent more than 30 years building relationships with U.S. suppliers which deliver high-quality parts quickly. Looking to suppliers overseas comes with too much risk to seriously consider at this point.

"They know what we need. Sometimes setting something up with a supplier can take months," she said.

As far as looking to buy from domestic suppliers,some parts, like the aluminum ladders required for fire trucks, are not made in Canada.

"[The tariffs] may give opportunity for Canada to set up these types of companies so people buy local but that takes time. It's not going to happen overnight," saidSkrumeda.

'It's staggering in its impact'

Don Leitch, president and CEO of the Business Council of Manitoba, said trade for the province is "critical."

"It's staggering in its impact," he said."There are many companies in Manitoba who exist because of trade."

According to provincial data, Manitoba imported $16.6 billion worth of U.S. goods in 2017. That's more than the value of the province's exportsto allcountriescombined.

Because the U.S. and Canadian economies are so intertwined, a host of companies, especially those in manufacturing, are set to be hit more than once, he said.

"They're getting squeezed on their selling price, they're getting squeezed on the price they'll have to pay for those goods," Leitch said.

Companies like Fort Garry, for example, routinely import aluminum components that originate in Quebec, which are then sold to the U.S. for further processing and then shipped back to Canada as parts. The aluminum ends up being dinged with duties twice.

For Leitch, whose organization advocates for diverse economies and free trade, no one wins in a trade war. Both sides of the border will be negatively affected.

"It factors into construction costs. It factors into investment costs. And it just creates significant uncertainty across the whole range. That's the worstthing," he said.

The top items Manitoba imports arepesticides, autos, engines, tractors and farm equipment.

In the list released by the federal government on May 31, potential items that could be hit withtariffs includeherbicides and insecticides, boats, fresh orange juice, jams and sauces, meats and household items.

An official from the federal department of finance said the total value of imports from the U.S. subject to new tariffs will equal $16.6 billion.