Uncertainty is proving harmful as Trump policies remain unclear
The decision to pause US tariffs on billions of dollars of Canadian goods was welcomed, but President Trump’s punishing tax hanging over cross-border trade is harming the economy anyway.
With the potential for Canadian products instantly becoming 25% more expensive for American buyers, many small businesses say they are seeing cancelled or delayed orders – 18% overall rising to 34% among exporters. And more than half say they don’t feel prepared for the impacts of tariffs.
New data from the Canadian Federation of Independent Business also reveals that the uncertainty is weakening the intentions of business owners to expand (24% of respondents are looking to delay plans) and causing them to consider reducing the size of their workforce or the hours that they work (20%).
"The uncertainty around tariffs is almost as damaging as tariffs themselves. It reverberates among business owners right now and businesses are adjusting operations on the fly as a result," said Simon Gaudreault, CFIB's chief economist and vice-president of research. "While we may have a few weeks of reprieve, there is still concern about the long-term impact of tariffs on small businesses."
With retaliatory tariffs also a risk, 45% of respondents are seeking new suppliers and 62% may pass on the additional costs to customers.
"Some firms may change their business models and find new markets, but it'll take some time. Many exporters though are telling us it will be a major struggle to pivot, and they'll have to decide whether to lay off staff, remain in Canada or explore other markets," Gaudreault added. "In some sectors, like retail, many businesses are indicating they'll be forced to pass on increased costs to customers. Others, like in the agri-business sector, report they will be forced to eat most of the increased costs.”
CFIB’s survey of business owners shows that one in five say that if tariffs are introduced, their business will survive for less than three months unless taxes are cut.
More than eight in ten respondents want the Canadian government to do more to address the risks including recalling parliament to stop the planned increase in the carbon tax due on April 1, make the carbon tax rebates tax free, and passing proposed legislation to increase the lifetime capital gains exemption threshold to $1.25M and ensuring the Canadian Entrepreneurs' Incentive stays in place.
“Overall, small business owners are sending a clear message that US tariffs and Canada's retaliatory measures will add further financial strain on businesses and Canadians alike," concluded Gaudreault.
