CALGARY — An Alberta company has halted sales to U.S. customers after its candles became subject to a 50 per cent tariff, highlighting the increasingly complex landscape facing Canadian small businesses selling south of the border.
Ellen Santos, owner of Farmhouse Charm Candles Inc., said the tariff hit just as the company was gaining traction in the U.S., including interest from new wholesale customers.
“We’re technically giving up the candles for free,” Santos said of trying to absorb the tariff. “That’s insane. And that’s not sustainable.”
The company makes its candles by hand in Calgary and says about 20 per cent of its sales come from U.S. customers.
Not all of its products, however, face the same treatment at the border.
Farmhouse Charm’s candles and wax melts are made with the same ingredients, with one key difference: the candles have a wick. That distinction puts the finished products into different customs classifications.
The company says its wax melts and room sprays are not subject to the 50 per cent tariff and will continue to be sold to U.S. customers. But candles account for the bulk of its revenue.
“It’s going to be hard,” said Glen Baulsobrino, the company’s operations manager. “The U.S. market is a huge market, especially for our products.”
Businesses diversify
The challenge extends well beyond one Alberta business.
The Canadian Federation of Independent Business (CFIB) says 40 per cent of small businesses exporting to the U.S. expect to be affected by the latest tariffs, while nearly one-third expect their revenues to fall by 50 per cent or more.
Jasmin Guénette, CFIB’s vice-president of national affairs, said the organization welcomes Ottawa’s efforts to support small businesses, but wants the federal government to go further.
“We are also asking the federal government to reduce the fiscal burden on small business, to reduce the small business tax rate so that businesses can keep more of their earnings and adapt and adjust their business situation,” Guénette said.
He added that uncertainty in the Canada-U.S. trade relationship is prompting businesses to adapt, including by finding suppliers outside the U.S. and closer to home.
“We have seen many businesses starting to diversify their operation,” Guénette said, adding that businesses could also look to send their products and goods to international markets outside the U.S.
‘40 million hosers’
But diversifying away from the U.S. market presents challenges of its own.
Moshe Lander, an economist at Concordia University in Montreal, said Canada’s geography and the size of the American economy make the U.S. difficult for Canadian businesses to replace.
“If you’re now going to try and go find customers in Europe, you now have to negotiate an ocean,” Lander said. “And that’s a much more complicated exercise. If you’re looking for Asia, same thing.”
“We’ll always be reliant on the U.S. market,” he said. “It is the largest economy in the world.”
A harder border could also constrain the ability of Canadian companies to grow, Lander said.
“Rather than an integrated North American market of half a billion people, it’s now 40 million hosers,” he said, adding that small businesses with dreams of becoming medium or large companies “might find that they don’t have that ability anymore.”
‘Hard time right now’
Despite those challenges, Santos and Baulsobrino are not abandoning their plans to grow internationally. They hope to begin expanding into other markets early next year while continuing to sell their non-tariffed products in the U.S.
At the same time, Santos said the company is putting more emphasis on its Canadian customer base and building relationships with local retailers in Calgary and elsewhere in Alberta.
“We’re trying to stay afloat by making contact with more local clients,” she said. “We have several partnerships with local stores in Calgary and within Alberta.”
Santos said the uncertainty has made it a difficult period for the business, but she remains hopeful the current trade environment will not last.
“We want to stay positive as well,” she said. “This will not be forever for sure. But it’s a hard time right now.”
With files from CTV’s Kristen Yu
