Canadian small businesses are feeling the pressure of the Canada-U.S. trade war as a national advocacy group warns about 40 per cent will close shop for good within a year.
Tariffs on steel and aluminum and retaliatory duties on U.S. goods are hurting small business owners, with a quarter fearing they will go under in six months if there aren’t any changes to tariff rates, according to the Canadian Federation of Independent Businesses (CFIB)
“It’s been, unsurprisingly, perhaps, a roller coaster of announcements, re announcements, retractions and businesses have had to navigate this uncertainty almost on a constant basis trying to adjust and readjust their plans,” Simon Gaudreault, CFIB’s chief economist and vice-president of research, told BNN Bloomberg in an interview. “They’re telling us that it has had a significant impact on their business in many cases, and the impacts can be also quite varied.”
The group says the trade war is squeezing small businesses as nearly 62 per cent are dealing with higher expenses and 48 per cent are seeing lower revenue.
“About seven out of 10 businesses mentioned that they were impacted by at least one type of tariff, or retaliatory tariff from the trade war,” said Gaudreault. “That’s a significant number. In some cases, businesses are more directly impacted. We can think of manufacturers, for example, but you also have in certain sectors of the economy significant numbers of businesses indirectly impacted. We can think, for example, of transportation companies that are part of the supply chain that are being caught in the crossfire.”
The U.S. Commerce Department recently hiked steel and aluminum tariffs on more than 400 products pushing a 50 per cent rate.
U.S. President Donald Trump imposed 35 per cent tariffs on products not covered under the Canada-U.S.-Mexico agreement (CUSMA) earlier this month. Goods transshipped to another country to evade the tariffs will be subject to a transshipment levy of 40 per cent.
“The 50 per cent tariffs, for example, that the U.S. government has put in place represents a significant addition to their business costs,” said Gaudreault. “Actually, that’s what our survey says. That’s one of the most important impacts that has been reported by businesses. Additional costs.”
The report found 41 per cent of businesses are dealing with supply chain disruptions and 36 per cent paused investments as a result.
“Businesses may also react to this by pausing certain business plans,” said Gaudreault. “For example, a third of businesses in our surveys mentioned … that they were pausing various plans like investment in machinery and equipment or hiring, and in some cases, you will also see production slowing down as businesses are trying to read a bit of what’s going on and trying to plan and build or reduce inventory.”
Canada has implemented retaliatory tariffs of 25 per cent on goods from the U.S. without any price adjustment from suppliers, according to the Department of Finance.
The CFIB estimates Ottawa has generated $29.8 billion from counter measures. They said 82 per cent of businesses want the federal government to support them with revenue collected from counter tariffs.
