Many Ontario restaurants that were hoping for a surge this summer are disappointed. From the wildfires that kept diners at home, to air-conditioning bills eating up their World Cup gains; now, they’re facing additional tariff threats from the U.S., according to Merchant Growth.
The U.S. has announced an additional 50% tariff, effective August 19, on nearly US$20 billion in selected Canadian goods. For small businesses, the impact could extend beyond direct exporters to those relying on U.S. suppliers, customers or partners.
Merchant Growth’s latest Small Business Pulse 2026 study found that:
- 60% of Canadian small businesses have some U.S. exposure
- Among those with U.S.-related activity 12 months ago, 57% have reduced it and 14% have stopped it entirely
This follows an already difficult summer for consumer-facing businesses.
In an interview with Retail Insider, Hash Aboulhosn, Chief Growth Officer at Merchant Growth, discusses the report’s findings.
Question: How are this summer’s challenges—wildfire smoke, extreme heat, higher cooling costs, and now renewed tariff threats—combining to affect the financial outlook for small restaurants and retailers?
Answer: Summer usually carries a big share of the year for restaurants and retailers that live on foot traffic. This year, wildfire smoke and long stretches of extreme heat kept a lot of customers indoors, and some operators ended up with a slower season than they’d planned for.
One sports bar owner told us the heat drove one of their slowest days of the whole season. Running the air conditioning around the clock was adding thousands of dollars a month to the hydro bill, and on top of that a round of HVAC and refrigeration failures cost roughly $5,000 to fix.
That reflects what we are seeing more broadly. In our Small Business Pulse 2026 survey launched in June:
- 37% of small businesses cited rising utility bills as a significant summer pressure.
- 37% cited weaker consumer demand.
- 55% have already reduced spending in response to economic uncertainty or trade pressures.
The renewed tariff threat adds another layer of uncertainty for businesses already managing weaker traffic, higher utility bills and unexpected repair costs.
Q: Your research shows that 60% of Canadian small businesses have U.S. exposure and many have already reduced that activity. What are businesses changing in practice, and do you expect the new tariffs to accelerate that shift?
A: What we are seeing is that businesses are already reconsidering how they work with partners in the U.S. Our survey found that:
- 14% have switched to Canadian or non-U.S. suppliers.
- 13% have stopped working with U.S. suppliers.
- 8% have pulled out of the U.S. market for sales.
Earlier research also found that, among businesses that had U.S.-related activity, whether that’s working with U.S. suppliers ot selling to U.S. customers, 57% had pulled back on that activity and 14% had stopped it entirely.
A fresh round of tariffs would sharpen those decisions. Owners have to choose whether to absorb the cost, raise prices, change suppliers, or hold cash, and a lot of them are hedging on more than one of those at once: 25% have raised prices and 22% have paused or cancelled expansion plans.
When a business cancels an expansion to wait out the uncertainty, that isn’t only softer demand today — it’s investment that doesn’t happen and will impact their business in the long-run. Canadian small businesses were already investing less per worker than their U.S. counterparts well before this, so every paused project widens a gap we’ve been carrying for years.
Q: Many small businesses won’t be directly exporting to the U.S. How could these tariffs still affect companies through suppliers, customers, pricing, or day-to-day operating costs?
A: A small business does not need to export directly to the U.S. to be affected. Our survey looked at exposure to U.S. suppliers, customers and partners, and about six in 10 (61%) of businesses reported at least some exposure through those relationships.
Think of a business that buys from a U.S. supplier, or one that buys Canadian but from a supplier now paying more to bring in its own inputs. Or a business whose customers depend on U.S. demand. The exposure runs through the supply chain, not just across the border.
Trade pressure is already showing up in day-to-day costs:
- 42% of businesses cited fuel cost increases from global trade disruptions.
- 18% cited tariffs.
- 13% cited supply-chain delays or shortages.
For an owner already facing softer demand and a bigger hydro bill, one more increase in the cost of keeping the doors open is what tips cash flow from tight to strained.
Q: Inflation has eased, but many businesses say consumers are still spending cautiously. What’s preventing stronger consumer demand, and what are you hearing from business owners about customer behaviour?
A: Consumers want to support local businesses, but price is still shaping where and how they spend. Among Canadians planning to dine out this summer, 69% said price or deals influence how they decide where to spend their money, but 56% also said supporting local or independent businesses matters.
Both are true at the same time, and that’s the bind: people mean to spend local, and they’re still counting every dollar.
Small businesses are feeling that caution directly, with 37% citing weaker consumer demand as a significant summer pressure.
The World Cup is a clear example of how uneven the upside can be. A marquee event doesn’t lift every business the same way. More than half (58%) expected no impact on their revenue, while others said their location would not receive more foot traffic or that they lacked the cash to invest ahead of the event.
The demand shows up; capturing it takes cash on hand, and a lot of small businesses don’t have much to spare right now.
Q: Looking ahead over the next six to 12 months, what strategies should small businesses be considering to protect cash flow and remain resilient if trade uncertainty and operating costs continue to rise?
A: The first priority is having a clear picture of cash flow, including essential expenses, areas of flexibility and how the business would respond to an unexpected cost or decline in revenue.
Businesses should also review their supplier exposure, pricing, inventory and financing needs before pressure becomes urgent. Many are already adjusting: 55% have cut spending, 25% have delayed hiring, 22% have paused or cancelled expansion plans, and 15% have reduced inventory.
Access to capital is a major concern. Three in four businesses surveyed (75%) said access to low-interest small-business loans would be the most helpful form of government support.
It isn’t that owners don’t want to invest in a better oven, more staff, or the tools that would let them do more with the same team. It’s that the capital to do it is hard to get on reasonable terms. Canadian businesses already invest only about 55 cents per worker for every dollar their U.S. peers put in, and that gap doesn’t narrow on its own. It narrows when a small business can actually finance the next piece of equipment.
So over the next six to 12 months, the businesses that come out ahead won’t necessarily be the ones that cut the deepest. They’ll be the ones that keep a close read on cash, make deliberate calls instead of reactive ones, and can still reach capital when the right investment — or a hard month — arrives.
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