Tariffs Take a Toll on Small Businesses

Strategic Insights -

Many small exporters are struggling to comply with the Canada-United States-Mexico Agreement, leading to costly audits, fines, and lost sales. Despite most Canadian exports being tariff-free, thousands of small businesses are facing a compliance headache, with limited access to clear and accessible information, rising fees, and confusing customs regulations.

Key Takeaways:

  • 44% of small exporters are compliant with CUSMA rules, dropping to 30% among small retailers (Canadian Federation of Independent Business)
  • Exporters have to navigate a complex process involving customs codes, rules of origin, production and supplier documentation, and packaging and labelling compliance
  • Small businesses are concerned about compliance paperwork, custom delays, and additional or hidden fees
  • Sectoral tariffs outside of CUSMA are having consequences, with many small businesses declining customer requests and losing sales (wholesale business in Manitoba)
  • CFIB recommends using collected Canadian counter-tariffs to rebate affected businesses or temporarily reducing the small business tax rate (Canadian Federation of Independent Business)
  • 66 cents of every dollar spent at local small businesses goes back into the local economy (author)

Statistics:

  • 44% of small exporters are compliant with CUSMA rules (Canadian Federation of Independent Business)
  • 30% of small retailers are compliant with CUSMA rules (Canadian Federation of Independent Business)
  • 85% of Canada-U.S. trade is tariff-free (Prime Minister Justin Trudeau)
  • 90% of Canadian exports are exempt under CUSMA (RBC)
  • $800 de minimis - the duty-free allowance often used for direct-to-consumer sales (U.S.)
  • 10% tariff on non-CUSMA-compliant potash and energy products
  • 50% tariff on aluminum and steel imports
  • 25% tariff on all cars and trucks not built in the U.S.
  • 50% tariff on copper
  • 35.19% duty on softwood lumber
  • Nearly four in 10 small businesses facing tariff costs worry about having to make tough decisions such as laying off staff or closing their business (author)

Sources:

  • Corinne Pohlmann, "When U.S. President Donald Trump increased tariffs on Canadian goods to 35 per cent from 25 per cent on Aug. 1" (The Star)
  • RBC, "RBC analysis: Most of Canadian exports are exempt from tariffs under Canada-U.S.-Mexico Agreement" (RBC News)
  • Canadian Federation of Independent Business, "CFIB urges government to rebates to affected businesses or reduce small business tax rate" (CFIB News)
  • Prime Minister Justin Trudeau, "Canada-U.S. trade is tariff-free" (Public Statement)