Conflict comes in many forms and whether we like to admit it or not, the world is currently at war on many fronts. While some countries are fighting conventionally with weapons, others are defending themselves against economic threats and challenges to their national sovereignty.
This is the case in Canada. While bombs are being dropped elsewhere, Canadian businesses are embroiled in an economic battle against what was a longstanding partner in trade and defense, and on the front lines of this fight are the more than one million small businesses that represent 98 percent of the economy.
From the restaurateur to the shop down the street, most, if not all, of these small businesses have been met with unprecedented challenges in the wake of the imposition of tariffs and, left with no other recourse, Canadian businesses, decision makers, and consumers alike have had to adjust to the new geopolitical landscape.
The tariff effect
Tariffs are a political and economic tool that have varied implications, depending on the motivation behind their use. Simply put, they are a tax imposed by one country on the goods and services of another, used as a form of political influence, to raise revenues, to protect competitive advantages through restricted imports, or to improve the predictability of the market.
Conversely, tariffs can also have unwanted consequences, including higher input costs, reduced profit margins, and cash flow strains, and often these result in higher prices that are passed down to the consumer. This, paired with weak consumer sentiment and ongoing financial uncertainty, can reduce sales, forcing business owners to seek out new markets and sources of supply.
Tariffs can weaken domestic industry, producing inefficiencies and slowing innovation due to less competition. And, as we have seen, they can generate tensions and even result in trade wars and the mass uncertainty that accompanies geopolitical strain. Luckily, a year into this new economic playing field, while uncertainty is still present, fewer businesses are reporting declines in sales and margins.
A recent survey conducted by BDC consulted almost 540 Canadian entrepreneurs and found that while entrepreneurs are still worried about the tariff impacts, they are also showing agility and resilience. According to BDC, “Compared to the start of the year, fewer businesses are reporting severe impacts. Currently, the bigger challenge is mounting economic uncertainty. Business owners are also increasingly concerned about volatile costs and unpredictable demand.”
The number of businesses affected by the tariffs is down slightly from March as many have adjusted their pricing, diversified their suppliers, and identified efficiencies to account for reduced sales, lower margins, and higher input costs.
A government in action
As is often the case with tariffs, businesses are passing on some or all of the added costs to consumers. They are also negotiating with suppliers, forming new strategic partnerships and alliances, and expanding into new markets—and many are looking to the government for additional support.
In the face of these unprecedented challenges, the Canadian government is also doing its part to empower business owners and reinforce the strength of the national economy. The budget put forth by the government acknowledged the magnitude of the challenges faced by small and medium-sized businesses in Canada and crafted a strategy to ensure their concerns were addressed and their challenges overcome.
The Honourable Rechie Valdez, Minister of Women and Gender Equality and Secretary of State for Small Business and Tourism, offers insight into some of the efforts the government has already taken to support small business, as well as what is in the pipeline in terms of additional resources and support.
She notes that, “We’re in the middle of a trade war and that level of uncertainty is causing anxiety and stress, so our federal government since coming into power has taken very significant steps to ensure that we are helping small businesses. But at a very high level, our Prime Minister’s and our government’s goal is to ensure that we’re going to build the strongest economy in the G7.”
One of the first orders of business was to eliminate interprovincial trade barriers that had resulted in a national economy divided. This has strengthened relationships between the Premiers and continues to open doors to opportunities for Canadian businesses to expand their markets and for Canadians to rally behind those businesses through improved access to their products.
As Minister Valdez explains, “We are removing our significant and heavy reliance on America and ensuring that Canadians and Canada can be its own best customer,” through a Buy Canadian Policy as well as a Small and Medium Business Procurement Program.
Likewise, the small and medium-sized export initiative, CanExport, paired with efforts to diversify trade partners, will work to strengthen opportunities for Canadian businesses at home and around the world through training support, trade shows, market research, and access to information and resources to ensure that they are maximizing their reach domestically and internationally, reducing red tape and streamlining processes to save entrepreneurs time and money.
One way this has already been achieved is through the introduction of the Business Benefits Finder, a free online tool designed to help businesses navigate available grants, funding, tax credits, and support programs across federal, provincial, and territorial levels.
There are also available streams of direct support. With one billion dollars earmarked for the Regional Tariff Response Initiative, five billion dollars for the Strategic Response Fund, and expanded loans through the BDC, the government is aiming to improve flexibility, create more ways to invest, and improve cash flow, which is certainly on the minds of business owners from coast to coast.
In response to the budget, there have been calls for greater access to capital and tax relief, as well as continued calls to reduce the regulatory burden; both elements have been addressed in the budget, but many feel that the support for small businesses falls short, particularly where they are excluded from programs like the Regional Tariff Response Initiative.
From the Canadian Federation of Independent Business (CFIB’s) perspective, “Small business confidence in the economy remains incredibly low given the massive uncertainty over tariffs from the U.S., China and now India,” said CFIB’s Executive Vice President of Advocacy, Corinne Pohlmann. “While progress was made on a few fronts, there were very few new measures that will offer immediate help for small business owners trying to keep the lights on.”
Strength in unity
Very few people could have foretold the severity and impact of the breakdown of geopolitical relations between Canada and the U.S., but businesses, consumers, and the government are all doing their part to protect the national interest.
Luckily, where one door closes another three will open, and that has been the case with the acquisition of new trade partners as well as the Canada-first sentiment that has blossomed country-wide. “Elbows Up” became the mantra and as Canadians put their support behind their national economy, there were tangible impacts.
Last year was Canada’s most successful tourism summer, with the sector bringing in an impressive 60 billion dollars. According to the World Travel & Tourism Council, there has been a significant decline in international tourism to the U.S., with a projected 12.5 billion dollar loss in international visitor spending in 2025, with some estimates reaching 30 billion. This was due in large part to the shift in sentiment, but also thanks to government initiatives like the Canada Strong Pass, which offers free admission and discounted overnight stays with Parks Canada from December 12, 2025, to January 15, 2026, inclusive and June 19 to September 7, 2026, inclusive.
“Tourism strengthens small businesses, so as Canadians stay local, shop local, they can leverage the Canada Strong Pass for free and discounted access and have some fun while doing that,” says Minister Valdez, noting that the pass has been renewed for Summer 2026, “which gives Canadians more to look forward to and a way to enjoy this fine country while propping up the businesses that serve as the fabric that connects our national economy.”
While uncertainty persists, there is optimism on the horizon. Canadian businesses can rest assured that the Canadian government and consumers have their backs and will continue to support them through this time of hardship as we all navigate the new norm, which includes new trade partners who are mutually invested in a positive tomorrow.
