Small business confidence has fallen for the third month in a row, according to new data from the Canadian Federation of Independent Business (CFIB), as the threat of Trump tariffs hangs over the Canadian economy.
The CFIB found in its latest monthly business barometer that more businesses are feeling less confident, with the index falling below 50 for the first time since last April. February’s index reading of 49.5 is about 10 points below the historical average. The index is measured on a scale between 0 and 100, and CFIB says results above 50 mean owners expect their business performance to be stronger, outnumbering those expecting a weaker performance.
The drop in optimism was significantly more for exporting small businesses (-23.3 points) than for importing businesses (-5.6 points.) And while confidence fell across the country, trade-dependent provinces such as Alberta, British Columbia, Manitoba and Ontario saw more pronounced declines. Manufacturing, wholesale and transportation – three industries that are vulnerable to tariffs – were also at the bottom of the confidence reading when it came to sectors.
“Canada got another tariff reprieve until early April, but the threat of tariffs kicking in after all is always at the back of the mind for many small business owners, affecting their long-term plans,” CFIB’s chief economist Simon Gaudreault said in a news release.
That April reprieve may be short-lived, however, as U.S. President Donald Trump said on Thursday that he plans to impose tariffs on Canada and Mexico starting next Tuesday. Trump also said he still plans to impose broad tariffs on April 2, writing in a social media post on Thursday that “the April Second Reciprocal Tariff date will remain in full force and effect.”
One of the CFIB’s inflation indicators also crept up in February. According to the report, small businesses plan to raise prices by an average of 3.1 per cent, up from 2.6 per cent in January and the highest level since last April. At the same time, average wage-increase plans decreased slightly, from 2.6 per cent in January to 2.2 per cent in February.
A CFIB survey released earlier this month focusing on the potential impact of a trade conflict between Canada and the U.S. found that more than half of businesses reported being unprepared to manage the impact of tariffs. About half (51 per cent) of exporters say it will take longer than six months to reach new markets and stabilize operations if tariffs are imposed.
“The uncertainty, coupled with ongoing inflationary pressures, is weighing down on small businesses, dampening their long-term outlook,” Andreea Bourgeois, CFIB’s director of economics, said in a news release.
