‘The worst outcome for Canada in the trade war is a bad deal, but the second worst outcome is the never-ending uncertainty small business owners have been wrestling with for the past six months’
Business closure is becoming a possibility for some Canadian employers amid the tariffs issue, according to a recent report from the Canadian Federation of Independent Business (CFIB).
Nearly one in five (19%) Canadian small businesses facing tariff-related costs say they will not survive more than six months if current conditions persist.
Small businesses are being hit hardest by both U.S. and Canadian tariffs on steel and aluminium (59%), as well as Canada’s own retaliatory tariffs on other U.S. goods (58%), according to the report.
"Small businesses don't have a lot of runway left. They are trying their best to absorb the costs, but if nothing changes, they will be forced to make some tough decisions," says Corinne Pohlmann, executive vice-president of advocacy at CFIB. "The worst outcome for Canada in the trade war is a bad deal, but the second worst outcome is the never-ending uncertainty small business owners have been wrestling with for the past six months.”
Confidence among Canadian small business owners has dropped significantly amid rising costs, according to a separate study.
Issues that small businesses face
The CFIB survey, which includes responses from 1,721 business owners, highlights that 62% of small businesses are facing higher expenses due to the ongoing trade war. Nearly half (48%) report lower revenues, while 41% are experiencing supply chain disruptions and 36% have paused investments. In addition, nearly one-third of Canadian small and medium-sized enterprises (SMEs) expect to be negatively affected by the loss of the $800 U.S. de minimis exemption.
CFIB claims that Ottawa is collecting billions in additional tariff revenue on U.S. imports, and 82% of small business owners believe the federal government should ensure that any returned tariff revenue includes support for smaller businesses affected by trade disruptions.
“The federal government needs to provide some stability and return tariff revenue to help small businesses. We've suggested several options, including temporarily reducing the federal small business tax rate to zero or a tariff rebate designed on earlier models, like the carbon tax rebate,” says Pohlmann.
“The trade war's impact on Canada's small businesses should be top of mind for the government as Canada continues its negotiations with the U.S. Canada can't fix its productivity crisis without empowering its entrepreneurs. If the government wants to build one Canadian economy, it needs to ensure small businesses are part of the solution and that includes providing them with tariff support during this very challenging time.”
Previously, Canadian business groups urged the federal government not to rush into a trade agreement with the U.S., warning that ongoing uncertainty is already affecting companies and their employees.
Previously, the federal government announced it will remove all remaining federal exceptions from the Canadian Free Trade Agreement (CFTA), eliminating all 53 that have existed since the Agreement’s introduction in 2017.
