Canada’s IPAs caught up in North American political fallout

Within a matter of months, the White House has managed to shake economic, cultural and social ties built over generations with its northern neighbour. Donald Trump’s tariff threats and comments about annexing Canada — which according to its new prime minister Mark Carney present “the most significant crisis of our lifetimes” — have sparked retaliatory import duties, boycotts of American goods, and threats to cut off electricity flowing to the US.

Canada’s investment promotion agencies (IPAs) are on the front line of this fallout. The US is the country’s biggest source of greenfield FDI, accounting for 47% of project announcements over the past two decades, fDi Markets data shows. They have deeply-integrated supply chains across their shared border, the longest in the world, and the USMCA trade agreement has helped Canada lure investors from other regions wanting to tap the world’s biggest economy.

The countries’ now rocky political relations are creating steep challenges for Canada’s IPAs. “We are seeing some global businesses — including US-based companies — put their expansion plans on hold, as they await greater clarity” regarding the White House’s on-again-off-again tariffs, says Invest in Canada CEO, Laurel Broten.

It is a trend confirmed by local investment promotion leaders stretching from Vancouver to Montreal. They tell fDi the uncertainty of fast-evolving politics is causing some foreign firms to pause strategic investment decisions and delay completion dates until there is more clarity.

Truthful tactics

Local investment promotion officials are rising to this challenge. “There is all this conflict … at the high political level. But business still continues to be done. So we’re very focused on driving that business,” says Rick Christiaanse, CEO of Invest Alberta.

IPAs’ role as a first point of contact for foreign firms has expanded to the point of becoming receptacles for investors’ far-reaching concerns. Investissement Québec is fielding calls from CEOs asking how to pay tariffs, and European firms wanting to know if their US exports from the province would be caught by duties against Canada or the EU. The IPA is being asked by US subsidiaries operating locally that sell back into their home market about whether they would be captured by US duties.

“Unfortunately, it’s not a question we have the answer to,” says Investissement Québec’s vice-president of FDI, Daniel Silverman.

This type of practical and on-the-ground advice is among foreign firms’ biggest requests and prompts agencies to sharpen their advisory skills and go beyond the typical investment promotion and facilitation playbook.

“Investors are asking for information about what is happening, what we’re expecting, and data to help re-evaluate investment decisions in real time,” says Daniel Hengeveld, vice-president of investment attraction at Toronto Global, adding that the agency’s aim is to equip investors with this information to help them navigate this period of uncertainty.

These open lines of frequent communication are one way IPAs are drawing on their Covid-era playbook, to ensure investors maintain confidence in their projects and Canada. Transparency is also key. “We’re trying to be candid and open about the uncertainty, [otherwise] it’s the elephant in the room,” says Julia Niebles, an investment attraction adviser at Toronto Global.

IPAs are adjusting their pitch by going back to basics and emphasising Canada’s value proposition: a highly-educated workforce, natural resources, clean electricity, institutional stability, and free trade agreements with 51 countries. But they are also diversifying their target countries. Toronto Global is becoming more proactive in South America, while Invest Alberta is focused on growing investment from Asia and Europe. “We are learning our lesson that at the end of the day, relying on the US isn’t a comfortable place to be long term,” says Mr Christiaanse.

British Columbia also wants more FDI from Europe, pushing their overlapping interests in sustainability — an area where the US is pulling back. “British Columbia has a strong clean energy advantage, very high level of [environmental, social and governance] commitment, and good focus on reconciliation with our Indigenous nations. So it’s very well aligned with what I think many European markets will be looking for in terms of investment … relationships,” says Diana Gibson, the province’s minister of jobs, economic development and innovation.

Avoiding Trump feedback

For all the focus on diversifying, a number of IPAs stress they remain committed to winning investments from their southern neighbour. “The US is still very much a priority market for us,” says George Spezza, director of economic development for the Niagara Region. “It’s the majority of our lead generation pipeline activities and a market we are not turning away from.”

However, IPAs are using new strategies to avoid the US’s political headwinds. Investissement Québec is being more targeted in the sectors it prioritises. “It’s a tough sell right now to say to an American manufacturer ‘Come and manufacture your product in Quebec’,” says Mr Silverman, noting that Mr Trump’s focus on keeping and creating manufacturing jobs in the US means investing abroad “could put the company in an uncomfortable position”.

Invest Alberta is using a different strategy to help American investors avoid the White House’s wrath: delaying the public announcements of projects they commit to in the province. “It’s not the right time to be in the media with ‘American firm announces investment in Canada’... You don’t want to open any American company up to getting feedback from the Trump administration,” says Mr Christiaanse.

In recent months the same IPA has nonetheless put more boots on the ground in the US — specifically in Democratic strongholds New York, Chicago and Boston. “This period of turmoil is going to give us an opportunity [for] more discussions, and we need to talk more to investors,” says Mr Christiaanse.

Toronto Global is also bypassing national-level politics by tapping into state and municipal relationships. “We’ve had subnational delegations reach out to us, start conversations, saying: ‘we have a lot of alignment … and we see opportunities for collaboration’,” says Ms Niebles. “Subnational actors aren’t just sitting back and waiting for the highest levels of governments to make decisions.”

With this combination of tactics, and Canada securing a record high 568 FDI project announcements in 2024 according to fDi Markets, the country seems in as good a shape as possible to ride out this period of political turmoil.