Economists say U.S. President Donald Trump’s trade agenda has become “rife with contradictions and vague statements.” (Foto AP/Frank Augstein, Archivo) ·ASSOCIATED PRESS
From cheese makers to the operators of continent-sprawling energy pipelines, Canadian companies earning big chunks of revenue in the United States have gone from bragging about access to American consumers and generating earnings in U.S. dollars, to spelling out strategies to withstand a trade war.
The latest deadlines from U.S. President Donald Trump’s White House suggest imported Canadian goods will be hit with a 25 per cent import tariff on March 4 (10 per cent on energy and critical minerals), as well as reciprocal tariffs that kick in April 2.
Of course, this could change at a moment’s notice, as Canadian officials continue negotiations with their American counterparts. On Wednesday, economists at Desjardins described a prevailing state of uncertainty for basically everyone.
“The whole situation is rife with contradictions and vague statements from the U.S. administration, which further clouds the issue for consumers, businesses, financial markets and policymakers,” Jimmy Jean and Marc-Antoine Dumont wrote in a research note.
“The main impact of imposing or simply threatening tariffs is a slowdown in economic activity, even if the goal is to increase local production,” they added.
With the fourth-quarter earnings season underway, executives from Canada’s largest companies are facing tough questions from investors about how Trump’s proposed levies could impact their bottom line. For many, the situation is not as simple as manufacturing in Canada, and selling in the U.S. Many have vast operations south of the border staffed by American workers.
In a recent report, New York-based Syntax Data used U.S. revenue as a starting point to understand which companies are potentially most at risk if higher prices for Canadian goods spur American consumers and businesses to seek alternatives.
Canadian fertilizer giant Nutrien (NTR.TO)(NTR) tops Syntax Data’s list, with 60.8 per cent of its annual revenue generated in the U.S., amounting to US$17.66 billion. America relies on Canada for more than 80 per cent of the potash used to nourish its crops, leaving farmers particularly exposed to the impacts of a trade war.
“The tariff costs and impact will be passed on,” Nutrien CEO Ken Seitz told analysts on a post-earnings conference call last Thursday. “It is going to mean rising costs for the U.S. grower.”
Next on the list is Canadian pipeline giant Enbridge (ENB.TO)(ENB), with 45.5 per cent of its annual revenue coming from the U.S., amounting to US$14.98 billion.
“We view the impact on volumes in our systems to be negligible in a tariff situation,” Colin Gruending, Enbridge’s president of liquids pipelines, said on a recent call.
“These are must-run systems, and society depends on it.”
Auto parts manufacturer Magna International (MG.TO)(MGA) is third on the list, with 25.4 per cent of revenue coming from the U.S., amounting to US$10.86 billion. Magna has about 142 manufacturing facilities across Canada, the U.S. and Mexico, and employs more than 73,000 workers across North America. Auto parts are seen as particularly vulnerable to tariffs, since they cross the Canada-U.S. border multiple times before incorporation in finished cars and trucks.
TC Energy (TRP.TO)(TRP) has the next largest exposure to tariffs via annual U.S. revenue, according to Syntax Data, amounting to US$6.28 billion or 52.2 per cent of its overall earnings. In 2019, the company changed its name from TransCanada to TC Energy in order to better reflect its assets in Canada, the U.S., and Mexico.
Last week, CEO François Poirier said Trump’s tariff threats have not impacted the company’s plans to focus its investments on America.
“We see the highest risk-adjusted returns being in the United States,” he said during a quarterly earnings conference call. “The vast majority of our discretionary capital is going, and we expect that it will continue to go, into the United States.”
Barrick Gold’s (ABX.TO)(GOLD) US$6.05 billion in annual U.S.-generated revenue (53.1 per cent) ranks the company fifth on the list. The price of gold (GC=F) is nearing US$3,000 per ounce, amid concerns and confusion over Trump’s tariff agenda.
Quebec-based cheese maker Saputo (SAP.TO) is next on the list, with US$5.78 billion in annual U.S.-generated revenue, amounting to 45 per cent of earnings. The dairy producer’s CEO Carl Colizza said earlier this month that he does not expect a material impact for the company because its Canada and U.S. divisions have “very few links between the two on a day-to-day basis.”
According to Syntax Data, Quebec-based Bausch Health (BHC.TO)(BHC) earns US$5.19 billion annually from the United States, amounting to 59.3 per cent of revenue. The pharmaceutical company makes branded generic drugs, mainly for skin diseases, gastrointestinal disorders, eye health, and neurology.
Gas station giant Parkland (PKI.TO) operates more than 4,000 fuel and convenience locations in 26 countries under banners including On the Run, Chevron, Pioneer and Ultramar. About 18 per cent of those are located in the U.S. According to Syntax Data, Parkland earns 20.1 per cent of its annual revenue in the United States, amounting to US$4.92 billion. The company is due to report its next quarterly financial results on March 5.
“If we were in a world of tariffs, I like our position relative to our peer group,” Kruger told analysts on a Feb. 6 earnings call. “Sixty to 65 per cent of our barrels stay north of the border, and they either go through our refining network, other refineries of customers, and/or off the coast. That’s a high fraction.”
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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