A new survey shows Canada’s auto sector is rethinking supply chains and seeking new markets as it faces tremendous pressure from the trade war started by the United States.

“We’re seeing a foundational and irreversible transformation underway in the Canadian auto sector,” said Dave Power, who leads KPMG Canada’s automotive division, in a news release.

“The implications down the supply chain and across the economy will be significant.”

The KPMG Canada survey of 128 automakers and suppliers found that 82 per cent are actively adjusting their supply chain strategies and 70 per cent are exploring international markets.

The moves come as U.S. President Donald Trump has said he doesn’t want any cars coming into the country from Canada and has imposed a variety of tariffs to impede imports.

The survey found that 63 per cent of original equipment manufacturers and suppliers have increased prices because of the new tariff environment and 62 per cent have substantially changed their product mix because of it.

Power says the changed trade relationship with the U.S. has fundamentally changed the automotive sector and is creating uncharted risks across the ecosystem.

The foundational changes underway are leading to unpredictability, but 40 per cent of executives surveyed believe they can emerge stronger with the same business model, 17 per cent expert to have to fundamentally change their company and nine per cent think they might fail.

Along with new markets abroad, manufacturers are also looking to diversify into other sectors, including 51 per cent who say they’re already transitioning their business to defence production.

Switching to defence spending would, however, require significant government investment, with 87 per cent of respondents agreeing that would be needed.

And while the government has promised a major ramp-up in spending, 74 per cent said that no amount of defence spending would make up for the business lost to the U.S.