One-third plan to cut US business as confidence drops and planning grows more difficult
Canadian small businesses are shifting supply chains and investment strategies as US-Canada trade tensions continue.
According to new survey results from the Canadian Federation of Independent Business (CFIB), widespread disruption caused by tariffs is prompting owners to move away from US-based markets.
A third (32 percent) of surveyed business owners have already changed their suppliers or markets to within Canada.
Another 27 percent plan to increase investment domestically, while 33 percent intend to reduce their business activity in the US over the next six months.
According to CFIB’s chief economist and vice-president of research, Simon Gaudreault, “Businesses need more certainty, it's simple as that.
As one business owner told us, the unpredictability of the current situation is making surviving the pandemic look like a walk in the park.”
Gaudreault added, “As we gear up for the April 2 reciprocal tariffs, no one knows where the US-Canada trade war is heading in the long term. For some businesses, making drastic changes is not feasible, but others are taking actions to offset the current impacts.”
CFIB’s survey shows only three in 10 businesses believe their adjustments will offset the effects of the trade war. Businesses are also promoting Canadian-made products, delaying or cancelling expansion plans, and considering international alternatives beyond the US.
While 70 percent of small firms support Canada’s retaliatory tariffs, nearly 90 percent are struggling with business planning. Nearly half (47 percent) say they do not view the US as a reliable trading partner.
The survey also found that, although most US exporters have goods compliant with the Canada-United States-Mexico Agreement (CUSMA), 30 percent remain unsure about compliance.
Half of Canadian small firms indicated they would find government support useful when dealing with CUSMA-related paperwork.
Nearly one-third of exporters rely on the US de minimis rule to export goods. The rule allows shipments up to US$800 to be sent to US consumers without duties or tariffs, but it may be phased out.
“Small business optimism is at historically low levels,” said CFIB president Dan Kelly. With the federal election underway, he urged all political parties to include small business policies in their platforms.
He pointed to the need for commitments to eliminate remaining internal trade barriers and reduce the tax burden.
Kelly said restoring business confidence is essential to strengthening the economy in the uncertain months ahead.
