The Tariffs for Canada and SMEs’ Responses

Author(s): Scott Douglas Jacobsen

Publication (Outlet/Website): The Good Men Project

Publication Date (yyyy/mm/dd): 2025/03/28

Ryan Mallough, Vice President of Legislative Affairs at the Canadian Federation of Independent Business (CFIB), discusses the impact of U.S. tariff uncertainty on Canadian small businesses. With about 20% facing paused or cancelled orders, uncertainty is almost as damaging as the tariffs. Over half of SMEs feel unprepared, prompting concerns about supply chains, layoffs, and price increases. Mallough highlights the need for government intervention, including a potential freeze on the carbon tax. He also emphasizes strengthening internal trade and diversifying international partnerships to mitigate reliance on the U.S. market.

Scott Douglas Jacobsen: So today, we’re here with Ryan Mallough. He is the Vice President of Legislative Affairs at the Canadian Federation of Independent Business (CFIB). He has experience managing Ontario’s COVID-19 response and oversees policy files related to electricity, the environment, municipal affairs, cannabis, and alcohol. Ryan joined CFIB in 2015 on the communications team, moved to the Ontario advocacy team in 2016, and assumed his current role in 2023.

Previously, he served as a Communications Officer at the University of Toronto and worked in research at Indigenous and Northern Affairs Canada. Ryan holds a Bachelor of Social Sciences (BSocSc) in Political Science from the University of Ottawa and an MA in Journalism from Western University.

Thank you for joining me today, by the way.

Ryan Mallough: Anytime.

Jacobsen: What percentage of small and medium-sized businesses reportedly face paused or cancelled orders due to U.S. tariff uncertainty?

Mallough: Currently, about one in five small businesses is affected. This is a significant number, especially considering that the tariffs have not yet been implemented.

What we’re seeing now is a reaction to uncertainty. Many businesses are closely following the news, which seems to change almost daily. This uncertainty is already having a tangible impact. Businesses are trying to secure their supply chains. Still, they are also being forced to assess where they may need to adjust operations.

Jacobsen: How does this impact differ for exporters compared to the overall SME group?

Mallough: The impact is more severe for exporters, who comprise a smaller fraction of CFIB’s membership. We are seeing a higher rate of order cancellations and contract holds because their American clients are hesitant. These clients effectively say, “We need to wait and see,” as they assess whether the U.S. tariffs will increase their costs.

Jacobsen: According to Simon Gaudreault, what is “almost as damaging as tariffs”?

Mallough: Uncertainty.

An announcement that tariffs would take effect on February 1 led businesses to make strategic decisions in preparation. The deadline was then delayed but not removed. Now, it has been pushed to March 4.

This level of uncertainty is unsustainable for small business owners. They must make informed decisions, commit to contracts, plan expansions, and forecast their financials with a clear sense of where things are headed. Businesses are accustomed to adapting, but this situation is forcing them to adjust unthinkingly.

Jacobsen: How many SMEs do not feel prepared for the potential impacts of these tariffs?

Mallough: Over half—around 54%—of small businesses do not feel prepared.

This underscores the widespread uncertainty in the business community. Many owners are still unsure about key details:

• Will the tariffs be broad-based, affecting multiple industries?
• Will they be limited to steel and aluminum?
• How will Canada respond with countermeasures?

These unknowns make long-term planning incredibly difficult for small businesses. Preparing is tough, but many business owners are still in wait-and-see mode. 

Jacobsen: What operational adjustments are they planning to make for those SMEs?

Mallough: We are already seeing many businesses looking for new suppliers and trying to expand their purchasing or selling markets. About 45% are in that scenario.

We also see:

• 25% delaying or cancelling investment plans, expansions, or new hiring.
• 20% considering workforce reductions.
• 14% stockpiling products in anticipation of price increases.

Businesses are not following a single strategy. They’re more of a throwing everything at the wall and seeing what sticks approach. Again, that uncertainty makes it difficult to determine the right course of action without knowing how things will unfold over the next month.

Jacobsen: Tariffs on specific industries can increase general costs. How many SMEs are willing to pass those costs on to consumers?

Mallough: This has been interesting because we see clusters at both ends of the spectrum:

• 13% of businesses say they will have to absorb the entire cost. These are often agriculture businesses or long-term contracts with locked-in pricing.
• According to our data, 21% of businesses will pay consumers the full cost. This is primarily true in retail.
• 26% are unsure about how they will handle the cost increases.

That means we, as consumers, will feel the price crunch. Tariffs will put pressure on both ends—businesses will face increased costs, and some will pass that burden on to consumers.

Jacobsen: What percentage of small businesses call for more pressure on Parliament? And what recommendations are being made to address the tariff threat?

Mallough: The demand is high—82% of small businesses want Parliament to reconvene to address the tariff threat.

Many businesses hear this anecdotally. We’re in an awkward situation where a lot is happening on the U.S. side. Yet, Canada does not have a fully functioning government, with the prime minister in a transitional phase.

New Liberal leadership is still a month away, and a quick election call is possible after that. Let’s look at April or early May before we have a functioning Parliament able to respond to this issue.

Meanwhile, we are less than a month away from key deadlines, March 4 and March 12. There is growing concern that we will not be able to act quickly enough—not just in terms of countermeasures but also in supporting businesses affected by the tariffs. Some provinces may face similar challenges in responding swiftly.

Here in Ontario, we are in the middle of an election campaign. The campaign will conclude before any tariff announcement. However, the government must still act quickly if tariffs take effect in March.

Jacobsen: Do we know how small businesses are interpreting these tariffs? In other words, do they have their views on their rationale beyond what is publicly stated?

Mallough: It’s primarily based on what is being stated in public forums, but when we look at survey comments from our members, opinions are all over the place.

Some businesses believe:

• If this concerns border security, let’s invest in border infrastructure and show we’re taking action.
• The same logic applies if this is about drug control—demonstrate that we are making necessary changes.
• If this concerns Canada being treated like a “51st state,” what steps can we take to address those concerns?
• Is this personal between administrations? Or is there a broader geopolitical factor at play?

There are many conversations around these questions. Some business owners wonder: Is this a threat, or will they follow through?

The reality is somewhere in the middle. It’s hard to tell, which adds to the uncertainty. Right now, the biggest challenge is that the gut reaction in many circles is to respond immediately—

• The President makes a statement or signs an executive order, and there’s an impulse to act immediately.

Waiting and not immediately deciding how to respond may be wise. However, inaction can also be perceived as a weakness.

That’s the push and pull our members are caught in—there’s a flood of information, but they don’t know:

• What is actionable?
• What will affect my business daily?
• How do I plan when things keep shifting?

Jacobsen: What policy measures does CFIB recommend to put pressure on Parliament?

Mallough: There are a few things the government can do.

In the immediate future, the key date for business owners is April 1—the scheduled increase in the carbon tax.

We have heard from:

• Pierre Poilievre and the Conservative opposition have committed to eliminating it.
• Mark Carney and Chrystia Freeland, the Liberal leadership frontrunners, have signalled possible changes or even scrapped the consumer side of the tax.

We don’t want the carbon tax to increase automatically during an election period, especially if we are indeed heading toward one.

Jacobsen: So, one of the things you’re looking for—if the government can reconvene early—is at least a freeze on the carbon tax increase for now. Then, once the election occurs and a new government is in place, they can decide what to do with it.

But for now, the goal is to eliminate that increase immediately.

Mallough: Exactly. Let’s take that increase off the table right away.

Beyond that, tax reductions, in general, are extremely popular among small businesses. This includes:

• Reducing the corporate tax rate,
• Lowering payroll taxes, and
• Cutting municipal property taxes.

Any of these measures would be well-received because they leave businesses with more money to reinvest in employees and operations.

Jacobsen: We’ve also seen strong sentiment around Buy Canadian and Shop Local initiatives.

Mallough: Absolutely, and that’s a significant and positive trend. The key will be to sustain that momentum and ensure that consumers continue supporting local businesses where possible.

Here’s a key statistic:

• 66 cents of every dollar spent at a local business stays in the local economy.
• In contrast, only 11 cents of every dollar a multinational spends stays local.

That’s why maintaining this shift toward local spending is crucial.

Jacobsen: The final issue that is getting much attention is eliminating internal trade barriers.

Mallough: Yes, and that’s encouraging to see. This issue has been on our radar for years.

• We were there when the original trade agreement was signed.
• We even recognized the trade minister at the time for that progress.

But eight years later, we still have many barriers in place.

Good progress has been made, particularly at the federal and Alberta levels. However, barriers that were supposed to be eliminated years ago remain, and additional restrictions haven’t been addressed yet.

Ministers and premiers have been saying the right things—including:

• Minister Anita Anand,
• Premier David Eby,
• Premier François Legault,
• Premier Doug Ford and
• Premier Danielle Smith.

But the key now is action, not just talk. The momentum is here; they have the tools to eliminate these barriers. They need to follow through.

Eliminating internal trade barriers would:

1. Improve goods mobility,
2. Increase labour mobility and
3. Create actual free trade within Canada as we focus on external free trade.

Jacobsen: When you conduct these surveys, what is the typical sample size?

Mallough: Usually, it’s in the couple thousand range.

We received about 2,200 responses for this survey— a solid sample size.

However, unlike most of our surveys (restricted to CFIB members), we opened this one up to all small business owners through various channels.

We’re still finalizing the entire dataset, but the results we’ve released are based on those 2,200 responses from CFIB members.

Jacobsen: Post-April 1, what are the likely outcomes?

Mallough: I wish I knew.

Jacobsen: At this point, how do you assess the situation?

Mallough: It’s hard to judge right now. Some form of U.S. tariffs are coming, and the April 1 deadline is also essential.

We’ve been so focused on March 4 and March 12, but an executive order is also under review that examines U.S. trade policy in general. The goal is to recommend tariffs and other reciprocal measures.

The President announced yesterday that this doesn’t just include tariffs—it also includes other taxes.

For example:

• The President specifically mentioned Canada’s Digital Services Tax.
• Value-added taxes (VATs), which are ordinary in Europe, were also referenced.

Traditionally, these aren’t considered tariffs, but if the U.S. is going to respond to those policies, the scope of retaliatory actions could expand significantly.

We’ll need to look for new strategies and opportunities, given that the U.S. is also exploring new angles in trade policy.

Jacobsen: So, is this trade conversation far from over?

Mallough: Definitely. We’re in this for the long haul.

Even if the details change, we look at four years of ongoing trade battles. The U.S. administration has been clear about its stance on tariffs, and while the President has emphasized border security, he has also consistently raised trade deficits.

This isn’t something that’s going away anytime soon.

Even if none of these current measures were happening, we were already set for trade renegotiations:

• The Canada-United States-Mexico Agreement (CUSMA) is up for renegotiation at the end of 2025 and into 2026.

So even if we get through the spring relatively unscathed, we know that:

• By fall and into next year, we’ll be right back into trade discussions.

Jacobsen: Regarding SMEs and tariffs, how much can we increase international trade?

You previously noted that:

• 66 cents of every dollar spent locally stays in the economy.
• However, only 11 cents per dollar were spent at a multinational stay within Canada.

Could tariffs—or at least their political implications—benefit Canadian businesses and internal trade?

Mallough: Potentially.

Indeed, the “Buy Canada” sentiment among consumers suggests that possibility. The big question is:

• How long can that momentum last?

There is an opportunity in this crisis for Canada to reevaluate its economy by:

1. Shoring up domestic supply chains.
2. Boosting local production and sourcing.

At the same time, we shouldn’t overlook external trade opportunities either. Diversifying beyond the U.S. may become even more critical as these trade tensions evolve.

We’ve relied on the U.S., but they might not be as reliable as they once were. We should look at other trade partners. Our existing free trade agreements extend beyond North America.

At the same time, counter-tariffs will have consequences—and their impact will intensify over time. It’s going to be important for businesses to remain flexible and adapt, but also for government policies to create the right environment for:

• Entrepreneurs
• Small business owners
• Attracting investment

Ultimately, the goal is to build a stronger Canadian economy.

Jacobsen: Ryan, thank you so much for your time today. I appreciate the opportunity.

Mallough: No problem.

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