Canada & US Trade Tensions Strain Small Business Relationships

By Kekeletso Nkele, small.news Assistant

(small.news) — Canadian small businesses increasingly view the United States as an unreliable trading partner one year into the ongoing tariff dispute, according to a new study from the Canadian Federation of Independent Business (CFIB), reported by Bloomberg and Global News.

The study shows that trade conflicts disrupt the daily operations of Canadian small businesses.

“Small businesses have faced massive uncertainty since this trade battle began last year,” Dan Kelly, president of the CFIB, said in a press release. “Owners struggle with frequent changes and threats—many are revised or dropped within hours. With the Canada–United States–Mexico Agreement (CUSMA) review coming soon, the stakes are higher.”

According to the survey, 75% of Canadian small businesses trading with the U.S. say the tariff fight has strained relationships with their U.S. partners. Meanwhile, 68% of the same group report being negatively affected by U.S. tariffs.

Tariffs Create Uneven Business Outcomes

CFIB research shows that tariffs are affecting firms unevenly. Of the surveyed owners, about 37% said 2025 was a good year for their business, while 35% reported that it was a poor year.

“Profits and revenues are down. This affects funds for investment and payroll,” said Marvin Cruz, CFIB’s senior director of research and one of the authors of the report. Cruz also said some owners are taking on debt or considering closing due to tariffs.

Debt, Closures, and Hiring Freezes

Among businesses that reported having a poor year, 18% said they had considered shutting down due to tariffs. In contrast, only 2% of businesses reporting an average or good year had considered shutting down.

Debt levels also varied widely. 31% of struggling businesses—those that reported a poor year—reported taking on additional debt. This compares with 10% of businesses reporting an average year and 5% reporting a good year.

Businesses experiencing weaker performance were also more likely to delay hiring and pause investments.

Limited Relief From US Court Ruling

A recent Supreme Court ruling is expected to provide some relief, though CFIB said the decision may not significantly change conditions for most Canadian exporters, as many goods are already covered by CUSMA.

However, the organization said the ruling could still help the 27% of businesses affected by tariffs on non-CUSMA-compliant goods. Steel and aluminum tariffs from both countries still challenge small businesses—44% say they are affected.

Government Support Program Struggles to Reach Small Businesses

CFIB also raised concerns about the federal government’s Regional Tariff Response Initiative (RTRI), noting that fewer than 1% of small businesses have applied for the program, and 77% are unaware it exists.

The organization said restrictive eligibility rules are a key barrier. In British Columbia, businesses must employ at least 10 full-time workers to qualify, while in Quebec, eligibility has closed, and applications were limited to manufacturing firms with annual revenues of $2 million or more.

CFIB Calls for Tax Relief and Tariff Rebates

The organization is urging the Canadian government to:

– Reduce the small business tax rate from 9% to 6%.
– Create a rebate program for tariff-impacted small businesses that ensures refunds are tax-exempt.
– Maintain the CUSMA agreement to protect supply chains and reduce uncertainty.