Sign in Subscribe
Tariffs

Small Businesses Struggle with Tariff Compliance and Costs

Strategic Insights

— 2 min read

Corinne Pohlmann, executive vice-president of advocacy at the Canadian Federation of Independent Business, highlights the challenges small businesses face in complying with the Canada-United States-Mexico Agreement (CUSMA) and dealing with sectoral tariffs. While most Canadian exports qualify for exemptions under CUSMA, thousands of small exporters struggle to navigate the complex rules and regulations. Prime Minister Mark Carney stated that 85 per cent of the Canada-U.S. trade is tariff-free, and RBC found that more than 90 per cent of our exports are exempt under CUSMA. However, only 44 per cent of small exporters are compliant with CUSMA rules, with the number dropping to 30 per cent among small retailers.

Key Takeaways:

  • The Canadian Federation of Independent Business found that only 44 per cent of small exporters are compliant with CUSMA rules, with the number dropping to 30 per cent among small retailers.
  • Protecting CUSMA has to be Canada's top trade priority, but complying with the agreement is a complex and time-consuming process that requires navigating customs codes, assessing product content, obtaining production and supplier documentation, and verifying packaging and labelling compliance.
  • Small businesses are lacking clear and accessible information around compliance requirements, leading to confusion and errors.
  • Many small businesses prefer to eat the 2.5-per-cent Most Favored Nation tariff rather than spend the time and money to become CUSMA-compliant.
  • Sectoral tariffs outside of CUSMA are having significant consequences, including a 10 per cent tariff on non-CUSMA-compliant potash and energy products, a 50 per cent tariff on aluminum and steel imports, and a 35.19 per cent duty on softwood lumber.
  • Concrete relief measures are needed to help small businesses struggling with tariff costs, such as rebating Canadian counter-tariff money or temporarily reducing the small-business tax rate.
  • Every dollar spent at a local small business keeps 66 cents in the local economy, ultimately benefiting the community.

Statistics:

  • 44 per cent of small exporters are compliant with CUSMA rules, compared to 85 per cent of the Canada-U.S. trade being tariff-free.
  • Only 30 per cent of small retailers are compliant with CUSMA rules.
  • 10 per cent tariff on non-CUSMA-compliant potash and energy products.
  • 50 per cent tariff on aluminum and steel imports.
  • 35.19 per cent duty on softwood lumber.
  • 66 cents of every dollar spent at a local small business goes back into the local economy.

Sources:

  • Corinne Pohlmann, executive vice-president of advocacy at the Canadian Federation of Independent Business.
  • Prime Minister Mark Carney.
  • RBC.
  • Canadian Federation of Independent Business's latest data.
  • Bloomberg file photo.

Read more