U.S.–Canada Trade War Squeezes Small Businesses as New Tariffs Raise Costs on Both Sides

New American and Canadian tariffs are disrupting cross-border commerce, forcing companies to reconsider suppliers, prices and investments while Washington and Ottawa remain divided over the future of their trading relationship.

Businesses on both sides of the U.S.-Canada border are facing renewed pressure after Washington and Ottawa imposed matching tariffs on billions of dollars in goods, disrupting deeply integrated supply chains.

President Donald Trump imposed 50 percent tariffs on roughly $20 billion, or C$27.6 billion, of Canadian products after trade negotiations between the neighboring countries broke down in August.

Canada responded with counter-tariffs of 15, 25 and 50 percent on C$27.6 billion of U.S. imports across multiple sectors, with the measures taking effect on September 8.

 

 

 

Ottawa targeted sectors including steel and aluminum, dairy products, appliances, agricultural equipment, pulp and paper, plastics and electronics, matching corresponding U.S. tariff rates on selected goods.

The United States then escalated the dispute by announcing import bans on several Canadian products, including most alcoholic beverages, whey, molasses and certain motorcycles, beginning September 29.

U.S. Trade Representative Jamieson Greer said the latest American measures were intended to respond to Canadian retaliation and offset what Washington describes as discriminatory treatment of U.S. commerce.

Canadian officials dispute that characterization. Ottawa says it suspended negotiations after Washington sought concessions it considered economically unsound and damaging to Canadian workers, businesses and national interests.

Despite the escalation, most trade between the two countries remains tariff-free, and the latest reciprocal measures directly cover only about 5.5 percent of bilateral goods trade.

The concentrated impact can nevertheless be severe for smaller firms whose customers, suppliers or equipment cross the border, because a tariff of up to 50 percent can erase margins quickly.

Vermont cheesemaker Jasper Hill Farm told the Associated Press that Canadian orders have disappeared while the company has also faced higher costs on specialized equipment purchased from across the border.

On Vancouver Island, Revival Stillworks says a 50 percent tariff on distilling equipment and weakening U.S. demand have forced the company to reconsider investments and explore other lines of business.

Nashville-based AmpRx, which sells rehabilitation technology, has reported declining Canadian sales even on products not directly tariffed, illustrating how political tensions can influence purchasing decisions beyond targeted goods.

Canadian honey producer Worker Bee Honey Co. has also warned that U.S. tariffs could worsen pressure on beekeepers already competing with low-cost imports and facing higher operating expenses.

Statistics Canada found that 32.2 percent of businesses expected U.S. tariffs on Canadian goods to negatively affect them over the following year, with manufacturers reporting particularly high concern.

The same survey found 27.4 percent of Canadian businesses had already passed tariff-related cost increases to customers, while 30.4 percent expected they were likely to do so during the next year.

Canada has announced a C$7.5 billion package of new and expanded assistance for workers and businesses affected by U.S. tariffs, including additional financing for small and medium-sized companies.

Prime Minister Mark Carney has signaled that Canada will not rush back into negotiations, arguing that the country should strengthen domestic investment and diversify trade while waiting for acceptable negotiating conditions.

Carney also announced expanded investment tax incentives as his government tries to attract capital, while Canada continues pursuing closer commercial relationships with Europe and other markets beyond the United States.

For American businesses, Canada remains an unusually important customer, particularly for border states, agriculture and specialized manufacturers, meaning retaliation can reduce exports even when the overall national economic effect appears limited.

The dispute remains fluid: both governments say they are prepared to negotiate, but businesses are already adjusting prices, suppliers, investment plans and export strategies as they prepare for prolonged uncertainty.