What to know
- Canada’s retaliatory tariffs on $28 billion worth of U.S. products took effect Sept. 8.
- A Merchant Growth survey found 69 per cent of Ontario small businesses are tied to U.S. suppliers, partners or customers.
- Businesses surveyed said they have responded to tariffs by cutting spending, delaying hiring and raising prices.
- An expert warns consumers could see higher prices and product shortages as businesses look for alternatives to U.S. suppliers.
- Merchant Growth’s chief growth officer says the uncertainty could last for weeks or even several years as Canada-U.S. trade negotiations continue.
Canada’s retaliatory tariffs against U.S. exports took effect on Sept. 8, and one expert says Ontario small businesses can expect to pay the price.
In response to intense trade tensions with the U.S., Canada’s dollar-for-dollar tariffs went into effect earlier this week, targeting $28 billion in U.S. products, from seafood to dairy to household appliances.
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The renewed trade war comes as many Canadians continue to struggle with an increasing cost-of-living and high unemployment rates as a result of economic uncertainty. But with the new tariffs kicking in, one expert is suggesting residents might need to prepare for more rising costs, as small businesses fight to deal with the effects of the trade war.
Small businesses to take the blow
A survey by Canadian online financing solution Merchant Growth conducted earlier this summer suggested that over 69 per cent of Ontario small businesses are tied to U.S. suppliers, partners, or customers.
By the time of the survey, 16 per cent said the tariffs were already a part of significant financial pressures impacting their business. But with more tariffs now kicking in, Merchant Growth’s Chief Growth Officer Hash Aboulhosn tells Now Toronto small businesses could be in for a bigger blow.
“You might see changes in supply, and the overarching theme with this is, of course, uncertainty. People just don’t like uncertainty, whether it’s in their business or in their personal lives, and that causes them to be more hesitant in their hiring decisions, their spending and growth decisions, and so you’re just going to see that manifest with people just taking a more cautious approach,” he explained.
In fact, by the time the survey was taken, 61 per cent of businesses said they’d cut spending, while 34 per cent said they delayed hiring, and 27 per cent said they’d raised prices in response to tariffs.
What does this mean for consumers?
With these businesses now navigating a new set of tariffs, Aboulhosn said consumers will most likely see even higher prices, and possibly missing products in stores, as businesses seek alternatives for their U.S. suppliers.
“In prior surveys, small businesses told us that many of them had not raised prices for their clients, despite their own costs rising. That compressed their margins. It also eroded their safety buffer. They tried to really protect their clients in many ways from the impact of rising prices,” he said.
“But in a survey prior to this one, they said that they finally had to start raising prices because their ability to absorb those costs has basically been completely eroded.”
On top of increasing pressures, Aboulhosn explained that switching suppliers and partners for Canadian or non-American alternatives might not always be simple, as that could come with higher prices and challenges navigating interprovincial trade barriers.
“Many of these businesses have been operating and have built processes and systems around one particular supplier. In some cases, there might not be another supplier that’s readily available or has capacity. The next vendor’s costs might be significantly more expensive,” he explained. “We’re almost certainly going to see higher prices.”
As unemployment remained at 6.4 per cent across Canada in August, Aboulhosn said more businesses might continue to avoid or delay hiring new workers, as they attempt to avoid economic uncertainty and reduce costs.
On the other hand, as pointed out by the expert, most Canadians still support the federal government’s decision to match the U.S. tariffs.
A recent Build Canada poll found that approximately 75 per cent of 1,696 surveyed residents support retaliatory tariffs even if the economic costs of the trade war last longer. Meanwhile, 69 per cent said they’ve chosen to buy Canadian products despite higher prices, 57 per cent reported cancelling or avoiding U.S. travel, and 55 per cent said they stopped buying some U.S. brands.
On the other hand, about 68 per cent of respondents said they would find the trade dispute unacceptable if someone in their household would lose their job in response, while between 56 and 60 per cent showed rejection to tax increases and 58 to 68 per cent to retirement losses.
How long will this last?
As trade negotiations continue evolving, Aboulhosn said it might be hard to determine how long these difficult conditions might last. However, according to him, businesses could be in for up to several years of challenges and higher costs.
“I think that certainly feels like right now is going to get worse before it gets better,” he said. “ It could be a couple of weeks where there’s some kind of breakthrough, [or it] could be a couple of years.”
“It makes a tremendous amount of sense for Canada and the U.S. to have a positive business relationship, and I do think that’s ultimately where we’re going to end up. I do think that cooler heads will prevail once the saber rattling is done, but this could go on for several years.”
