Why Canadian factories are hitting pause — and the paradox it creates

On July 7, 2026, KPMG released a national survey of 275 Canadian manufacturers. The results are stark: 57 per cent have paused, reduced, or cancelled capital expenditure projects because of tariff uncertainty. 42 per cent have done the same to research and development. 52 per cent describe themselves as operating in "endurance mode" — focused on survival rather than expansion. And four in ten have already moved production to the United States, or are actively considering it.

Tariffs create two kinds of damage. The first is direct — the cost of the tariff itself. The second is slower, quieter, and possibly more consequential: the investment decisions that don't get made at all.

The headline numbers

What the 57 per cent is actually doing

The capital-investment number is not a single decision. It's three:

What tariffs currently sit on the table

For context, the tariff picture Canadian manufacturers are trying to plan around:

Uncertainty is a slower kind of pressure than a tariff. It shows up in decisions that don't get made.

The paradox — and it's a real one

Two weeks before the KPMG survey, the Business Development Bank of Canada published a separate study putting a $350-billion price tag on the country's small-business productivity gap. The gap, per that study, is closable through deeper digital and AI investment. In other words: Canada's own federal Crown corporation is telling manufacturers they need to invest more in modernization, at the exact moment 57 per cent of them have hit pause on doing so.

That's not necessarily a contradiction the manufacturers themselves can resolve. It's a structural bind. The Canadian Manufacturers & Exporters (CME) June 2026 survey found that nine in ten manufacturers support extending CUSMA, and roughly three-quarters say a failure to secure a full 16-year renewal would negatively affect their business. The signal from operators is consistent: they want certainty before they commit capital.

Are you in endurance mode?

The KPMG number — 52 per cent — is a category, not a definition. What it looks like on the ground varies. A quick self-check:

What to watch next

None of the manufacturers making these decisions are being reckless. They're doing what any business does when the ground beneath a 10-year investment horizon shifts monthly — they wait. The cost of waiting, however, compounds. Capacity that doesn't get built now takes years to build later. Digital transformations that get postponed usually get postponed again. And every plant that moves south is a plant that doesn't come back the moment tariffs ease.

The KPMG survey isn't a forecast. It's a measurement of where the sector stands right now. Whether it looks the same in six months depends on decisions being made in Washington, Ottawa, and inside 275 boardrooms across the country.