'Businesses are worried the worst is yet to come'
Canadian small businesses are facing unprecedented pessimism as tensions escalate in the U.S.–Canada trade dispute, according to new data from the Canadian Federation of Independent Business (CFIB).
CFIB’s Business Barometer long-term index crashed to an all-time low in March, dropping 24.8 index points to 25.0.
The small business confidence indicator reached a lower mark than it did at any time during the 2020 COVID-19 pandemic, 2008 financial crisis or 9/11, according to the report.
Meanwhile, the short-term index has dropped to a level similar to the time of the pandemic.
Source: Canadian federation of Independent Business (CFIB)
"Small business owners are feeling pessimistic about their business's perspectives for the next few months or even beyond. It's hard to make critical decisions for the long, medium or short term when so much can change within a matter of hours," said Simon Gaudreault, CFIB's chief economist and vice-president of research. "No one knows when the tariff war will end, and businesses are worried the worst is yet to come."
Recently, Hudson's Bay Company announced it will fully liquidate its business as it failed to secure sufficient financing to pursue a restructuring transaction under the Companies’ Creditors Arrangement Act (CCAA). Peavey Mart, Johnston & Murphy, Comark Holdings and UCG Canada Holdings have also ceased operations or announced significant store closures, according to previous reports.
How do US tariffs affect Canadian employers?
U.S. President Donald Trump has said his month-long exemption on blanket tariffs for goods covered by the Canada-U.S.-Mexico Agreement (CUSMA) will run out April 2, according to a Financial Times (FT) report.
However, even before the deadline, the majority of Canadian businesses has already felt the negative impact of tariffs, according to CFIB’s survey of over 1,000 employers, conducted from March 5 to 7, 2025.
And the impact is felt across different industries.
Source: Canadian federation of Independent Business (CFIB)
To recoup the losses caused by tariffs and the ongoing financial struggles, small businesses plan to raise prices by an average of 3.7 per cent, an increase from 3.0 per cent in February.
That is the largest month-over-month spike in price increase intentions since the pandemic, according to CFIB. Average wage increase plans also dropped to 1.9% from 2.2% last month.
And few employers (11 per cent) are looking to hire over the next few months, while more (19 per cent) are planning to lay off staff.
This is crucial, as the shortage of skilled labour is the second biggest factor limiting sales or production growth among companies – just behind a shortage of demand.
Source: Canadian federation of Independent Business (CFIB)
And things could be worse. Toronto Dominion forecasts that Trump will levy widespread tariffs on most of America’s trading partners in April, raising the effective tariff rate from the existing 2.5 per cent to 14 per cent, according to FT.
How can employers build resilience amid tariffs issue?
One expert from KPMG has previously advised employers to build resilience amid the trade war.
Here are some ways companies can build resilience in the face of US tariffs, according to BDO Canada:
- Identify areas where processes can be streamlined to increase agility
- Explore tariff engineering opportunities to qualify for reduced-duty classifications
- Focus on shortening delayed payment times to improve cashflow
- Identify areas where sales cycle can be shortened
- Assess potential for pre-payment of goods at lower tariff rates
- Explore hedging opportunities in the event of the US dollar strengthenin
Meanwhile, Corinne Pohlmann, executive vice-president of advocacy at CFIB, noted that businesses urgently need all the help, and policy makers must strive to create a “much-improved business environment”.
"Now is the time to show strong support to small businesses,” she said. “Taking proactive actions, such as making carbon tax rebates for small businesses tax free, adopting full mutual recognition right across Canada, increasing the lifetime capital gains exemption, and ensuring there are supports that are accessible to small businesses to help them through this challenging ordeal would significantly boost confidence at a time when small businesses need it the most."
Previously, Ottawa announced a $6-billion aid package intended to protect Canadian businesses and workers and to “support our businesses and ensure they have the liquidity they need through this turbulent time,” said Steven MacKinnon, minister of employment, workforce development, and labour.
