TORONTO – Small and medium business leaders say they could have to make minor adjustments to their operations in the short term to cope with widespread U.S. tariffs on Canadian goods, but more drastic measures may be needed later on.
Companies say they prefer measures such as reduced hours or hiring freezes over significant layoffs if they are forced to make changes due to the 25 per cent levy, according to a poll of 50 small and medium enterprise leaders across Canada.
“However, many also acknowledged that these measures could only be sustained for six to 12 months before more significant workforce reductions would become necessary,” said a report by World Trade Centre Toronto, the trade services arm of the Toronto Region Board of Trade.
“This creates a potential ‘delayed impact’ scenario where initial employment statistics might suggest minimal effects, only to see more substantial job losses emerge over time if tariff conditions persist.”
U.S. President Donald Trump’s blanket 25 per cent tariffs on imports from Canada, with a lower 10 per cent rate for energy products, took effect March 4.
Two days later, Trump paused the levy’s application to goods and services compliant with the United States-Mexico-Canada Agreement until April 2.
The report said industries with high fixed costs and limited ability to implement partial measures may face earlier pressure to make more “dramatic” workforce adjustments.
It also noted the toll of tariffs on small or medium businesses could vary significantly by region, based on the concentration of U.S.-dependent businesses in different areas.
Canadian small and medium businesses derive an average of 31.1 per cent of their revenue from U.S. sales, according to the survey, which found large disparities in that data among respondents.
While some businesses have little or no U.S. market dependence, 18 per cent said they rely on the U.S. for more than three quarters of their revenue.
For the latter group, the tariff threat “represents an existential challenge requiring immediate and comprehensive strategic response,” the board said.
“These businesses face potential revenue impacts that could threaten their very viability if not addressed effectively.”
The report said 63 per cent of businesses surveyed anticipate cutting or delaying investments in research and development if tariffs significantly affect their revenue streams.
It called that a “concerning potential for long-term competitive erosion,” as research and development investments typically drive market competitiveness three to five years into the future.
As federal and provincial governments continue to navigate tariffs and negotiate with their American counterparts, the board recommended policymakers focus on priorities such as trade diversification, diplomatic engagement and providing innovation incentives.
Meanwhile, it said businesses should prioritize alternative market entry strategies, supply chain flexibility and operational efficiency improvements.
This report by The Canadian Press was first published March 25, 2025.
