More than half of Canadian small businesses say they are feeling the sting of escalating tariffs between the United States and Canada, according to a new survey by Merchant Growth, a digital financing and growth solution for small businesses.
The survey, which polled 130 small business owners, reveals widespread impacts on workforce decisions, rising costs, and mounting uncertainty as companies scramble to adapt to the ongoing trade dispute.
Workforce Reductions Ripple Across Industries
The ripple effects of U.S. tariffs and Canada’s counter-tariffs have been felt across various industries, from automotive and steel to consumer goods. Major corporations like Stellantis, the automaker behind Chrysler, Dodge, and Jeep, temporarily laid off 4,500 Canadian employees, while Sheertex, a Canadian maker of unbreakable pantyhose, reduced its workforce by 40%.
The survey found that these large-scale layoffs have trickled down to small businesses as well. More than one in four (29%) small businesses have adjusted their workforce and/or hiring plans due to the tariffs.
Specifically, 17% of businesses have reduced their workforce and paused hiring, while 12% have only paused hiring plans. Around one in 10 (11%) have yet to make any changes but plan to do so soon. In contrast, three in five (60%) report that the tariffs have had no impact on their workforce or hiring plans.
Rising Costs Passed to Consumers
Tariffs are pushing up costs for businesses, and many are passing some of those increases onto consumers. Among companies facing higher costs due to tariffs, 39% have raised prices, though most (81%) have passed on only a quarter or less of the added expense.
This trend is already showing up in consumer prices. Statistics Canada data show that grocery prices rose 2.8% year-over-year in February 2025, with the pace accelerating to 3.2% in March. Coffee, in particular, is expected to become more expensive, as Canadian roasters and retailers face higher costs for beans and equipment sourced from the U.S. and other countries hit by new tariffs.
Adaptation Strategies: Diversification and Caution
Despite the challenges, only about half (51%) of small businesses surveyed have implemented strategies to manage tariff impacts. Among those taking action:
- 42% diversified supply chains by reducing reliance on U.S. suppliers
- 20% pursued new export markets outside of the U.S.
- 13% completely exited the U.S. market
- 5% applied for federal support programs (e.g. EDC’s $5B Trade Impact Program, BDC loans)
- 3% invested in automation/tech upgrades to offset increased operational costs
- 56% have implemented other strategies
What Small Businesses Want from the Next Government
When asked which federal measures would help most, business owners gave mixed responses:
- 38% said increasing access to low-interest loans for market diversification
- 27% said deferred tax payments for small businesses
- 22% said permanent tax incentives for small businesses, like expanding the small business deduction limit and a potential refundable credit on expenses for non-U.S. supplier development
- 22% said payroll relief in the form of wage subsidies
- 13% said eliminating barriers to interprovincial trade
While some federal support programs exist, access can be limited, and many businesses say more targeted relief is needed to weather the ongoing trade tensions.
At Merchant Growth, we’re committed to helping Canadian small businesses navigate this uncertainty. Whether it’s through flexible financing, strategic advice, or advocating for policy changes, our goal is to empower entrepreneurs to adapt, grow, and thrive – even in turbulent times.
The road ahead may be uncertain, but with the right support and a willingness to adapt, Canadian small businesses can weather the storm and emerge stronger on the other side.
Want a deeper look at the data? Our full report offers a detailed breakdown of survey findings, including industry-specific impacts, workforce trends, and what small businesses say they need from policymakers.
🔹 Download: Small Business Pulse Customer Experience
