How Tariffs Impact Canadian Small Business

An Introductory Primer for Uncertain Times

Revised August 26, 2025 | Published August 22, 2025

WHAT'S IN THIS ARTICLE
Breaking News | Why You Need to Understand Tariffs Now | Tariff Basics | How This Hits Your Bottom Line | Hidden Ripple Effects | Your Early Warning System | Practical Strategies That Work | Government Relief Available | Your Action Plan | Bottom Line

Let's start with a reality check. If you're running a small business in Canada right now, you're likely feeling anxious about how tariffs impact Canadian small business operations.  And you should be paying attention ... but not panicking.

I'm a retired bookkeeper, not a tariff specialist, so I'm presenting this information to put the issue on the table and help you address it proactively. Think of my thoughts as a way to draw up a list of questions you might want to ask your accountant or trade advisor to help make your meeting productive. Because it's really hard sometimes to get the information you need when you don't know the questions to ask.

I'm going to walk you through what tariffs actually mean for your business, why they're different from other taxes like GST, and most importantly, what you can do about it. No economics degree required.

Why Every Canadian Business Owner Needs to Understand Tariffs Now

Here's the thing: whether you import, export, or just sell to local customers, tariffs are affecting your business. Maybe you've already noticed prices creeping up from suppliers. Maybe your U.S. customers are ordering less. Or maybe you're wondering why your competitor suddenly raised their prices.

These aren't random events. They're the ripple effects of tariff policies, and understanding them is the difference between being reactive and being prepared.

Tariff Basics: What You Actually Need to Know

Let me break down tariffs in the simplest way possible. Think of import tariffs as a toll booth at the border. When goods come into Canada, our government might charge a percentage of their value. We do this to protect Canadian industries like our auto manufacturers, steel producers or dairy farmers, raise some government revenue, or retaliate when other countries tariff our exports. The retaliation part often involves responses to U.S. (and other countries) trade actions.

Here's the compliance piece many miss: as the importer of record (see note), you're legally responsible for paying tariffs correctly. Get it wrong, and you face penalties on top of the tariffs. This isn't like sales tax where mistakes are easily fixed – customs violations can haunt your business for years.

Note: The importer of record could be the business owner themselves if they're importing directly, or their supplier if buying from a Canadian distributor who imports.

Export tariffs work differently. When the U.S. puts a 25% tariff on Canadian products, American importers pay that to the U.S. government. But here's what actually happens: those American companies often demand price cuts from Canadian suppliers to stay competitive. So you (the Canadian business owner) eat the cost indirectly. It's like being forced to put your products on sale, permanently.

How This Hits Your Bottom Line

Understanding the practical impact of tariffs helps you prepare for potential challenges in your business operations. Let's look at three areas that can affect your business:

1. Direct Import Impact - If you import any goods (services are a bit different - tariffs are generally not a direct concern), tariffs create immediate cash flow problems. For example, consider a furniture retailer importing from the U.S.. When Canada retaliated with tariffs, her costs jumped 25% overnight. But here's the compliance nightmare: she had to pay those tariffs when the goods arrived, not when they sold. That's a massive cash flow hit that many businesses aren't prepared for. It requires careful financial planning.
   
2. Indirect Supply Chain Effects - Even if you don't import directly, you're not safe. Your suppliers' costs might spike from tariffed inputs. That 'Made in Canada' packaging might use American materials that suddenly cost 25% more due to tariffs. These hidden tariffs (often referred to as cascading) are everywhere, and tracking them for proper pricing is a compliance challenge.
3. Export Documentation Requirements - For businesses selling internationally (exporters), tariffs often mean increased paperwork. A craft brewery shipping to the U.S., for example, now needs extensive paperwork proving origin of every component. Missing required forms can result in shipments being held at the border while competitors' products reach customers on schedule. These compliance requirements represent both time costs and potential lost sales opportunities. The compliance burden alone may drive some businesses out of export markets.

The Hidden Ripple Effects Nobody Talks About

Here's what can go wrong!

Here's where businesses get into real trouble: the paperwork.

• Origin Documentation - Every product needs proof of where it's made. But what if your 'Canadian' product uses 40% American materials? Suddenly you need certificates from every supplier. Miss this, and you might pay tariffs you could have avoided.
• Tariff Classification - Products have specific codes that determine tariff rates. Choose wrong? You could overpay or underpay. Underpay and face penalties plus interest. Overpay and maybe never recover the money. Getting professional help with classification isn't optional anymore.
  
• Record Keeping - Canada Border Services Agency can audit you years later. Every invoice, every origin certificate, every customs form needs to be perfectly organized. This isn't like keeping receipts for taxes – customs audits are detailed and unforgiving.
  
• Timing Issues - Tariffs change fast. That shipment you ordered in June might face different rates when it arrives in August. Your purchase orders need clauses addressing who pays if tariffs change mid-shipment.
  

An example: Aluminum tariffs and beverage cans

Let me paint you a picture of how integrated our supply chains really are. Canada doesn't manufacture 473 ML beverage cans. (FYI They do manufacture 355 ML cans.) That's right! That beer you are holding is in a can manufactured in the U.S. Crazy right? Well it gets crazier. The aluminum in the cans is from Canada. So let's see what happens now that tariffs apply.

Canadian aluminum gets tariffed entering the U.S. at 25%. The U.S. can manufacturer's costs go up as they are now paying more. As a result, the U.S. can manufacturer raise prices on finished cans to cover the tariff cost. Canadian beverage companies (including beer crafters) importing the cans pay more for those cans. It especially hurt when Canada imposed retaliatory tariffs ... this means there is a hit to aluminum cans on both exports and imports. Double whammy! Canadian beverage companies pass along the additional costs so Canadian consumers pay more for drinks. So far, the 8 to 10 cents a can tariff costs are being absorbed by craft breweries. But they will not be able to sustain this cost. At some point they will have to pay along the costs. Removal of the retaliatory tariffs will help but not entirely.

This is happening across hundreds of products. That 'Made in USA' product might be 40% Canadian materials. When those materials get tariffed, you pay more for the 'American' product. It's economic whack-a-mole.

Long-term, the U.S. manufacturer will likely try to find non-tariffed aluminum sources, which could hurt Canadian aluminum exporters even more. This is one reason why tariffs are so disruptive to integrated supply chains. Even if you're not directly exporting the tariffed product, if that product is an input in something you later import, you still get hit.

But businesses adapt. One solution gaining traction is for Canadian aluminum manufacturers to build (or retool) large size beverage can manufacturing plants right here in Canada. Instead of shipping raw aluminum to the U.S. for processing into large cans, then importing those finished cans back to Canada, the entire process stays domestic. No tariffs, shorter supply chains, and Canadian beverage and beer companies get more predictable pricing.

This kind of supply chain reshoring is happening across industries. Tariffs don't just change prices. They can reshape where and how things get made. For example, it has been suggested that Canada go back to using those stubby beer bottles. This is another example of how trade tensions can reshape where and how things get made.

This reshoring trend is getting policy support too. The federal government is currently working with provinces and territories to reduce internal trade barriers within Canada, making it easier for businesses to source domestically and avoid international tariffs altogether.

This is a great example of how both private business adaptation AND policy changes are responding to the same tariff pressures.

Then there's the currency chaos. Tariffs mess with the Canadian dollar (CAD). When trade tensions rise, the CAD often weakens, making your imports even more expensive. It's a double whammy with tariffs. Your exports might get a bit more competitive with a weaker dollar, but that's small consolation when your costs are skyrocketing.

But here's what's really killing businesses: uncertainty. When you don't know if tariffs are coming, going, or changing, how do you plan? Do you sign that long-term supply contract? Do you invest in that new equipment? Do you hire those extra workers? Many businesses are sitting on their hands, which slows the whole economy down.

Your Early Warning System

Here's how to see it coming!

You can't afford surprises. Here's your compliance-focused monitoring system:

Set up Google alerts for "Canada retaliatory tariffs', 'CUSMA' plus your industry, and your specific products plus 'tariff'. But also monitor 'customs compliance' and 'CBSA audits' – enforcement often increases during trade disputes.

Understanding Different Communication Styles

You can't afford to be surprised by tariff changes. It's important to pay attention to tariff negotiations in both countries. If you have been following along already, you may have noticed that tariff monitoring is tricky because currently, different governments are communicating differently about trade policy. Understanding these different styles is important for your planning.

U.S. announcements currently (2025) often come through social media or public statements, sometimes as negotiating positions rather than final policy. These can move markets quickly, but not every announcement becomes actual policy.

Under the current government (2025), Canadian responses are typically following a more measured, consultation-heavy approach: diplomatic channels first, extensive industry consultations, then official government announcements when decisions are final. This consultation process can involve input from the federal cabinet, premiers, businesses, indigenous leaders, and the Prime Minister's trade advisory council - ensuring all affected sectors have input before policy decisions are made. When Canada does announce retaliatory tariffs, they're usually carefully targeted and actually happening.

What Does This Mean for Your Planning?

• Monitor U.S. announcements for early warning signals.
• Wait for official Canadian government notices before making major business changes.
• Expect consultation opportunities - if your industry might be affected, you'll may have chances to provide input through your industry association or direct government consultation.
• Expect Canadian responses to follow a predictable timeline: initial diplomatic response → comprehensive industry consultation → official policy announcement → support programs for affected sectors. This predictable pattern helps you plan instead of panic.

Here's A Suggested Monitoring Checklist For You:

• Join industry associations – they often participate in government consultations and share advance warning. They often know what's coming before it's announced. The Canadian Federation of Independent Business (CFIB) supports and advocates for small businesses in Canada.
• Watch for consultation announcements from government - this is your chance to have input. It is expected that the federal government will be holding industry consultations beginning this September. The objective would be to set priorities for the upcoming CUSMA review in 2026.
• Pay close attention to your supplier price increase notices. They might mention 'market conditions' or 'currency fluctuations', but often they're really talking about tariff impacts. Dig deeper as they might be passing on tariff costs without proper documentation, leaving you exposed.
• Set up alerts for both countries' trade announcements.
• Follow your industry association's communications closely.

Practical Strategies That Actually Work

Here's what to do about it!

Let's get down to brass tacks. What can you actually do about all this?

For short-term survival, you need to get aggressive about three things. First, price strategically. Build tariff contingencies into your quotes. Use shorter-term pricing so you're not locked in when costs spike. And be transparent with customers about why prices change – they'll appreciate the honesty.

Second, manage your cash flow like your business depends on it, because it does. Remember, tariffs are due when goods arrive, not when you sell them. This can create a serious cash crunch. Consider factoring, which means selling your outstanding invoices for immediate cash. For example, if you have a $10,000 invoice that won't be paid for 60 days, a factoring company might give you $9,500 today. Yes, you lose 5%, but it keeps cash flowing when you need it for tariff payments.

You might also need to expand your line of credit or time purchases more strategically. Buy before tariffs hit if you can, but don't overdo it – carrying excess inventory has its own costs.

Third, renegotiate everything. This is no time to be shy. Talk to suppliers about sharing the tariff pain. Lock in prices where you can. Consider cost-plus arrangements, where instead of agreeing to a fixed price, you pay your supplier's actual cost plus a predetermined markup. For instance, instead of buying at $100 per unit fixed, you might agree to pay their cost plus 15%. When tariffs hit and their costs jump to $120, you pay $138. When tariffs drop and costs fall to $80, you pay $92. This shares the risk fairly and avoids constant renegotiation.

For long-term resilience, you need to think bigger. Diversify your supply chain so you're never dependent on one country. Consider reshoring some supplies to avoid border issues altogether. Build relationships with multiple suppliers so you have options when things go sideways.

Develop new markets too. If U.S. sales drop, where else can you sell? Other provinces? Online markets? Don't wait until you lose your biggest market to start looking for alternatives.

And get financially nimble. Keep debt low, build cash reserves, and have contingency plans. The businesses that survive disruptions are the ones with financial flexibility.

Understanding Government Support: A New Business Environment

The support landscape has shifted dramatically as it responds to the current trade tensions. The current federal leadership brings financial sector experience – the Prime Minister understands that cash flow problems kill businesses faster than profitability issues ever will.

This shows in program design. Tax deferrals? They know you need cash now, not next year. Remission programs? They recognize some imports simply have no Canadian alternative. EI modifications letting you reduce hours instead of laying off staff? That's understanding the real cost of losing trained workers you spent months (or years) training.

But here's the catch: these programs assume business sophistication. They're designed by people who understand complex business, for businesses that can navigate complex applications. The tariff remission process isn't a simple online form – it requires proving that alternatives don't exist, understanding tariff classifications, and maintaining detailed documentation that would make an accountant proud!

The consultation process has changed too. Instead of two-year studies, we're seeing faster decision making: quick stakeholder input through advisory councils, rapid program design to respond to the changing volleys in the trade tensions, faster short term implementation measures (there is still some lag time implementing longer term solutions). Great if you're ready, challenging if you're still figuring out what hit you.

Here's a reality check. The August 22nd expansion of U.S. tariffs to 407 steel derivative products  (everything from wind turbines to baby strollers) shows how quickly this environment changes. As Canadian Steel Producers' Association CEO Catherine Cobden put it, "This list was much broader than we expected it to be." If industry associations are getting surprised, imagine where that leaves individual small businesses.

Government Relief: Programs Evolve Based on Industry Feedback

The good news? Federal and provincial / territorial governments are responding, and programs are evolving based on what's actually happening in the real world; governments refine their support packages based on tariffs enacted.

For example, when 25% steel tariffs imposed in March jumped to 50% in June and then expanded to derivative products, Canada's response evolved through industry consultation to introduce sectoral relief. In July 2025, Prime Minister Carney announced enhanced steel industry relief including "$70 million in new funding over three years to help steel workers get retrained" and measures to "prioritize the purchase of Canadian steel in procurement for infrastructure projects" (Toronto Star, July 16, 2025). But as the August expansion shows, this is an ongoing chess game, not a one-time fix.

Beyond the remission process for tariff relief, governments at all levels are rolling out support programs as trade tensions persist. The key is knowing where to look and acting quickly when programs open.

The Large Enterprise Tariff Loan Facility (LETL) "aims to provide financial support to eligible large businesses—particularly those vital to Canada's food, energy, economic, and national security—that are struggling to secure traditional financing due to the US trade conflict" (Impact of tariffs on Canadian businesses, Doane Grant Thornton LLP, July 8, 2025). While you might not qualify directly, these programs create ripple effects. If your major customer gets support, they're more likely to keep buying from you instead of switching suppliers or cutting orders.

Provincial programs are all over the map but often include:

• tax deferrals
• low-interest loans
• grants for supply chain adaptation.

Recent analysis shows businesses tracked responses including Ontario's "$11 billion in relief including 6-month tax deferrals" and Quebec's "loans up to $50 million for business model adjustments" (Impact of tariffs on Canadian businesses, Doane Grant Thornton LLP, July 8, 2025).

The challenge? These programs often have short application windows and specific eligibility criteria that change as situations evolve.

Don't assume you're too small to matter. Many programs start for large businesses then get adapted for SMEs. Others flow through industry associations or regional development agencies specifically targeting smaller operations. The key is staying informed and being ready to move quickly when programs match your needs.

The documentation reality. As international trade lawyer John Boscariol noted about the derivative products expansion, "They have to go back and figure out exactly where each component came from. There are all kinds of costs you're introducing on top of the tariffs" (Toronto Star, August 22, 2025). This complexity applies to government support applications too – you need to prove your case with documentation.

What does this mean for you and your business? Government support is available and evolving, but it requires preparation and sophistication to access. The businesses that benefit are those that treat government relations like any other business function ... with dedicated attention, proper documentation, and strategic thinking.

Remember, initial government responses often get enhanced after industry feedback. If current programs don't meet your needs, engage through your industry association. Set alerts for '[your industry] tariff relief Canada' and watch for program updates, not just initial announcements.

Sources: Impact of tariffs on Canadian businesses, Doane Grant Thornton LLP, July 8, 2025; 'Steel is the very foundation of Canada.' Carney delivers aid package to industry, workers ravaged by Trump tariffs, Toronto Star, July 16, 2025; Josh Rubin, Canadian steel and aluminum industries already reeling from Donald Trump's 50 per cent tariffs have received another blow, Toronto Star, August 22, 2025

Your Action Plan For This Week

Don't wait. This week, take these specific steps:

• Audit Your Compliance Exposure - List every product you import or export. Document their tariff classifications. Use Canada's official Tariff Finder tool (https://www.tariffinder.ca/en/) to quickly get current tariff rates for your specific products - it's intuitive and works even without HS codes. Identify which suppliers provide origin certificates. Calculate your exposure at different tariff levels (10%, 25%, 50%). This isn't optional anymore. You can't manage what you don't measure.
• Strengthen Your Documentation - Create a customs compliance binder. Include supplier certificates, classification rulings, and CBSA correspondence. When auditors come, first impressions matter.
  
• Review Your Contracts - Every supplier agreement needs a tariff clause. Who pays for changes? How quickly must they notify you? What documentation must they provide? Get legal help if needed. Contract gaps cost more than lawyer fees.
  
• Build Your Knowledge Base - Register for CBSA's online portal. Subscribe to their tariff notices. Join the Canadian Society of Customs Brokers forum. Knowledge prevents expensive mistakes.
  
• Secure Your Financing - Approach your bank now about increasing your line of credit. Show them your tariff exposure analysis. Banks prefer lending to prepared businesses, not desperate ones. Meanwhile, accelerate collections – even offering small discounts for fast payment beats waiting 60 days when you need cash for tariff payments. Defer non-essential spending. Cash is king during uncertain times.
  
• Strengthen Your Key Relationships and Plan Scenarios - Talk to suppliers about their tariff exposure – their problems will become your problems. Discuss contingency plans with major customers. Share information with industry peers. You're all in this together. Then create scenario plans: What if tariffs hit your imports? What if they hit your exports? What if your customers get squeezed? Hope for the best but plan for the worst.

The Bottom Line: Build Systems, Don't Wing It

Understanding how tariffs impact Canadian small business isn't just about economics; it's about survival and preparation.

Here's the truth: you can't control whether tariffs get imposed or retaliated. You can't control currency fluctuations or global trade tensions. But you can control how diversified your business is, how much cash buffer you maintain, how quickly you adapt to changes, and how well you communicate with stakeholders.

Every business faces the same tariff challenges, but not every business will handle compliance properly. Those that do will avoid penalties, access relief programs, and maintain customer trust. Those that don't will face audits, penalties, and cash flow crises.

Don't try to 'wing it' with customs compliance. In today's environment, that's business suicide. Tariffs aren't temporary inconveniences. They're the new reality requiring permanent systems.

The good news? Proper compliance isn't rocket science. It's about documentation, classification, and staying informed. Get these right, and tariffs become manageable costs, not existential threats.

The businesses that will thrive won't be those unaffected by tariffs. They'll be those with bulletproof compliance systems who see change coming and adapt fastest. While competitors scramble with customs problems, you'll be focusing on growth.

Repeat after me ... compliance is my competitive advantage!

Final Thoughts: This Too Shall Pass (But Prepare Anyway)

I've lived through decades of softwood lumber disputes, NAFTA negotiations, and more trade wars than I care to remember. Trade disputes are like storms. They're disruptive, sometimes damaging, but they do pass.

The businesses that survive and thrive are those that stay informed without obsessing, prepare without panicking, and adapt without abandoning their core business. Remember, every challenge creates opportunities. While your competitors are paralyzed by uncertainty, you can be positioning for growth. Some of the best businesses were built or transformed during turbulent times.

The new economic reality is the level playing field in trade is changing. Canadian businesses may have to face more foreign competition in their home market as part of maintaining access to the U.S. export market. Plan accordingly.

What's your biggest tariff concern right now? Understanding your specific vulnerabilities is the first step to building systems that protect your business. Because in these uncertain times, the one certainty is that customs compliance has moved from 'nice to have' to 'must have'.

Stay nimble, stay informed, and remember – you've navigated challenges before. This is just the next one.

I've walked you through what you can't control and what you can, shown you how compliance becomes your competitive advantage, and given you practical steps to weather these trade tensions. Good Luck!

Back to top

Copyright © 2023-2025 Bookkeeping-Essentials.ca
All rights reserved. Do not duplicate without permission.

I developed this site's content as a reference guide (I use it myself) based on my professional experience. While I strive for accuracy and completeness, this information is general in nature and should not be considered professional advice. I cannot be held liable for errors or omissions. Please consult qualified professional advisors before acting on any information found here. Review my website's Terms of Use and Privacy Policy before relying on any information. Note: This website (bookkeeping-essentials.ca) is NOT associated with Bookkeeping Essentials Ltd. operating in Bonnyville, Alberta.