Small businesses affected by the latest U.S. tariffs and retaliatory tariffs from Canada now face a third problem: industry groups say that government relief measures are unlikely to truly benefit them. The federal government announced an aid package totalling up to $7.5 billion on Tuesday, but Dan Kelly, president of the Canadian Federation of Independent Business (CFIB), said that most of the funds come from regional development funds, thus excluding many small businesses from applying. Kelly said, “I suspect at least half of small businesses won’t be able to get any grants at all.” He pointed out that most of the funding will be distributed through economic development agencies located across the country, namely the Regional Tariff Response Initiative.
Kelly also stated that these agencies have different eligibility criteria for business applications, typically requiring a minimum number of employees, revenue, or both. “I’m disappointed. I had hoped they would at least remove these restrictions,” Kelly said. “There’s no indication that they’ve adjusted the RTRI thresholds. It’s unfortunate that the government’s message seems to be: you only deserve support if you have a large number of employees or an annual income of hundreds of thousands or millions.” Tariff relief measures are mostly in the form of loans, increasing the burden on small businesses.
Kelly points out that another major problem is that most of the tariff relief is provided in the form of loans. This is not attractive to businesses that are still repaying debts incurred during the pandemic and are struggling due to the uncertain outlook for tariffs. Kelly said, “Companies facing a 50% tariff simply don’t have the capacity to take on any more debt.” Kelly stated that Trump’s latest round of 50% tariffs targets many Canadian goods, primarily affecting products manufactured or shipped by small businesses. The tariffs took effect at 12:01 AM on Saturday. However, Kelly also holds a somewhat optimistic view, believing that the federal government has acted relatively quickly in introducing tariff relief measures.
“I understand that it’s difficult for the government to achieve perfection immediately. They can’t be perfect from day one, but… they are indeed willing to work with businesses to try to get things done.” A senior official from the Canadian Chamber of Commerce said the government must ensure that businesses that truly need help receive support as quickly as possible. “Their speed of response to tariff reductions and precision will be crucial,” said Matthew Holmes, head of government policy at the Canadian Chamber of Commerce.
Holmes added that while the federal government has said it will provide subsidies flexibly and in a targeted manner, it remains to be seen whether it can actually do so. “This is a government commitment, but in practice we will closely monitor the progress,” Holmes said. Richard Lyall, president of the Ontario Housing and Construction Association (RESCON), said that for businesses in the construction industry, Canada’s retaliatory measures mean further increases in costs, while they are already under pressure from the U.S. tariffs. Lyall said, “Canada’s list includes appliances, drywall, cement powder, structural steel, and electrical equipment, all of which will drive up construction costs.” He estimated that Canada’s retaliatory tariffs could increase the cost of building a house by $5,000 to $10,000. Trump’s tariffs have increased the cost of building a house by tens of thousands of dollars.
Lyall also stated that some estimates suggest that the tariffs imposed by Trump—including the latest 50% tariff—have increased the cost of building a home in Canada by $15,000 to $25,000. However, he pointed out that this pressure will not be immediately apparent because builders have already stocked up during the industry slowdown. Lyall said, “This impact will gradually become apparent. The industry is already quite sluggish. If it were to operate at full capacity as it did in previous years, the problems would be even greater.” Nevertheless, Lyall is optimistic about whether the trade war will continue to escalate. He believes the situation may ease if the Democrats control the House and Senate in the November midterm elections.