Canada’s small businesses deeply pessimistic about their futures

A poll that tracks the mood of Canada’s small business community shows that employers are losing confidence in their ability to grow, pointing to the negative impact of tariffs.

Source: RawPixel

A poll that tracks the mood of Canada’s small business community shows that employers are losing confidence in their ability to grow, pointing to the negative impact of tariffs.

In their monthly “Business Barometer” report, the Canadian Federation of Independent Business measured a substantial drop in small business optimism from just a few months prior.

Gauging how small firms see themselves doing 12 months from now, the CFIB saw long-term small business confidence halve between Nov. 2024 to Mar. 2025, dropping from 59.8 on the index to just 25.0 in Mar. 2025.

This marks a 34.8-point drop on the small business confidence index, a remarkable drop from the years-long 60-point average on the index.

This is the lowest long-term business optimism in Canada since the CFIB began tracking the metric – lower than any scores after the 9/11 terrorist attack, the 2008 financial crisis, or the COVID-19 pandemic.

A whopping 62 per cent of small firms say that the tariffs are having or will harm their business, with the transportation industry, manufacturers, and wholesalers claiming the worst impact.

Overall, the hospitality, manufacturing, and transportation industries are the least confident in their futures, languishing at 17.0, 18.6, and 21.0 on the index respectively.

Businesses in Nova Scotia, Ontario, and Alberta are the three provinces whose businesses have the lowest rate of confidence in their long-term future while New Brunswick and Newfoundland and Labrador remain the most optimistic.

The marked drop in business confidence comes after U.S. President Donald Trump has gone back and forth between threatening and imposing tariffs on Canadian imports. Currently, Trump has placed tariffs on Canadian aluminum, steel, and lumber imports.

CFIB Ontario director Julie Kwiecinski said that the uncertainty of a trade war leads to negative economic consequences and harms the ability of businesses to plan in the long term.

“It’s impossible to make decisions on hiring, expanding and other operational matters against the backdrop of ever-changing tariffs,” said Kwiecinski.

In a comment to True North, CFIB chief economist Simon Gaudreault said that while small firms support retaliatory tariffs, they would like to see the government provide other relief measures.

“Our research shows that while most small firms support Canada’s retaliatory tariffs, they’re finding the trade war increasingly stressful to navigate,” said Gaudreault.

“They want additional measures implemented including tax relief, buy-local programs, and removal of interprovincial trade barriers.”

Small businesses have also indicated that they plan on increasing prices at a faster rate and will need to slow the rate of wage growth for their employees.

In Nov. 2024, small businesses on average anticipated they would have to increase prices by 2.5% while the average wage increase was also 2.5% over a year. However, anticipated price increases rose to an average of 3.7% while average wage growth dropped to 1.9%.

Gaudreault said that the federal government ought to take several measures to help Canada’s small businesses weather the trade conflict, including cutting the carbon tax once and for all, providing tax cuts, and returning funds collected from retaliatory tariffs to small businesses.

“Ottawa should pass legislation to formally eliminate the carbon tax and ensure the small business carbon tax rebates are tax free,” said Gaudreault.

“It could also lower EI premiums for smaller employers to the same rate paid by employees, lower the small business tax rate to 0%, and legislate the planned LCGE (capital gains tax) increase to $1.25 million. We also recommend that any funds collected from Canadian retaliatory tariffs is returned to affected businesses as quickly as possible.”