The widespread business disruption caused by U.S.-Canada tariffs has incited some Canadian small- and medium-sized enterprises (SMEs) to retreat from the U.S. This shift reflects a broader loss of confidence, with nearly half (46%) of small business owners no longer viewing the U.S. as a reliable trading partner.[i]
According to Statistics Canada, Canadian exports destined to the U.S. in August 2025 declined by 3.4%.[ii] On the other hand, imports from the U.S. decreased by 1.4%. In the first eight months of 2025, Canadian exports were 3.3% lower than during the same period in 2024, while imports declined by 0.5%. Canada’s trade surplus with the United States also narrowed, falling from $7.4 billion in July to $6.4 billion in August.
Nearly all SMEs (92%) believe Canada should strengthen its trade ties with other countries besides China and the U.S. in response to rising trade tensions.[iii] Furthermore, 50% of small businesses are or will be diversifying away from U.S. suppliers and markets to a certain extent. One-third of Canadian SMEs have already either fully (5%) or partially (28%) pivoted away from U.S. business due to the trade war (Figure 1). An additional 5% of SMEs are in the process of fully pivoting away from the U.S., while 12% are in the process of partially pivoting. Finally, 15% of small businesses have not yet pivoted but are considering their options. Moreover, they reflect a broader loss of confidence in what was once Canada’s most reliable trading partner and signal a deliberate strategy by Canadian SMEs to seek out and establish more stable, dependable, and diverse supply chains and markets.
Figure 1
Is your business pivoting to find non-U.S.-based suppliers or customers as alternatives?
Source: CFIB, The U.S.-Canada Trade War and Your Business, August 8 – September 2, 2025, final results, n=2,673.
A full or partial pivot has been most undertaken by small businesses in retail (42%) and wholesale (35%). Small businesses in the agriculture sector are twice as likely to be planning full (10%) and partial (21%) diversification, compared to the cross-sector average.
“We had previously been buying hardware and raw materials that came from the U.S. We have now shifted to purchasing more from other sources even though the prices were higher.”
—Wholesaler, Ontario
“We have stopped importing and selling U.S. products. We are selling out the current inventory and won’t reorder. We are never buying American again.”
—Retailer, Nova Scotia
" I think we need to negotiate with the U.S., but also with other countries to ensure that we stay competitive and that our businesses have a backup plan. That’s how we’ll maintain our economy. We can’t put all our eggs in one basket.”
—Construction business owner, Quebec
“We’ve stopped buying American products altogether. There’s just too much uncertainty surrounding prices or buying overpriced goods that may become unavailable.”
—Retailer, Quebec
Among small businesses diversifying their supply chains, two-thirds (67%) are opting for Canadian alternatives (Figure 2). More than one-third (34%) are seeking out European Union suppliers and markets, while 21% are turning to Mexico. These results underscore how Canadian SMEs are adapting to geopolitical uncertainty by both localizing operations and leveraging international partnerships.
Figure 2
Where is your business pivoting to find alternatives to U.S.-based suppliers or customers?
Source: CFIB, The U.S.-Canada Trade War and Your Business, August 8 – September 2, 2025, final results, n=1,694.
However, these shifts are not necessarily always viable or possible for all small businesses. In fact, one in five (19%) business owners is not even considering finding alternatives to U.S. suppliers and customers (Figure 1). The business model might be built around a specific U.S. customer base, an American brand or a product that is only sourced there. The U.S. economy is also the largest in the world: in certain niche markets (low-volume or specialized products and/or services), a non-U.S. production or target market may not be economically viable due to limited demand. In such cases, U.S. partners remain the only realistic option. Additionally, many SMEs have long-standing relationships with U.S. suppliers or customers, built on years of trust, contractual reliability, and integrated logistics, which are not easily or efficiently modified/replaced. Geographic proximity to the U.S. also makes American customers or suppliers more accessible or cost-effective compared to some domestic or international alternatives.
“We have researched to try to find Canadian companies to replace some of what we have been getting from the USA. Canada just doesn’t manufacture some specific dance & athletic wear items, or if there is a Canadian manufacturer for a few of them, they are limited, and the cost of labour is so high. To import directly from somewhere else like China, Europe, or Australia, there are high minimums, high shipping costs and they require a large opening order to get a new account with them. It’s a lot of tedious work and expensive for a small retail business to go through just to keep our doors open, when things were working well with our existing suppliers.”
—Retailer, Ontario
“Almost all the products we sell are not manufactured in Canada and never have been. We can only source them from the U.S./Mexico. We are a locksmith installing locking hardware, we cannot compromise and order knockoff overseas hardware and risk a breach for our clients. At the end of the day, as costs increase, we increase our prices, and the end user always pays the bill.”
—Professional services business owner, British Columbia
“We stopped importing as many goods as possible from the US. Even though it has increased shipping costs from Europe/Asia & has taken considerable time to "shift", we feel it is important.”
—Hospitality business owner, Alberta
When speaking with members, many identified the shipping costs as a barrier to trade diversification. Moreover, there is a sentiment among some business owners that the current trade circumstances are temporary, making them willing to manage short-term tariff-related costs rather than fully restructure supply chains or develop new trading relationships. As such, while some firms have successfully diversified, many remain closely tied, in full or in part, to U.S. supply chains.
Transitioning away from established suppliers or customers is therefore not immediately feasible for many SMEs due to supply chain constraints, cost pressures, and the time required to build new partnerships and adjust internal operations. For most, trade diversification is a gradual and complex process. Importers are usually able to pivot to new suppliers faster than exporters can shift to new markets. About 26% of importers expect they need more than six months to move to new suppliers.[iv] On the other hand, exporters face longer adaptation timelines, with 51% of them anticipating a much longer timeline to stabilize operations.
“As a veterinary hospital, we have very little options in terms of where we can source our supplies. The vast majority of everyday items like vaccines, flea and tick prevention, and veterinary diets comes from the states. Tariffs will force us to raise prices, which will lead to animals not getting the care they need as people just cannot afford higher veterinary costs.”
—Professional services business owner, New Brunswick
“We are a construction company that sources many of our materials and equipment from the US. While we’ve made an effort to shift toward purchasing Canadian-made products, the cost of supplies, equipment, vehicles, trailers and small tools has risen significantly since the tariffs. Despite these increases, our pricing has remained the same, which has reduced our profit margins and left little room for reinvestment in new equipment/other business needs. Unfortunately, I don’t see much relief being offered for small businesses in the construction industry at this time.”
—Contractor, Ontario
“60% of my products come from or through the US. Some of my products are no longer available from my suppliers. Some replacement products are not selling as well. Having a hard time finding Canadian made products, and affordable Canadian made products.”
—Retailer, Ontario
“Our business is very vulnerable to tariffs. We buy granite blocks from the U.S., process them, and send the finished products back to the U.S. If Canada sets counter-tariffs, we could be affected on both sides of the border, automatically making us unable to compete. As 60% of our market is in the U.S., we’re very worried about our future.”
— Manufacturing business owner, Quebec
Buying Canadian: The Local Side of Diversification
Many SMEs are making a strong effort to promote Buy Local or Buy Canadian whenever possible, with 43% actively encouraging customers to choose domestically made products.[v] These efforts seem to be reflected in business sales, as 39% of business owners reported increased sales of Canadian or locally made products, 15% saw growth in sales of other internationally made goods (excluding U.S.), and 40% reported a decline in U.S.-made product sales (Figure 3).
Figure 3
Since the start of the trade war, what changes have you noticed in the following areas?
Source: CFIB, Your Voice – May 2025 survey, May 6 – June 2, 2025, First subject (n=2,028), Second subject (n=2,026), Third subject (n=2,020).
Note: Members were allowed to select one answer for each line.
“Everything USA-made that we bring in has a tariff, so we have since stopped buying from the USA. We have plenty of good Canadian furniture manufacturers to buy from. We will never buy American again.”
—Retailer, British Columbia
“I support retaliatory tariffs, but the federal government needs to find a way to ensure that the funds collected in this trade war are coming back to small businesses that have been severely impacted. Even though I cannot source some products in Canada, I am a Canadian small business. Local businesses need to be able to stay in business.”
—Retailer, British Columbia
While some Canadian business owners may not be able to pivot completely to Canadian/locally made products because of specific barriers to diversification, buying from local small businesses remains essential to sustaining communities and supporting entrepreneurs.
This reinforces the broader need to support local businesses. Previous CFIB research has shown that when Canadians buy from small independent retailers, 66 cents of every dollar stay within the local economy, compared to just 11 cents from multinational businesses and 8 cents from online giants.[vi] In times of trade tensions and economic uncertainty, buying local and supporting Canadian SMEs is not just symbolic, but also essential to protect Canada’s local economies and long-term resilience.
Conclusion and recommendations
Now more than ever, it is essential for the federal government to support SMEs affected by this ongoing trade war. With Ottawa collecting billions in additional tariff revenue on U.S. imports, a strong majority of SMEs (82%) said the government should ensure that any tariff revenue that is returned includes support for smaller businesses affected both directly and indirectly by trade disruptions and cost pressures.
[1] CFIB, Special survey on the Impact of the U.S.-Canada- trade war, March 13 - 31, 2025, n=3,398.
[2] Statistics Canada The Daily — Canadian international merchandise trade, August 2025
[3] CFIB, Your Voice – April 2025 survey, April 10 – 24, 2025, n=2262.
[4] CFIB, Survey on the impact of U.S.-Canada tariff situation on businesses, February 6 - 13, 2025, n=1,716 (importers), n=524 (exporters).
[5] CFIB, Your Voice – May 2025, May to June 2025, n = 2,090.
[6] Matchett T., Boston E., Small Business, Big Impact: Small Retailers’ Local Contributions, CFIB, 2023.