Nearly 40% of Canadian Small Businesses May Not Survive Another Year of Tariffs: Your Survival Guide

What This Means for You

Canada's small businesses are the backbone of the economy — 1.08 million employer businesses representing 98.2% of all firms and employing 5.8 million Canadians. If you own one, work for one, or rely on one for goods and services in your community, the latest data from the Canadian Federation of Independent Business should be on your radar.

The numbers paint a stark picture: 38% of small businesses dealing with tariff costs say they will not survive another year under current conditions. Nearly one in five say they have less than six months. And Statistics Canada separately found that roughly 40% of businesses plan to pass tariff-related cost increases directly to consumers — meaning Canadians who do not own businesses will feel the impact through higher prices on everyday goods and services.

Here is what you need to know, what support is actually available, and how to protect yourself whether you are a business owner, an employee, or a consumer.

If You Own a Small Business

Immediate actions to take this week:

Apply for the Regional Tariff Response Initiative (RTRI): This is the federal government's primary support program — $1 billion over three years in non-repayable contributions of up to $1 million per business. It is delivered through Regional Development Agencies (FedDev Ontario, PrairiesCan, PacifiCan, ACOA, CED, FedNor, CanNor). According to CFIB data, less than 1% of eligible small businesses have applied, and 77% are completely unaware the program exists. Contact your regional agency directly: FedDev Ontario, PrairiesCan, PacifiCan, ACOA
Check BDC loan eligibility: The Business Development Bank of Canada increased its maximum loan size from $2 million to $5 million specifically to help tariff-affected businesses. Visit bdc.ca or call 1-888-INFO-BDC
Request CRA flexibility: The Canada Revenue Agency is offering deferred GST/HST remittances and corporate tax payments for businesses affected by tariffs. Call the CRA business inquiries line at 1-800-959-5525
Review your supply chain immediately: According to CFIB, 67% of affected businesses are turning to Canadian suppliers, 34% to EU suppliers, and 21% to Mexican suppliers as alternatives to U.S. sources. The earlier you diversify, the more negotiating leverage you have

Calculate your exposure:

Here is a practical framework for assessing your tariff risk:

List all U.S.-sourced inputs (raw materials, components, finished goods for resale)
Identify the applicable tariff rate for each item — steel and aluminum face 50% tariffs on 400+ products, while other goods face 25% under the general retaliatory tariff schedule
Calculate total additional cost per month: (value of U.S. imports × applicable tariff rate)
Compare against your monthly operating margin: If tariff costs exceed 30% of your margin, you are in the high-risk category that CFIB identifies as unlikely to survive 12 months without intervention

Example scenario: A small auto parts distributor in southern Ontario importing $150,000 per month in U.S. components faces $37,500 in monthly tariff costs at the 25% rate. On a typical 8-10% operating margin ($12,000-$15,000 per month on that revenue), the tariffs alone exceed the entire profit margin by a factor of 2.5. This is why the CFIB numbers are so alarming — many businesses are not just seeing reduced profits, they are operating at a loss on every transaction involving U.S. inputs.

Provincial programs worth investigating:

Ontario Together Trade Fund: Up to $5 million per project for re-shoring, new technologies, and finding alternative markets
Ontario Trade-Impacted Communities Program: Up to $40 million in grants for affected communities
Ontario small business tax rate: Reduced from 3.2% to 2.2%, saving the average small business approximately $2,400 per year
Other provinces: Check your provincial economic development agency for similar programs — many provinces have launched tariff-specific support since early 2025

If You Work for a Small Business

The employment picture is concerning. Small businesses shed 73,100 jobs in 2025 — a 1.38% decline — and the Bank of Canada has warned that "industries sensitive to trade have been the primary source of weakness in employment growth." Here is how to assess and protect your position:

Assess your risk level:

High risk: You work in manufacturing, transportation, wholesale, or agriculture — the sectors CFIB identifies as hardest hit, with 27-46% of businesses reporting negative impacts
Medium risk: You work in retail or food service — these sectors face pressure from rising input costs being passed through the supply chain
Lower risk: You work in healthcare, education, or professional services — these sectors have less direct trade exposure, though they are not immune to broader economic effects

Immediate actions:

Have an honest conversation with your employer about the business's financial health. If they are struggling with tariff costs, it is better to know now than to be blindsided by layoffs
Update your resume and LinkedIn profile now — do not wait until you receive a layoff notice
Research Employment Insurance eligibility: If you lose your job due to tariff-related business closure, you may qualify for EI. The standard benefit is 55% of your average insured weekly earnings, up to a maximum of $668 per week in 2026. Apply immediately upon job loss at canada.ca/ei
Explore the $570 million Workforce Reskilling Fund: Budget 2026 allocated this specifically for workers displaced by trade disruptions. Contact your local Service Canada office or visit jobbank.gc.ca
Check provincial training programs: Many provinces offer retraining subsidies for workers in tariff-affected industries. Ontario's Second Career program, for example, provides up to $28,000 for retraining

If You're a Consumer

Statistics Canada found that 39.4% of businesses say they are very likely or somewhat likely to pass tariff costs directly to you. Based on our analysis, here is where you will feel it most and what you can do:

Where prices are rising fastest:

Auto parts and vehicles: The 25% tariff on non-CUSMA-compliant vehicles and the 50% tariff on steel and aluminum components are flowing through to repair costs and new vehicle prices. According to industry data, the auto parts sector has shed 9.5% of its workforce year-over-year, and remaining businesses are raising prices to survive
Building materials: Softwood lumber production is down over 25%, with 22 mills closed since 2022 and 50 more operating at reduced capacity. New 25-50% tariffs on upholstered wood products and kitchen cabinets are adding to renovation and construction costs
Grocery and household goods: Any product with U.S.-sourced ingredients, packaging, or transportation is subject to cost increases. Look for Canadian-sourced alternatives — 41.6% of retailers are now actively promoting Canadian-made products

Practical savings strategies:

Compare prices at multiple retailers — the degree of cost pass-through varies significantly between businesses
Buy Canadian-made products where possible, which avoid the tariff markup entirely
Stock up on non-perishable goods that are likely to see further price increases (building materials, auto parts, household goods with U.S. components)
Use the Canada Tariff Finder to understand which products carry the highest tariff premiums and plan purchases accordingly

The News: What Happened

According to the Canadian Federation of Independent Business, survey data collected from 1,721 small business owners between August 8 and 20, 2025, revealed that 38% of businesses dealing with tariff costs say they would not last another year if conditions remain unchanged. Nearly 19% said they have less than six months of runway, as reported by CTV News.

A larger CFIB survey of 3,315 members, conducted between August 11 and September 2, 2025, found that 63% of small businesses reported higher expenses, 53% saw reduced profits, 48% experienced lower revenue, and 42% faced supply chain disruptions, according to CFIB's published research. Only 7% of respondents reported any positive effects from the trade war. Seventy-five percent said the tariff situation had increased their stress levels, and 79% cited unpredictable tariff changes as a barrier to business planning.

By February 2026, one year into the trade war, a follow-up CFIB survey of 1,379 respondents found that 68% of small business owners continue to be negatively affected and 52% no longer consider the United States a reliable trading partner — up from 49% who reported strained U.S. relationships in March 2025 to 75% by early 2026, according to CFIB.

Statistics Canada's Canadian Survey on Business Conditions for the first quarter of 2026 separately found that 39.4% of businesses are very likely or somewhat likely to pass tariff costs to consumers, while 5.8% anticipate an inability to continue operations beyond 12 months and 41.3% are uncertain about their operational sustainability, as reported by CTV News.

CFIB President Dan Kelly stated: "Small businesses have faced massive uncertainty since the trade battle began last year. Small business owners have been dealing with the whiplash of trying to keep up with sudden changes and threats, including many that don't happen or are revised within hours."

Analysis: Why This Matters

The Scale of the Problem

Based on our analysis of the combined CFIB and Statistics Canada data, the potential economic impact is substantial. Canada has 1.08 million small businesses employing 5.8 million people — 46.6% of all private-sector employment. If the 38% closure rate from CFIB's survey were to materialize fully, that would represent approximately 410,000 businesses and millions of jobs at risk. Even a fraction of that figure would constitute the largest wave of small business failures since the 2008 financial crisis.

The sectors facing the most severe pressure are transportation (38% negatively affected), manufacturing (27%), wholesale (26%), and agriculture (46.6% expecting inflation as a major obstacle). These are not marginal industries — they form the core of Canada's goods-producing economy and employ hundreds of thousands of Canadians in communities across the country.

Government Response: Significant but Poorly Delivered

The federal government has committed substantial resources: the $1 billion Regional Tariff Response Initiative, a $5 billion Strategic Response Fund for highly trade-exposed companies, expanded BDC lending, and CRA payment flexibility. Combined with the $29.8 billion in revenue generated from counter-tariffs, the fiscal response is not insignificant.

But the delivery problem is severe. CFIB found that less than 1% of eligible businesses have applied to the RTRI, and 77% did not even know it existed. Some provinces have added barriers: British Columbia requires a minimum of 10 full-time employees to qualify, effectively excluding most small businesses. Quebec's RTRI application window has already closed and was limited to manufacturers earning over $2 million annually. These restrictions mean the businesses that need help most — the smallest and most vulnerable — are the least likely to receive it.

What Happens Next

The CUSMA (Canada-United States-Mexico Agreement) review is approaching in the months ahead, and the outcome will determine whether the current tariff regime becomes permanent, escalates, or is partially rolled back. CFIB Chief Economist Simon Gaudreault has characterized the situation as "a roller coaster of announcements, re-announcements, retractions" — a volatility that makes business planning nearly impossible.

The Bank of Canada forecasts GDP growth of just 1.0-1.1% for 2026, with business fixed investment expected to remain "quite weak." The BDC's economic outlook specifically warns that "businesses are expected to be cautious in their hiring." If current trends continue through the summer without significant tariff relief, the closure rate could accelerate as businesses exhaust their cash reserves and credit facilities.

Your Action Plan

Immediate (This Week):

If you own a business: apply to the Regional Tariff Response Initiative — you are likely eligible and almost certainly have not applied
Review all U.S.-sourced supply chain inputs and begin identifying Canadian or non-U.S. alternatives
If you are an employee in a high-risk sector: update your resume and check jobbank.gc.ca for opportunities in less trade-exposed industries

Short-term (This Month):

Business owners: contact your Regional Development Agency to understand the full range of available support
Request CRA payment flexibility if tariff costs are straining your cash flow
Explore BDC financing to bridge the gap while you restructure supply chains
Consumers: identify Canadian-made alternatives for your most common purchases

Long-term (This Year):

Develop a diversification strategy that reduces U.S. supply chain dependence below 50% of total inputs
Monitor CUSMA review developments — the outcome will shape the trade environment for years
Consider whether your business model is viable under a permanent 25% tariff regime, and plan accordingly
Workers: invest in skills training through the federal Workforce Reskilling Fund or provincial programs

Other Perspectives

Government Position:

According to CBC News, the Carney government has characterized its response as comprehensive, pointing to the $1 billion RTRI, the $5 billion Strategic Response Fund, the Buy Canadian procurement policy prioritizing domestic suppliers in tariff-hit sectors, and CRA payment flexibility. The government has also emphasized that counter-tariff revenue of $29.8 billion provides fiscal room to support affected businesses and workers.

Conservative Opposition:

Conservative Leader Pierre Poilievre has called the 2026 budget "the most costly and largest budget deficit in Canadian history outside of COVID" and argued that despite 20 international trips, PM Carney "has not reduced a single tariff line in any other foreign country," according to the Globe and Mail. The Conservatives advocate eliminating retaliatory tariffs and pursuing aggressive expansion of energy exports as an alternative strategy.

NDP Position:

The NDP has committed to ensuring every dollar from counter-tariff revenue goes directly to affected workers and communities "with no loopholes and no delays," and has proposed a "Build Canadian Buy Canadian" plan that would ban American companies from government contracts when Canadian workers can do the work, according to NDP communications.

Business Community:

CFIB Executive VP Corinne Pohlmann stated: "Small businesses don't have a lot of runway left. They are trying their best to absorb costs, but if nothing changes, they will be forced to make tough decisions." CFIB has recommended reducing the small business tax rate from 9% to 6%, creating a rebate program for tariff-impacted SMEs, and ensuring that government rebates are not treated as taxable income. According to CFIB, 82% of surveyed members want government to return counter-tariff revenue to affected businesses.

Economists:

The Bank of Canada has warned that the "adjustment process will result in job losses in some sectors and hiring in others," while BDC forecasts GDP growth of just 1.0% for 2026. TD Economics is somewhat more optimistic with a 2.4% growth forecast, but notes that business fixed investment is expected to remain "quite weak." The Business Council of Canada's Theo Argitis told reporters that the budget is "not a generational budget" and that "there was not enough that might speed private investment at the scale necessary for significant growth."

Note: Including multiple perspectives does not imply all views are equally valid, but ensures readers can make informed judgments.

Corrections Policy

We strive for accuracy. If you find an error in this analysis, please email us at [email protected]. We will promptly investigate and correct any factual inaccuracies.

Updates:

No corrections to date (as of April 12, 2026)

Sources

Canadian Federation of Independent Business, "Nearly one in five small businesses dealing with tariff costs won't last more than six months if nothing changes," August 2025 — cfib-fcei.ca
Canadian Federation of Independent Business, "One year into the trade war: half of Canadian small businesses no longer feel the U.S. is a reliable trading partner," February 2026 — cfib-fcei.ca
CTV News, "Caught in the crossfire: CFIB says about 40% of small businesses won't last a year," 2025 — ctvnews.ca
CTV News, "Nearly 40% of businesses likely to pass on tariff costs to customers: StatCan," 2026 — ctvnews.ca
Statistics Canada, "Canadian Survey on Business Conditions, First Quarter 2026," February 2026 — statcan.gc.ca
Innovation, Science and Economic Development Canada, "Key Small Business Statistics 2025" — ised-isde.canada.ca
Business Development Bank of Canada, "Canada 2026 Economic Outlook" — bdc.ca
Federal Economic Development Agency for Northern Ontario, "Regional Tariff Response Initiative" — fednor.canada.ca
Globe and Mail, "Poilievre says Carney failed on tariffs" — theglobeandmail.com
CBC News, "Carney unveils billions in funding, Buy Canadian policy" — cbc.ca