Corinne Pohlmann, Executive Vice-President of Advocacy at the Canadian Federation of Independent Business (CFIB), unpacks the potential fallout of U.S. President Donald Trump’s proposed 25% tariffs on Canadian exports. For small businesses, particularly exporters, the prospect of rising costs and economic uncertainty looms large. While CFIB advocates for targeted relief funded by tariff revenues, Pohlmann warns that broad retaliatory measures could do more harm than good.

Beyond tariffs, Canada’s internal trade barriers present another persistent challenge. Pohlmann argues that mutual recognition of standards offers a faster and more pragmatic solution than full regulatory harmonization. Meanwhile, existing government programs—such as Work-Sharing—may provide a temporary lifeline for businesses bracing for disruption.

With Trump’s unpredictable approach to trade negotiations, Pohlmann stresses the importance of strategic, measured responses. For Canada’s small businesses, the challenge isn’t just weathering potential tariffs but navigating the broader economic volatility and regulatory uncertainty they could bring.

Scott Douglas Jacobsen: What are CFIB’s primary concerns regarding President Trump’s proposed 25% tariffs on Canadian exports, which have been delayed but are expected to take effect on March 1st?

Corinne Pohlmann: Imposing a 25% tariff on Canadian exports to the United States would significantly impact the Canadian economy, particularly on small businesses across the country. About half of all small businesses in Canada engage in trade with the U.S. The majority—approximately 47%—import from the U.S. In comparison, around 18% to 20% of exports to the U.S. These tariffs would primarily impact exporters. In contrast, retaliatory tariffs imposed by Canada would affect importers.

When we surveyed our members at the end of last year—when this issue was already making headlines—over 80% indicated that these tariffs would have some impact on their business. While only about 50% of small businesses directly trade with the U.S., many others rely on companies that do. For example, some purchase goods from wholesalers or distributors that trade directly with the U.S., meaning they, too, will feel the effects.

Another concern is the potential impact on the Canadian dollar. If its value declines, importing goods will become more expensive, further straining businesses. These factors will significantly affect small businesses, leaving them with limited options. In fact, over two-thirds of our members told us they would likely have to raise prices, which would, in turn, affect Canadian consumers. At a time when affordability is already a concern, this will only add further financial strain.

Jacobsen: How is this affecting Canadian small business owners?

Pohlmann: There is a great deal of anxiety. We are receiving numerous calls, even though businesses have a reprieve. While this provides some breathing room, there is still widespread concern about what these tariffs will mean in the long term.

Many businesses are rethinking their entire business models because they have relied so heavily on the U.S. as either a supplier or a customer. Just before this interview, I read an article about a company in the Montreal area that is now laying off employees because 80% of its products are exported to the U.S. However, its American customers are already shifting to other markets, finding it more cost-effective to source from Asia rather than Canada due to the 25% tariffs. The company is uncertain whether its current business model will remain viable, so it is initiating layoffs while exploring ways to sustain operations.

Although this may not be a universal issue, similar situations are unfolding across many companies in Canada.

Some businesses can pivot, though shifting to other markets may take some time. Others may have to rethink their current approach and explore alternative ways to manage the situation.

Exporters will experience the most significant direct impact. They may have to decide whether to remain in Canada, retain all their employees, or pivot to other markets quickly. The situation is also challenging for importers, but they at least have the option of increasing prices and attempting to adjust as they transition to alternative markets that may offer lower costs for their customers.

Jacobsen: What is CFIB’s position on broad retaliatory tariffs from the Canadian government?

Pohlmann: We are concerned that broad retaliatory tariffs would have a widespread impact on many small businesses. A more strategic approach would be to focus tariffs on products readily available within Canada or from other countries.

This would minimize disruption. Raising prices abruptly is difficult for small businesses, as they do not want to alienate their customers.

Small businesses and consumers are already struggling. However, absorbing a 25% increase is nearly impossible because most small businesses operate on razor-thin profit margins. This disadvantages them compared to large multinational corporations, which are often better equipped to absorb sudden changes in the marketplace.

We urge the government to avoid broad-based retaliatory tariffs and instead focus on select products. Additionally, we encourage flexibility so that adjustments can be made if the tariffs disproportionately impact specific sectors. The government was receptive to industry feedback during the Trump tariffs in 2017 and 2018, making modifications when necessary. We hope they will take a similarly adaptive approach this time.

Jacobsen: Canada and the United States share the longest contiguous border of any neighbouring countries. What percentage of Canadian small businesses are directly involved in trade with the U.S.?

Pohlmann: About one in two small businesses in Canada trade with the U.S. This does not mean they do so daily—some trade weekly or frequently. In contrast, others may only do so a few times a year. Even for those with infrequent trade, it remains an important part of their business operations.

The majority of these businesses are importers, sourcing products from the U.S. However, around one in five to one in six exporters send goods to the American market, a level of trade significantly higher than that of any other country.

Unfortunately, we find ourselves in this situation, and we remain hopeful that these tariffs will continue to be delayed. The uncertainty surrounding them can sometimes be as damaging as the tariffs themselves.

Jacobsen: What policy measures would help small businesses remain competitive in this uncertain market?

Pohlmann: We can take several important steps. This uncertainty presents an opportunity to address longstanding issues that have hindered businesses for years finally.

First and foremost is internal trade. Interprovincial trade barriers have long been a challenge for businesses in Canada. Yet, efforts to address them have not had a significant impact. Breaking down these barriers—especially the differing rules and regulations between provinces that add unnecessary costs and paperwork for small businesses—would be an important step forward.

Recent International Monetary Fund (IMF) research suggests that Canada’s internal trade barriers are equivalent to a 21% tariff. Reducing these barriers would allow for a freer movement of goods and people within Canada, making domestic trade more efficient. We have even heard from businesses that it is sometimes easier to trade with the U.S. than with other provinces, which should not be the case. We need a more concrete and bold approach rather than allowing efforts to be stalled by protectionist interests. Instead of harmonizing every rule, provinces should recognize each other’s regulations, making trade easier across the country.

Second, competitiveness and productivity are critical concerns. Productivity in Canada has been declining, so our standard of living has dropped over the past decade. This is a major issue because we currently see more small businesses closing than opening, which historically has not been the norm in Canada. To reverse this trend, we must address tax structures—are they too onerous? What can be done to ease the cost of doing business? This remains the number one concern among our members, as high costs are preventing business growth.

Another key issue is red tape—the excessive regulations, paperwork, and compliance requirements that create unnecessary business burdens. Many of these regulations are outdated, redundant, or duplicative, yet businesses must still comply.

Last week, during our Red Tape Awareness Week, we released a report showing that businesses in Canada spend over $50 billion annually on government administration and regulations at all three levels: municipal, provincial, and federal. About one-third of that burden is unnecessary red tape, which could be eliminated without compromising health, safety, or environmental protections. The problem is that governments do not effectively remove outdated regulations, leaving businesses stuck navigating bureaucratic obstacles that no longer serve a purpose.

Eliminating just one-third of unnecessary red tape would significantly boost productivity and make it easier to do business in Canada. One of the most startling statistics from our report is that two-thirds of business owners would not recommend entrepreneurship to their children due to the overwhelming regulatory burden. That is a troubling indicator of how much red tape discourages innovation and growth.

This issue also affects other professions, such as doctors. Many healthcare professionals are bogged down by administrative paperwork, limiting their time spent treating patients. If we streamline paperwork for doctors, we would have more healthcare professionals available to serve Canadians. Addressing these regulatory challenges should be a top priority for all levels of government.

Jacobsen: You mentioned that a 25% tariff is set to be implemented unless another round of negotiations results in a delay or a reversal. At the same time, internal trade barriers can sometimes act as a tariff. How should these internal trade barriers be dealt with?

Pohlmann: Canada’s size undoubtedly increases the cost of doing business, particularly in terms of transportation. However, interprovincial trade barriers only make matters worse. Transportation is a great example.

A truck traveling across the country may have to stop at provincial borders and adjust its configuration based on differing provincial weight regulations, axle requirements, or cargo classifications. These variations create unnecessary costs and delays.

Each province does not intentionally make it difficult for businesses. Instead, provinces have historically developed independent regulations without considering how they align with their neighbours. Fortunately, a pilot project has been launched to mutually recognize transportation regulations across Canada.

Under this initiative, provinces will agree that if a truck is compliant in British Columbia, it will be automatically recognized as compliant in Alberta, Saskatchewan, Manitoba, Ontario, and beyond—without needing modifications to meet slightly different provincial regulations. This is an encouraging step and serves as a test case for a broader solution: mutual recognition of interprovincial regulations.

If expanded, this approach could significantly reduce business costs. For example, a small construction company in New Brunswick and Nova Scotia currently needs two sets of safety gear because each province has slightly different protective boots and jacket regulations. With mutual recognition, the company could use a single standardized set across both provinces.

While such differences may seem minor, they create substantial additional costs for businesses when layered together. Companies adapt as needed, but many of these regulations lack practical justification. Gravity works the same way in every province. So, if fall protection equipment is safe in Nova Scotia, it should also be considered safe in New Brunswick. Yet today, workers must use separate gear for each province.

Jacobsen: Are there any initiatives to comprehensively standardize minor trade regulations in a way that could optimize internal trade across Canada?

Pohlmann: Yes, and that is why mutual recognition is the fastest and most effective way to address these barriers. Since 2017, Canada has had the Canadian Free Trade Agreement (CFTA). At the time, there was great momentum—all provinces agreed to create a formal agreement to improve interprovincial trade.

This agreement replaced the Agreement on Internal Trade (AIT), which had been in place since the early 1990s but had become outdated. Under the CFTA, provinces committed to eliminating unnecessary trade barriers. Still, they were also allowed to list exceptions—rules they could keep in place without change.

Some provinces had as few as eight exceptions, while others had as many as 30. A working group was created to review and harmonize these rules across Canada systematically.

The problem is that the process has been extremely slow. The working group identified about 30 regulations for harmonization, but only 18 have been addressed in eight years. At this pace, fully harmonizing trade rules across Canada could take centuries.

This is why mutual recognition is a much better approach. Instead of trying to standardize all regulations, provinces would agree to recognize each other’s rules as valid. This would mean businesses only need to comply with the regulations of their home province. That compliance would be accepted in other provinces.

From a business perspective, this is the fastest and simplest solution. Last fall, we were pleased when all provinces agreed to launch a pilot project in the transportation industry using mutual recognition. We hope this approach will expand beyond transportation to many other sectors, if not the entire regulatory framework governing trade in Canada.

Jacobsen: The Trump administration seems likely to present some challenges for Canadian businesses. What support programs currently exist to help small businesses weather any uncertainties?

Pohlmann: Nothing comparable to the support programs we had during COVID-19 exists, and we do not believe the same level of intervention is needed. This situation is different. Businesses were completely shut down during the pandemic, and the economy reached a standstill. While the 25% tariffs will be a significant blow, they will not shut down the economy.

Any support measures should, first and foremost, be funded by the revenue collected by the Canadian government from its retaliatory tariffs. If the projected $30 billion in affected goods is accurate, and we assume a 25% tariff rate, that could generate approximately $6–7 billion. This revenue should provide targeted relief to the businesses most directly affected.

If the impact is short-term, lasting only a month or two, most businesses should be able to survive. However, if the situation persists for an extended period, further policy responses may be necessary.

Organizations such as BDC (Business Development Bank of Canada) and EDC (Export Development Canada) could offer low-interest loans. However, we are cautious about this approach, as many businesses are still struggling to repay loans from the Canada Emergency Business Account (CEBA), which was introduced during COVID-19. While CEBA provided temporary relief, it became a financial burden for many small businesses. Even today, about half of our members are still repaying their CEBA loans and other debts accumulated during the pandemic.

At this point, it is too early to determine additional measures until we fully understand the economic impact of the tariffs. However, there are existing programs that businesses can utilize.

For example, Employment Insurance (EI) remains available for laid-off workers. From an employer perspective, there is also the Work-Sharing Program, which helps businesses retain employees during temporary downturns. Under this program, EI partially subsidizes salaries. At the same time, employers continue to pay a portion, allowing businesses to avoid layoffs in the hope that economic conditions improve within a few months.

This program was successfully used during COVID-19 and was also implemented in response to previous tariffs in 2017–2018. Again, it could be an effective tool, particularly for exporters and manufacturers facing reduced demand due to the tariffs.

Jacobsen: It is not always wise to speculate, but what do small businesses take on the rationale behind the 25% tariffs?

Pohlmann: Regarding President Trump, I don’t think anyone truly understands how his mind works. Like everyone else, we just read what’s in the news. His book, The Art of the Deal, outlines his negotiation style, and this approach aligns with how he typically operates.

In discussions with my American counterparts, who were seeking advice on navigating this situation, they said the same thing: He thrives on making people uncomfortable, boxing them into a corner, and then extracting concessions from them. That is just how he operates. He is unpredictable, so I find myself pessimistic and optimistic about where this may go.

My optimism comes from the possibility that this is all just a negotiating tactic—that, in the end, he is simply using this as leverage to extract concessions in the Canada-U.S.-Mexico Agreement (CUSMA) negotiations. If that is the case, he may never impose the 25% tariffs; if he does, they could be short-lived.

The pessimist in me is concerned that he is highly unpredictable and prone to unilateral decisions. Reports from inside the White House suggest that his advisors say one thing while he says another. Although he has only been in office for a few weeks, conflicting information about his trade priorities exists.

Canada is not the main target this week, but that could change next week. He frequently shifts focus, focusing on different parts of the world. Because of this, even experienced business leaders do not necessarily have better insight into their decision-making.

At this point, all we can do is wait and see.

Jacobsen: Geopolitics requires diplomacy, compromise, and consensus-building rather than a purely adversarial approach. While a high-stakes negotiation style might work in certain business contexts, it does not translate well to international relations. Yet, Trump appears to apply the same mentality to business and politics—which is catastrophic for longstanding, stable partnerships like the one between Canada and the U.S.

Pohlmann: I would argue that this volatility is not just an international issue—it is also happening domestically within the United States. His rash decision-making is not limited to geopolitical affairs; he also makes abrupt policy changes at home.

He came into office determined to disrupt the status quo, and that is precisely what he is doing.

As we both acknowledged earlier, this will be a bumpy ride.

Jacobsen: Corinne, on that happy note, thank you for your time today. It was a pleasure to meet you, and I appreciate your insights and expertise.

Pohlmann: Thank you!