Navigating the Impact of New U.S. Tariffs on Canadian Small Businesses

In 2023, the U.S. imported billions of dollars’ worth of goods from Canada, with key sectors including energy, transportation, and manufacturing. The following is a breakdown of the top U.S. imports from Canada and their respective values:

• Oil and Gas: $103.22B
• Transportation Equipment: $73.44B
• Primary Metals for Manufacturing: $35.53B
• Chemicals: $30.68B
• Food Products: $29.72B
• Machinery: $22B
• Petroleum and Coal Products: $15.82B
• Wood Products: $11.28B
• Plastics and Rubber Products: $10.38B
• Paper: $9.29B

With tariffs in place, businesses that rely on these imports and exports could face increased costs, supply chain disruptions, and potential shifts in consumer demand.

Beyond businesses, these tariffs will also affect everyday Canadians. Higher costs for goods, especially food, energy, and consumer products, may lead to inflationary pressures. Consumers might notice price increases in grocery stores, at the gas pump, and in retail. However, the effect on domestic prices is not straightforward. In some cases, producers who face reduced demand from the U.S. market may decide to sell more within Canada, potentially leading to lower prices for certain goods. The overall impact on prices will depend on how businesses adjust to changing trade dynamics.

These tariffs will also have negative consequences for American consumers and businesses. Higher costs for Canadian imports could lead to increased prices for essential goods in the U.S., further fueling inflation and reducing affordability for American households and companies relying on Canadian materials.

Despite these challenges, Canada has a strong and resilient economy. It is the tenth-largest economy in the world, powered by abundant natural resources such as oil, natural gas, timber, minerals, and fresh water. Canada has weathered past economic disruptions, and with strategic adjustments and government support, businesses and individuals can navigate this period effectively. And hey, at least this won’t be worse than COVID-19!

The U.S. sources nearly 40% of its fresh produce from Canada and Mexico. With the introduction of tariffs, food prices in the U.S. could rise, leading to reduced demand for Canadian agricultural exports. Small businesses in the farming and food distribution sectors may experience tighter margins and higher production costs.

Canada’s automotive industry, which engaged in over $110 billion in bilateral trade with the U.S. in 2023, is highly integrated with American supply chains. Tariffs could lead to increased costs for vehicle components and extended production delays, impacting manufacturers, suppliers, and auto retailers.

Canada supplies 20% of the crude oil consumed in the U.S., and tariffs on petroleum and coal products could disrupt trade flows. This could result in higher operational costs for Canadian energy companies, impacting businesses that depend on fuel and energy-intensive manufacturing.

Primary metals, chemicals, and machinery—key components in various manufacturing industries—are among the top Canadian exports to the U.S. Tariffs could drive up costs for small manufacturers that depend on these materials, forcing them to either absorb costs or pass them on to consumers.

While these tariffs present challenges, small business owners can take proactive steps to mitigate risks and adapt to the changing landscape.

1. Assess Supply Chain Dependencies
   • Identify products and materials affected by tariffs.
   • Explore alternative suppliers, both domestically and internationally.
2. Adjust Pricing Strategies
   • Factor increased costs into pricing models.
   • Communicate with customers about potential price adjustments.
3. Seek Government Assistance
   • Monitor federal and provincial initiatives designed to support affected businesses.
   • Explore tax incentives and relief programs that could offset higher costs.
4. Advocate for Policy Adjustments
   • Engage with industry associations to voice concerns.
   • Participate in discussions on potential trade negotiations and economic relief measures.
5. Diversify Revenue Streams
   • Look for new markets beyond the U.S.
   • Explore opportunities in domestic markets or other international trade partners.

The new U.S. tariffs on Canadian imports present both challenges and opportunities for small businesses. By staying informed, adjusting business strategies, and leveraging available resources, Canadian entrepreneurs can navigate these economic shifts and continue to thrive. As trade policies evolve, small business owners must remain agile and proactive in safeguarding their operations and long-term growth.

Despite the uncertainty, Canada remains one of the world’s leading economies, with vast natural resources and strong trade partnerships. This moment presents an opportunity to build new alliances, strengthen domestic industries, and ensure long-term economic resilience.

For continued updates on trade developments and how they impact Canadian small businesses, stay connected with our blog. If you have specific questions or concerns, feel free to reach out—we’re here to support your business through these changes.