Escalating trade tensions with the US have hindered Canada’s manufacturing sector. The sector has contracted for eight consecutive months to the end of September. However, challenges in the industry have been ongoing for years. Bloomberg reported that business investment in Canada has trailed the US since 2015. Manufacturing CEOs are now calling for some help in the form of tax incentives. That, combined with a potential trade deal with the US, may help ease the pressure on this critical sector of Canada’s economy.

• Canadian manufacturing executives are encouraging Canada’s government to support the industry with corporate tax cuts and incentives similar to those recently introduced in the Big Beautiful Bill in the US.
• According to the Association of Equipment Manufacturers, incentives such as support for research and development or bonus depreciation could help Canada’s manufacturing sector. The association believes these measures have supported US manufacturing amid trade tensions.
• The Canadian federal government is scheduled to announce its Budget 2025 on November 4. Manufacturing executives believe it will have a pro-growth, pro-business agenda.
• The sector may stabilize from a trade deal with the US. Prime Minister Mark Carney confirmed on Tuesday that a sector trade deal could be finalized before the end of October.
• And the US is facing its own challenges. The US government shutdown has now become the second-longest in history. The two sides are still at odds over expiring healthcare subsidies. Federal civilian workers will miss their first whole paycheck this Friday.

Manufacturers are calling for support and are optimistic they will get some help in the upcoming budget. It has been a tough year for manufacturers, particularly in industries facing high US tariffs, such as lumber, automotive and steel. A trade deal and tax incentives may help ease the pressure on the entire industry and prepare it for future growth.

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