One in five Canadian small businesses could shut down within six months due to tariffs
Small businesses are under pressure from the trade war and the shifting nature of tariffs and countermeasures, facing higher expenses, declining revenues and supply chain disruptions, says Michelle Auger, senior policy analyst at the Canadian Federation of Independent Business (CFIB).
One in five Canadian small businesses grappling with tariff-related costs could be out of business within six months if conditions don’t change, according to CFIB, whose latest report underscores the mounting strain on employers.
This pain isn’t confined to a few industries – it’s widespread, and the implications extend beyond small enterprises. Auger points out that while the immediate focus is on SMEs, the ripple effects of closures and cutbacks would inevitably touch larger employers too. If 19% of small businesses can’t weather the tariff storm, that represents a significant portion of the Canadian workforce suddenly at risk.
Supply chain disruptions, lost contracts and reduced consumer spending driven by small business instability could also cascade into bigger corporations, tightening margins and slowing growth, she says.
“That that's a huge amount of people who are at jeopardy of losing their jobs, and that's what we're saying to the federal government; we need to see change and reprieve for small businesses, because this could have rippling effects,” she explains.
Rising costs force tough staffing and supply chain decisions
According to CFIB, 62% of small businesses report higher costs because of tariffs, 48% are dealing with lower revenues, and more than a third have paused investments. Small firms are being hit hardest by tariffs on steel and aluminium (59%) and by Canada’s retaliatory tariffs on U.S. goods (58%). That reality has translated into difficult staffing decisions.
“One business owner was telling me that instead of a five-day work week, he's gone down to four days just to make sure he can make ends meet and also hold on to the staff he has,” Auger says.
Yet not all owners are able to avoid cuts.
“I think a lot of businesses are having to lay off right now and take that approach to staffing as a way to mitigate cost,” she explains.
For those trying to avoid layoffs, small operational shifts can help reduce tariff exposure. Auger points to tactical adjustments in supply chains and contracts.
“Employers can look at shifting supply chains, looking for other markets to sell to or import from. There are also ways of structuring contracts with businesses where services could be taken out of contract costs,” she says.
Still, she notes many entrepreneurs are unaware of these technical workarounds, often relying on customs brokers to navigate the complexities.
Relief measures fall short as backlogs mount
The federal government’s recent move to lift countermeasure tariffs offers some relief but she stresses that this doesn’t undo the damage already done.
“There are already billions of businesses that have paid into these counter measures, and these additional funds that have been collected in Ottawa. So, we continue to urge the government to get that money out to help support those businesses that are struggling,” she says.
Beyond the financial strain, structural inefficiencies are compounding the problem. Auger points to the federal remission program, designed to help firms apply for relief from countermeasure costs.
“The federal government remission program is completely backlogged,” she says. “The remission program was essentially established to help businesses cope with counter measures and help some who have been financially impacted, but because it's so backlogged, people aren't getting responses, and right now we haven't even heard of a business owner whose remission application has been successfully done.”
While there is hope that reducing internal trade barriers within Canada and giving small firms more access to procurement opportunities could provide long-term gains, Auger says the immediate concern is survival.
“The trade war has had such an impact on small businesses, and they're not really top of mind right now of our federal government,” she says. “Canada is built on small businesses – they are a large employer across the country, and we need to make sure we continue empowering those entrepreneurs to ensure we meet the productivity crisis that we're seeing.”
