‘Few small firms can absorb a 50% tariff, and few can pass that cost on to customers while staying competitive’
Already hurting due to the continued impact of trade disruptions caused by tariffs from the United States, small businesses in Canada are about to take another hit – which could further hurt their hiring capabilities, according to a report.
Two in five exporters sell products that would be hit by a proposed 50% U.S. tariff, with more than three-quarters of those firms expecting revenue declines, reports the Canadian Federation of Independent Business (CFIB).
Among the 40% of exporters reporting their products would be affected, more than one-third expect revenues to fall by 50% or more. Overall, more than nine in 10 exporters to the U.S. said they are concerned about the proposed tariff, and 32% described themselves as extremely concerned.
The tariffs “will cause massive dislocation for small businesses that rely on U.S. clients and American buyers that rely on Canadian suppliers," says Dan Kelly, CFIB president. "Most of these businesses have been operating under the long-standing assumption that [Canada-United States-Mexico Agreement] (CUSMA)-compliant goods would remain tariff free. The prospect of losing sales, slashing prices, or having to pivot to new markets altogether, is generating a lot of small exporter anxiety in the lead-up to August 19."
The U.S. government's threatened 50% tariffs on $28 billion in Canadian goods could ultimately cost the Canadian economy around 50,000 jobs – and the trade uncertainty driving that risk is unlikely to disappear before the end of President Donald Trump's mandate, according to a previous report.
The five sectors with the largest concentrations of exposure are machinery and equipment; wood, forestry and building products; plastics, polymers and packaging; agricultural, food and beverage products; and arts, jewellery and creative products, according to the CFIB.
Already, more Canadian businesses are closing than opening, with exits outpacing entries for six consecutive quarters – a reversal that threatens job creation, wage growth and career mobility across Canada, the CFIB previously warned.
Federal government’s comments
Previously, Prime Minister Mark Carney called the tariff action "the latest in a series of unilateral U.S. trade actions" that violate CUSMA, adding that Canada has made detailed proposals to resolve the dispute and modernize the agreement, and stands ready to intensify discussions in the coming weeks, according to a CBC News report released in July.
Carney had also pledged to defend Canadian workers against tariffs.
Meanwhile, following a meeting of the Advisory Committee on Canada-U.S. Economic Relations last month, Federal Trade Minister Dominic LeBlanc underscored that Canada will continue to work closely with provinces, territories, industry and labour to ensure a coordinated "Team Canada" approach, with talks focused on protecting Canada's interests ahead of this week's First Ministers' Meeting in Charlottetown.
The federal government has signed agreements with several provinces – including Ontario, Newfoundland and Labrador and Manitoba – that will help employers retain their workers amid the tariffs issue.
On July 1, the U.S. government declined to renew the CUSMA for another 16 years. A complete breakdown of the deal could cost Canada 102,000 jobs in 2027 alone, according to a previous report.
