How U.S. Tariffs on Canadian Goods Impact Small Businesses?

Last updated: 2025/03/02 at 11:18 PM

wealthgram

17 Min Read

As a small business owner, you’ve probably heard about tariffs for the last little while, and for good reason.

Contents

What Are Tariffs and Who Pays Them?Who Pays the Tariffs? Why Should We Care? How Do the Trump Tariffs Affect Canada’s Economy?Canadian Businesses That Could Take a Hit How Could U.S. Tariffs Affect Your Canadian Business?1. Less profit 2. Supply Chain Ripple Effects 3. Job Cuts and Layoffs How to Stay Prepared Against U.S. Tariffs—No Matter What Happens 1. Expand Your International Customer Base 2. Focus on Your Canadian Market 3. Stay Informed on Trade Policies 4. Adjust Your Pricing 5. Secure Flexible Financing 6. Build an Emergency Fund Final Thoughts: Stay Informed, Stay Ready

Trade tensions between Canada and the U.S. are nothing new, but when U.S. tariffs on Canada come into play, they can have a serious impact on businesses of all sizes. From decreased demand to disrupted supply chains, these economic policies can directly affect your bottom line.

Tariffs don’t usually change overnight, but we’re in uncharted territory right now, with decisions being made and put into action faster than ever.

Take what happened in early 2025. A 25% tariff on Canadian imports was announced by U.S. President Donald Trump, shaking up industries that depend on cross-border trade. While negotiations eventually put it on pause, the uncertainty lingered, leaving businesses scrambling to adjust.

If nothing else, this was a wake-up call: tariffs can hit anytime, no matter who’s in charge. Governments shift, trade policies evolve, and businesses are often caught in the crossfire. A new tariff can lower demand for Canadian products, disrupt supply chains, and force tough pricing decisions that impact your bottom line.

But there’s good news: You’re not powerless. With the right approach, you can prepare, adapt, and keep your business strong. That way, as changes come, you’re less likely to be caught off guard.

What Are Tariffs and Who Pays Them?

At their core, tariffs are taxes on imported goods. When the U.S. imposes tariffs on Canadian products, demand for Canadian goods may decrease as they become more expensive for American buyers, in comparison to the price pre-tariffs.

Who Pays the Tariffs?

A common misconception is that Canadian businesses pay the tariff. They don’t. It’s actually the U.S. importer (buyer) who foots the bill. But that doesn’t mean Canadian businesses are off the hook. Higher costs for American buyers can make Canadian products less competitive, leading to lower sales, pricing pressure, or even lost customers

Here’s how that plays out in real life: Say you own a furniture company in British Columbia that sells custom-made wooden tables to American buyers. If the U.S. slaps a 20% tariff on Canadian wood products, that means the U.S. retailer has to cough up an extra 20% just to bring your tables into the U.S. Now, they’ve got a choice: eat the cost of the tariffs themselves or bump up their prices and pass that cost on to their customers.

Why Should We Care? How Do the Trump Tariffs Affect Canada’s Economy?

Tariffs don’t just affect individual businesses—they send shockwaves through the entire Canadian economy.

Take a local coffee roaster that exports specialty beans to the U.S. If tariffs suddenly make those beans more expensive for American buyers—because American importers will be paying the tariffs on items imported from Canada—the U.S. buyer might switch to a local supplier instead.

When the cost of exporting to the U.S. goes up, Canadian businesses are forced to make tough decisions: raise their prices for Canadian customers to offset lost revenue, lower their prices for American customers, or find new markets. Multiply this scenario across industries, and the ripple effect becomes clear.

For manufacturers, tech companies, and retailers, tariffs don’t necessarily mean higher costs for Canadian businesses—but they do mean a tougher time selling to U.S. customers. Since American buyers are the ones footing the bill, they might start looking elsewhere, pushing for discounts, or just buying less. This could mean less profit for you.

But here’s the thing: as a small business owner, you can’t afford to just wait and see what happens if or when tariffs are imposed. No matter what decisions come from the Trump administration (or any other administration), it’s important to stay informed, be flexible, and have a plan in place.

Government policies can shift at any time, but smart business owners stay prepared.

Canadian Businesses That Could Take a Hit

Some industries are more vulnerable to tariffs than others. If your business falls into one of these sectors, it’s a good idea to start preparing now:

Manufacturing & Construction: If you sell steel, aluminum, or other materials to the U.S., Trump’s tariffs make your goods more expensive for American buyers. That could mean fewer orders, tougher price negotiations, or customers looking elsewhere.
Food & Beverage: Selling food to the U.S.? Tariffs can bump up your prices, making it harder to compete with local producers. And if you buy ingredients from the U.S., your costs could go up too.
Automotive & Trades: If your business deals with car parts, machinery, or equipment, tariffs could make your products less appealing to U.S. buyers, pushing them to look for alternatives.

How Could U.S. Tariffs Affect Your Canadian Business?

When the U.S. imposes tariffs on Canadian goods, businesses that rely on trade can feel the effects almost immediately, shaking up your operations in ways that are hard to predict. Here’s how the Trump tariffs could impact Canada’s economy.

1. Less profit

Like we saw with the furniture example, the tariffs Trump imposes can make Canadian products significantly more expensive for U.S. buyers. A 25% tariff means something that used to sell for $1,000 in the U.S. now costs $1,250. That kind of price hike could push American customers to look for cheaper, locally made alternatives—leaving Canadian businesses with fewer sales and tighter margins.

You can quickly figure out how much tariffs will cost using a calculator, so you’re not caught off guard by unexpected fees.

Ultimately, if you sell to the U.S., you may make less money, be forced to raise your prices in Canada or other markets and risk losing customers. Either way, it cuts into your bottom line and makes it harder to stay competitive.

2. Supply Chain Ripple Effects

Even if you don’t sell to the U.S., you’re not totally off the hook. If your Canadian suppliers export to the U.S. and start losing business because of tariffs, they might try to make up for the loss by raising prices elsewhere—including in Canada. That means you could end up paying more for materials or products you rely on, even if your business has nothing to do with cross-border trade.

3. Job Cuts and Layoffs

When businesses lose sales or struggle with higher costs, they often have to cut expenses. That can mean fewer hours for workers, hiring freezes, or even layoffs. Industries like farming, manufacturing, and natural resources—where a lot of goods are sold to the U.S.—could be hit the hardest.

How to Stay Prepared Against U.S. Tariffs—No Matter What Happens

You can’t control tariffs on Canadian goods, but you can control how your business handles them. The key is to stay flexible and ready for anything.

1. Expand Your International Customer Base

If the U.S. imposes tariffs, your biggest challenge isn’t higher costs, it’s that your products become less competitive for American buyers. If they start looking elsewhere, relying too much on U.S. sales could put your business at risk.

One way to stay ahead is to diversify where you sell. If you mainly do business in the U.S., now might be the time to explore more Canadian markets or even expand into other countries. Canada has strong trade agreements with regions such as Europe and Asia, which could open up new opportunities.

But if completely expanding or changing markets isn’t an option, building stronger relationships with U.S. buyers can help you weather the storm. That might mean offering flexible pricing, long-term contracts, or highlighting what makes your product worth the extra cost.

The more options you have, the less one trade policy can throw off your business.

2. Focus on Your Canadian Market

If U.S. tariffs are making it harder to turn a profit, it’s time to shift your focus back home. A strong Canadian customer base means you’re not depending on U.S. sales, giving you more control over your business. Here’s how you can make that happen:

Highlight the benefits of “Canadian-made”: Canadians love supporting local and Canadian businesses, so focus on marketing your goods as Canadian-made. Share your story, talk about what makes your stuff special, and remind people why buying local matters.
Encourage customer loyalty: Offer loyalty perks, exclusive deals, or even free shipping within Canada to make shopping with you more appealing than ordering from the U.S.
Find new Canadian customers: If most of your focus has been on U.S. sales, it’s time to see where else in Canada you can grow. Are there provinces or industries you haven’t tapped into yet? Expanding locally could bring in new customers who’d love what you offer.
Take advantage of Canadian business programs: Look into government grants, funding, or trade programs designed to support local businesses. You might find financial support that makes shifting your focus easier and more profitable.

By putting more energy into your Canadian customers, you’re building a stronger, more stable business.

3. Stay Informed on Trade Policies

Trade policies can change quickly, and the tariffs Canada faces today might not be the same tomorrow. Keep up with industry news, sign up for trade newsletters, and join small business groups that talk about these issues. If tariffs affect your industry in a big way, a trade consultant might also be something worth considering to help you plan ahead.

4. Adjust Your Pricing

Maybe the thought of lowering your prices makes you cringe a little. Totally fair. But when U.S. buyers are dealing with tariffs and seeing higher costs, they might start second-guessing their orders. Instead of immediately slashing prices or losing customers to cheaper alternatives, think about the bigger picture—loyalty can be more valuable than short-term profit.

A small price adjustment now might feel like a hit, but keeping a loyal customer is often worth more than constantly chasing new ones. Maybe you offer a small discount for repeat orders or better payment terms to make things easier on their end. A little flexibility could go a long way in showing them you value their business—without hurting your bottom line.

At the same time, don’t just assume they’ll understand what’s happening.

If you’ve built good relationships with your U.S. buyers, be upfront. Let them know why prices are shifting and what you’re doing to help keep things fair. If they trust you, they’re way more likely to stick around, and in the long run, a steady customer beats a one-time sale any day.

5. Secure Flexible Financing

The impact of tariffs can put a strain on your cash flow. If your American customers start pulling back because of the tariffs they have to pay, having quick access to funds can help you keep your business on track even while you’re taking a hit.

A business line of credit is a great safety net. It gives you the flexibility to cover short-term costs—whether it’s dealing with tariff-related expenses, slow business seasons, or jumping on a new opportunity.

At Merchant Growth, we offer an option for small businesses looking for a faster and more flexible alternative to traditional bank loans. Our business line of credit is designed to help businesses cover short-term costs, whether it’s dealing with tariff-related expenses, seasonal slowdowns, or taking advantage of a new opportunity. With this type of financing, you can:

Get access to funds quickly without a drawn-out approval process
Borrow only the amount you need and repay it on terms that work for your cash flow
No collateral needed—your personal and business assets stay safe

When money gets tight, having a flexible funding option can help you handle surprises and keep your business moving forward.

6. Build an Emergency Fund

When it comes to potential Trump tariffs, or trade shifts, or economic curveballs, you never know when something might hit your bottom line. That’s why having an emergency fund isn’t just smart, it’s survival.

Ideally, you’d have three to six months’ worth of expenses set aside so you’re covered if cash flow slows or sales take a hit. But let’s be real—saving that much overnight isn’t easy. The good news? Small steps add up.

If saving that much feels out of reach, start small. Set aside a percentage of your revenue each month. Even a little cushion can help you handle surprises and keep things running smoothly when the economy shifts.

Final Thoughts: Stay Informed, Stay Ready

Tariffs are just one of many curveballs small businesses have to deal with. While you may not be the one directly paying the tariffs if the U.S. decides to impose them, you do still feel the ripple effects.

Maybe it’s tougher to compete in the U.S. market, maybe your customers start pushing for lower prices, or maybe your suppliers adjust their own prices to make up for lost business.

But here’s the thing: you’ve handled challenges before, and you’ll handle this too. Whether it’s exploring new markets, switching up suppliers, or keeping extra cash flow on hand, there are always ways to stay ahead.

You can’t control trade policies, but you can control your level of preparation. Stay flexible, stay informed, and keep your business moving forward—no matter what comes next.

Need a financial safety net to help you navigate challenges? Merchant Growth offers fast, flexible financing designed for small businesses. Learn more today!