Many Canadian small businesses are feeling the financial pressure from the current Canada/US trade war and they’re not seeing much relief from government support or the Buy Canadian movement, says the 2026 Canadian Small Business Report by Merchant Growth.
“You don’t have to export anything to feel this trade war. It lands on a supplier’s invoice, or with a customer who decides to hold off, and a lot of owners can’t pass that cost along,” said David Gens, Founder and CEO of Merchant Growth. “Canadians have shown up for local businesses, and that matters, but it hasn’t been enough to cover what owners are paying for goods and fuel. With tariffs, fuel prices, and slower spending all hitting at the same time, small businesses need financing that’s fast and flexible enough to keep up, so one hard quarter doesn’t decide whether they stay open.”
Looking ahead, 41% of Canadian small businesses plan to hold steady with their business plans. Meanwhile, some are planning to make further adjustments by cutting costs and finding ways to improve margins. Over the next six months, Merchant Growth said:
- 22% plan to raise prices for customers
- 14% plan to wind down their business
- 11% plan to delay or cancel a planned investment
- 9% plan to reduce staff or hours
- 8% plan to invest in equipment or technology
Nearly two in three (65%) small business owners say U.S.-Canada trade tensions have affected their business in 2026. Among those owners, more than half (52%) say their business is performing worse than it was at this point last year. Many owners also feel shut out of the national response, with over one in three (37%) saying they’re not part of the conversation at all. Meanwhile, another 39% say large exporters, manufacturers, and political considerations come first, said the report.
Despite the series of tariff relief programs that federal and provincial governments have introduced, 68% of small business owners say they have seen no noticeable impact from these initiatives. Canadian consumers say they have been choosing Canadian, but small business owners haven’t felt the boost. Over half (56%) of Canadian consumers have shopped more from Canadian small businesses in the past 12 months than in previous years. However, two in three (67%) small business owners say the Buy Canadian movement hasn’t had a noticeable impact on their business. As economic pressures stack up, some owners are putting their own finances on the line to keep their businesses afloat. More than one in five (22%) small business owners have used personal credit, such as credit cards, home equity lines of credit or personal loans, to fund their business, added the report.
The 2026 Canadian Small Business report also found that:
How have U.S.-Canada trade tensions impacted small businesses?
The U.S.-Canada trade tensions are directly impacting Canadian small businesses’ bottom lines. As a result of the trade disruptions:
- 38% saw an increased cost of goods or supplies
- 27% faced lower revenue
- 26% experienced lower customer demand
- 23% absorbed higher costs because they couldn’t raise prices
- 13% delayed or cancelled a planned purchase or investment
- 12% faced a higher cost of equipment or machinery purchased from the U.S.
- 12% saw cancellation or pause of contracts or orders
- 6% lost a U.S. customer or contract outright
In response to the U.S.-Canada trade tensions, small businesses are adjusting how they operate with U.S. partners and customers:
- 13% stopped working with U.S. suppliers or partners
- 9% found new suppliers outside the U.S.
- 8% stopped selling to U.S. customers
- Looking ahead, 11% of small business owners plan to seek new customers or suppliers outside the U.S. over the next six months.
Is the Buy Canadian movement helping small businesses?
- The share of Canadian consumers who have shopped much more from Canadian small businesses has gone up from 20% in 2025 to 24% in 2026.
- Canadian consumers’ top motivators for buying from Canadian small businesses are supporting the local economy (75%), supporting Canadian jobs (69%), and U.S. tariffs (55%).
- Canadian consumers’ top barriers to buying from Canadian small businesses are prices (52%), product availability (31%), clarity that a product is Canadian (23%), and store locations (23%).
- That support has yet to translate into a meaningful change for most owners. Only about one in four (24%) small business owners say the Buy Canadian movement has had a positive impact on their business so far in 2026, while 67% have seen no noticeable impact.
Canadian small business owners are raising prices and pulling back on growth plans
This year, the three biggest pressures on Canadian owners’ businesses are inflation or rising input costs (44%), weak customer spending (38%), rising fuel and energy costs (36%), and trade uncertainty (12%).
In response to these pressures, Canadian small business owners are shifting their approach to pricing and operations. However, some are trading off their growth plans.
- 22% increased prices for customers
- 15% delayed or cancelled a planned investment to expand the business
- 13% diversified their products or services
- 11% reduced staff or hours
- 10% paused hiring
- 9% adopted new technology (AI, automation systems, etc.)
Merchant Growth is a Canadian financial technology company that specializes in small business financing. Founded in 2009, Merchant Growth has since supported over 15,000 Canadian businesses with over $1.5 billion in growth financing.
In an interview with Retail Insider, Hash Aboulhosn, Chief Growth Officer at Merchant Growth, takes a closer look at the report.
How have Canada-U.S. trade tensions affected small businesses over the past year in terms of costs, revenue, customer demand and relationships with U.S. suppliers and customers?
It’s hit a lot of small businesses, and it’s landing as a direct hit to the bottom lines. Nearly two in three Canadian owners (65%) tell us they’ve felt some impact from trade tensions with the U.S.
Rising costs are the biggest concern, with 38% saying their cost of goods or supplies has increased, followed by lower revenue at 27%, and lower customer demand at 26%. And it’s not spread evenly. Owners who’ve been affected by trade tensions are twice as likely as those who haven’t to say business is worse than it was in 2025 (52% vs. 27% of Canadian small businesses overall).
We’re seeing signs of that pressure in the broader economy, too. Statistics Canada’s July retail trade data came in down 0.7% month over month, led by a drop at general merchandise stores, as trade uncertainty is weighing on discretionary spending.
On the supplier and customer side, some owners are already taking action: 13% have already stopped working with U.S. suppliers or partners, 9% have found new suppliers outside the U.S., and 8% have stopped selling to U.S. customers altogether. And it’s not slowing down, another 11% say they plan to look for new customers or suppliers outside the U.S. in the next six months.
That search for options outside the U.S. is happening at the same time as the biggest change to internal trade in this country in a decade. The Free Trade and Labour Mobility in Canada Act came into force on January 1, 2026 and the Canadian Federation Of Independent Business (CFIB) has flagged some of the barriers it’s chipping away at, in sectors like health care and education, as equivalent to a 40% tariff. For owners looking beyond the U.S. for suppliers or customers, there’s more room to move inside Canada than there was a year ago.
What does the report show about the ability of Canadian small businesses to access government support, and why do many owners feel they have been left out of trade negotiations?
Honestly, the data isn’t encouraging: more than two in three owners (68%) say government support, federal or provincial, for those hit by tariffs hasn’t made a noticeable impact on their business, and a lot of them don’t feel like anyone’s speaking for them at the table in the first place either.
Some of that comes down to how the support itself is built. The last federal budget put $1 billion into a Regional Tariff Response Initiative, and the eligibility rules disqualify many small businesses. That’s the kind of program design owners are dealing with when they tell us the support isn’t registering.
One year after your previous benchmark, what has changed in consumer support for buying Canadian products, and to what extent do small businesses say that sentiment is translating into measurable business results?
The overall number of Canadians shopping Canadian hasn’t changed year over year, but those who are doing it are doing it more. Over half (56%) of Canadians say they’ve shopped more from Canadian small businesses this past year, the same as in 2025. What has shifted is intensity. About 1 in 4 (24%) now say they’ve shopped “much more” Canadian, up from 20% last year. The main reasons people give are supporting the local economy (75%), supporting Canadian jobs (69%), and U.S. tariffs (55%).
While Canadians have been choosing to support local, one of the surprising findings from the study is that the Buy Canadian movement isn’t giving many businesses a boost. Two in three (67%) Canadian small businesses say the Buy Canadian movement hasn’t made a noticeable impact on their business so far in 2026, and only 24% say it’s had a positive effect.
Part of that, in my view, comes down to costs. A lot of owners are dealing with higher costs across the board right now, and there’s only so much of that an owner can pass on before they start losing customers. So even with more people saying they want to buy local, that doesn’t automatically show up as healthier margins if the cost side is moving just as fast.
How are current economic pressures affecting small-business owners’ decisions around financing, investment, expansion and their own personal finances?
About 1 in 5 (22%) have raised prices and 15% have delayed or cancelled an investment they’d planned to grow the business. Right now, a lot of owners are just trying to get through the year. Between trade uncertainty and inflation, the priority for most owners is paying their employees and vendors, keeping customers served, and keeping the doors open.
Much of that pressure is landing on owners personally, not through the business at all. About 1 in 5 (22%) have used personal credit, credit cards, HELOCs, and personal loans to keep the business funded this past year. Meanwhile, 28% have cut their own salary, and 15% have stopped paying themselves altogether.
A lot of that comes down to access. The Big Six banks hold 93% of Canadian financial assets, but their loan sizes typically start at $250,000, well above what most small businesses need. And even when they can secure financing, it comes at a cost. When an owner needs cash for payroll or a supplier invoice, a credit card or a line against their house is often the fastest option, even if it’s not the cheapest. This is why we need faster and more flexible financing options for small businesses, giving them a better option to fund what they need to grow, not just keep their doors open.
What does the data reveal about the steps small businesses are considering to cope with the current environment, including raising prices, reducing staff or hours, delaying growth, investing in technology or equipment, or potentially winding down their businesses?
Owners are getting smarter about where they spend and how they price, trying to protect margins wherever they can, but that also means trade-offs on growth. Looking ahead six months, price increases are the most common plan, 22% of owners say they’ll raise prices, 11% plan to delay or cancel an investment, and only 4% plan to hire.
That low hiring number lines up with a bigger staffing squeeze. More than 1.3 million temporary work permits expire by the end of 2026, and many employers relying on the program say they’d likely close without those workers. On top of that, CFIB puts the cost of pure compliance work at $17.9 billion a year nationally, with the smallest firms paying about seven times more per employee than the largest, the baseline cost of staying open before any of these other pressures.
Small businesses have created millions of jobs in the private sector. So when owners pull back, it shows up as fewer job postings and fewer independent businesses in the communities they serve.
Many businesses are looking to close their doors, with 14% planning to wind down in the next six months. Small businesses impacted by trade tensions are more than twice as likely to be considering it (19% versus 6% for those who haven’t been touched by it.)
More from Retail Insider:
