Tariffs have been in the headlines a lot in recent years—and for good reason. These taxes on imported goods can have far-reaching effects, especially for Canadian small businesses that rely on international trade.
If you haven't thought much about tariffs since high school economics, you're not alone. But with ongoing global trade tensions and changing government policies, understanding tariffs is more important than ever.
A tariff is a tax that the government charges on goods imported from other countries. For example, if Canada brings in products from the United States, and a 25% tariff applies, Canadian importers must pay that tax at the border. That added cost usually gets passed on to the consumer in the form of higher prices.
Whether you’re importing parts, finished goods, or materials from the U.S., China, or elsewhere, tariffs can impact your bottom line. Here's how:
Countries impose tariffs for a variety of reasons:
While tariffs might benefit some sectors (like domestic manufacturing), they can hurt others by increasing costs and limiting access to global markets.
When countries impose tariffs back and forth in retaliation, it’s called a trade war. This tit-for-tat strategy can escalate quickly, causing market instability and straining international relationships.
Trade wars typically end when the countries involved reach an agreement. But in the meantime, small businesses often feel the brunt of the uncertainty.
Even if you don’t import goods yourself, your suppliers might—which can still impact your pricing and supply chain. According to the Canadian Chamber of Commerce, a 25% tariff could shrink Canada’s GDP by 2.6% and cost the average household around $1,900 per year.
That’s a big ripple effect.
While you can’t control government policy, you can take steps to protect your business:
Talk to your suppliers. Find out where your goods come from and if they could be affected by future tariffs. If needed, consider sourcing from alternative markets or local suppliers.
Build some flexibility into your pricing. If costs increase, you may need to adjust prices or find ways to maintain margins without losing customers.
Stay informed on trade agreements and tariff updates. Organizations like the Canadian Chamber of Commerce or your industry association can be great resources.
Have a financial cushion or contingency plan in place to weather sudden cost changes. Consider working with your accountant or financial advisor to build this into your budget.
If you’re investing profits or managing business savings, diversify. A broad portfolio can help buffer the impact of short-term market swings caused by tariff news or global events.
Tariffs are more than just a policy buzzword—they have real consequences for Canadian small businesses. From higher costs to shifting trade routes, the ripple effects can challenge even the most resilient entrepreneurs.
But with knowledge, preparation, and the right financial strategies, your business can stay ahead of the curve and remain competitive, no matter what the global market throws your way.
We are here to help you optimize your management decisions and make your business more successful. Reach out to Koroll & Company for personalized guidance.