Half of Canadian small businesses no longer view the U.S. as a reliable trading partner one year into the trade war, according to a new study by the Canadian Federation of Independent Business.
The study shows the strain is showing up directly in day-to-day business dealings.
“Small businesses have faced massive uncertainty since the trade battle began last year,” Dan Kelly, president of the CFIB said in a press release.
“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. With the Canada-U.S.-Mexico Agreement (CUSMA) coming up for review in the months ahead, the stakes are even higher.”
About 75 per cent of small businesses say the tariff fight has strained their relationships with U.S. partners or clients, up from 49 per cent in March 2025. More than two-thirds (68 per cent) of Canadian small business owners also continue to report being negatively affected by U.S. tariffs.
Tariff pain is widespread, relief is limited
CFIB research also found tariffs hit firms unevenly, with 37 per cent of owners saying 2025 was a good year, while 35 per cent said it was a poor one.
“There’s reduced profits, reduced revenues. These are the major things, and all of this has implications on what funds they have available to reinvest in their business, or to pay employees,” said Marvin Cruz, CFIB’s senior director of research and one of the authors of the report.
“The entrepreneurial spirit is a bit dampened.”
Cruz said the pressure is pushing some owners toward tough decisions, including taking on more debt or even thinking about closing.
About 18 per cent of businesses that reported a poor year said they contemplated permanently closing because of tariffs, compared with two per cent among those reporting an average or good year.
Nearly a third, 31 per cent, of businesses that had a poor year said they took on increased debt, compared with 10 per cent for those reporting an average year and five per cent for those reporting a good year. Poor-performing businesses also reported higher levels of reduced hiring and paused investments.
Federal relief failing to support SMEs
While a recent U.S. Supreme Court decision on tariff rates is expected to provide some relief, CFIB said it will not change the situation for most Canadian exports, since many goods are already covered under CUSMA. The group said the ruling should still help the 27 per cent of businesses hurt by tariffs on non-CUSMA compliant goods.
At the same time, CFIB said steel and aluminum tariffs imposed by both countries remain a major challenge, with 44 per cent of small businesses reporting they have been affected.
Limited uptake in federal tariff response initiative
CFIB also pointed to limited uptake of Ottawa’s Regional Tariff Response Initiative (RTRI), stating that less than one per cent of small businesses have applied and 77 per cent are entirely unaware the program exists.
“We keep hearing the same things from small business owners: they’re too small to qualify, they didn’t know about the program, or that the required paperwork isn’t worth the time and resources,” said Corinne Pohlmann, CFIB executive vice-president of advocacy.
CFIB said restrictive eligibility rules are a key barrier. In British Columbia, businesses must employ at least 10 full-time workers to qualify, while in Quebec, eligibility is now closed and applications are limited to manufacturing firms with annual revenues of $2 million or more.
The organization said it has sent a letter to Prime Minister Mark Carney, Finance Minister Champagne, and Canada’s Regional Development Agencies questioning the program’s design and effectiveness.
CFIB is calling on Ottawa to:
- Provide broad tax relief, including a reduction in the small business tax rate from nine per cent to six per cent.
- Create a rebate program for tariff-impacted SMEs and ensure rebates and refunds are not treated as taxable income
- Stay focused on maintaining the CUSMA agreement to reduce uncertainty and protect cross-border supply chains.
Methodology
Final results for the Your Voice- February 2026 survey. The online survey was conducted between February 5-24, n= 1,379. For comparison purposes, a probability sample with the same number of respondents would have a margin of error of at most +/- 2.60 per cent, 19 times out of 20.
Final results for the Your Voice – December survey. The online survey was conducted between December 4-31, 2025, n= 1,663. For comparison purposes, a probability sample with the same number of respondents would have a margin of error of at most +/- 2.40 per cent, 19 times out of 20.
