Thank you, Mr. Lavigne.
Thank you everyone for having us.
There are indeed many businesses in Quebec and elsewhere in Canada that are dealing with major commercial upheaval as a result of both the U.S. tariffs imposed under section 232 and the fundamental change in the way those tariffs are applied.
The decision to now apply ad valorem tariffs, or tariffs on the total value of the products rather than on the relative value of the steel, aluminum or copper content, is having extremely serious consequences. This is a technical change with a disproportionate economic impact. In practical terms, the more a product is processed and the higher its added value, the more it is penalized. The result is that secondary or tertiary processing companies, which are the heart of Quebec's manufacturing sector, are over-penalized. Their gross margins, which are already slim in many cases, are being almost entirely or entirely wiped out by the tariffs. In many cases, the U.S. market has become economically inaccessible because our products cannot compete as a result of these tariffs. Businesses whose products were and still are compliant with the Canada-United States-Mexico Agreement, or CUSMA, are now subject to applied tariffs of 25% on the total value of their products, which is simply unsustainable.
It is important to make that clear to the committee today. What is happening is that the application of ad valorem tariffs under section 232 has now rendered CUSMA inoperative. Businesses that comply with the rules of origin under CUSMA and that structured their supply chain based on the agreement are still subject to unpredictable, punitive tariffs with no effective short-term recourse.
All of this undermines the very credibility of the North American trade framework, discourages investment in Canada and Quebec and accelerates decisions to relocate to the United States. In most cases, this is not a strategic choice, but one that is simply necessarily to ensure the company's survival.
For us, the most critical short-term challenge is liquidity. What is more, Canada's retaliatory tariffs, combined with the administrative burden and long delays associated with the remission process, are forcing companies to front the cost of the tariffs to the detriment of their operations, investment projects and, ultimately, jobs, of course.
We have had many clear reports from our members. Acquisition and expansion projects have been put on hold, contracts have been or will be lost once they are renegotiated, particularly with American clients. As a result, some companies will be choosing to relocate their operations to the United States. In fact, some are already in the process of doing so.
The Fédération des chambres de commerce du Québec is calling for swift, targeted and structural measures to address this situation.
We have several short-term recommendations.
First, as far as possible, the government must avoid imposing new countertariffs on imports of intermediate inputs and semi-finished materials from the United States. If necessary, countertariffs should be limited to finished products that compete with equivalent products already manufactured in Canada.
Second, the government must immediately reinstate and extend horizontal remissions on the countertariffs applicable to steel and aluminum imports from the United States for all manufacturing sectors until the tariffs have been completely lifted.
Third, the government must reverse the burden of proof for the remission process for companies. In our opinion, remissions should be granted up front, and it should then be up to the Canada Border Services Agency to show, through investigations, that an equivalent Canadian capacity exists.
Fourth, the government must better promote the drawback program to manufacturers who export, with an expedited pathway for steel, aluminum and copper processors.
Fifth, the government must immediately relaunch the regional tariff response initiative, which is vital to SMEs in the current context, and it must keep that initiative in place until the current tariffs are lifted.
Finally, we believe it is essential that all revenue generated from Canadian tariffs on American or foreign goods, particularly those from China, be fully reallocated and used to support affected businesses and sectors, rather than being put into the consolidated revenue fund.
These measures are essential in the short term, but they are no substitute for what really matters, and that is quick, tangible progress in the discussions with Washington on the section 232 tariffs. Without that, CUSMA will continue to exist on paper but be violated in spirit and letter, as is currently the case.
We will be happy to answer any questions you may have.