TORONTO — Canadian small businesses are losing confidence in the U.S. as a reliable trading partner, and are shifting to suppliers in domestic and other international markets in the wake of President Donald Trump's tariffs.
A new report by the Canadian Federation of Independent Business says 47 per cent of members it recently surveyed do not consider Canada's southern neighbour to be a reliable trading partner anymore.
Nearly one-third of business owners report having already shifted to suppliers and markets within Canada, while 27 per cent say they intend to increase their domestic investments. Another 33 per cent plan to reduce their reliance on the U.S. over the next six months.
"That's obviously a massive, massive change on the part of Canada's business community ... that has been quite linked to the U.S., both as an export market and as a source of so many of Canada's imports," said CFIB president Dan Kelly in an interview.
"It paints a pretty stark picture of the state of Canada-U.S. relations right now.'
Trump's blanket 25 per cent tariffs on imports from Canada, with a lower 10 per cent rate for energy products, took effect March 4. Two days later, the president paused the levy's application to goods and services compliant with the United States-Mexico-Canada Agreement until April 2.
The CFIB said that while most companies that export to the U.S. have CUSMA-compliant goods, 30 per cent said they are unsure about their compliance and half want government support in handling the necessary paperwork.
Trump also signed a plan to institute 25 per cent tariffs on all steel and aluminum entering the U.S., ending previous exemptions for Canada. Those tariffs took effect March 12.
A third category, dubbed "reciprocal" tariffs, which would apply to goods from countries that have tariffs on U.S. goods, are slated to come into force April 2.
“As one business owner told us, the unpredictability of the current situation is making surviving the pandemic look like a walk in the park,” said CFIB chief economist and vice-president of research Simon Gaudreault in a press release.
“As we gear up for the April 2 reciprocal tariffs, no one knows where the U.S.-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.”
The business group said small businesses are promoting Canadian-made products, delaying or cancelling expansion plans and exploring international alternatives.
But only three in 10 say they are confident their actions will help offset the impact of the trade war.
While small firms are planning contingencies for all potential scenarios when the April 2 deadline arrives, Kelly said it's been challenging for many.
"The U.S. is such a massive market for consumer products and industrial products," he said.
"I've talked to lots of businesses who say, 'The only company that supplies this part is in the U.S., like there isn't another one that does the specific thing that I use,' and so they're having to think about fundamental business changes in some cases in order to make these kinds of accommodations."
This report by The Canadian Press was first published March 26, 2025.
Sammy Hudes, The Canadian Press
