CANADA TRENDS AND DEVELOPMENTS Contributed by: Kevin West, Andrea Hill, Priya Ratti and Meryam Kellow, SkyLaw
or taxes to be a ground for termination. However, some force majeure clauses may allow for ter - mination due to delay, which may be triggered if supply chains are disrupted. Termination clauses With new protectionist policies from all levels of government, diligence will need to be performed to determine the extent to which the govern - ment can cancel an existing agreement and the amount of compensation, if any, that might be available. Procurement policies It is yet to be seen how governments will impose restrictions on US businesses in procurement contracts. We expect that counterparties will look to determine if the entity is beneficially owned by a US person. Businesses that rely on government contracts will need to carefully consider the new rules and the risks of further changes. Which goods and businesses are subject to tariffs? Most of the tariffs announced by the United States apply across the board without exemp - tions. This causes a challenge for exporters who have not had to worry about tariffs in the past. Specific industries have been targeted with additional tariffs, including the auto sector, steel and aluminium and softwood lumber. Technol- ogy and services will not be directly impacted by tariffs at the moment, but this could change. The United States is also targeting retaliation for Canada’s digital tax. What steps can be taken when there is a slowdown? If the tariffs and turmoil result in a slowdown of activity, investors will need to consider how costs can be reduced. Employee layoffs are a
challenge and in Canada may entail significant near-term costs. Collective bargaining agree - ments should be reviewed. Agreements with clients and suppliers will need to be carefully considered. Potential acquirors should consider the Canadian response Canada is taking firm and direct action in retali - ation for the tariffs. In response to the 4 March 2025 tariffs, then-Prime Minister Trudeau addressed the nation and promised immediate and wide-ranging retaliatory tariffs, as well as unspecified non-tariff measures. According to a survey by KPMG released earlier this year, nine in ten Canadian business leaders believe Canadian governments must stand firm in protecting Canada’s sovereignty and values and over eight in ten want a targeted, dollar-for- dollar retaliatory response and are willing to suf- fer short-term pain. Investment Canada Act Investments by non-Canadians are subject to the Investment Canada Act. This is an inherent - ly political tool for the government to block or impose conditions on investments from acqui - rors or in industries that the government is sensi- tive to. Recently, a large focus of the government was on acquisitions by nations such as China and Russia in critical minerals. US investors were often given a friendly pass. Not any longer. With the USA aligning itself with Russia, and as a way of retaliating against the USA, we expect the Canadian government to subject many more US investments to scrutiny under the Investment Canada Act. Moreover, the Prime Minister in his 4 March 2025 address made clear that Canada will take measures to prevent predatory behaviour that
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