How US tariffs are impacting Canadian SMEs—and what you can do about it

It’s no news that the United States under the Trump administration is slapping tariffs on many of their trading partners. On March 12, the U.S. introduced a 25% tariff on all steel and aluminum imports from Canada. This triggered a swift response from the Canadian government in the tune of $30 billion worth of retaliatory tariffs on American goods. 

While the rest of the world watches what’s seemingly a ‘battle of tariffs’ between longtime allies, for many Canadian small and mid-size enterprises (SMEs), this escalation is more than just a headline. It has real, lasting consequences, especially for business owners in manufacturing, energy, and agriculture. 

The ripple effects are disrupting supply chains, hiking operating costs, and putting jobs at serious risk. So, here’s what you need to know as a Canadian business owner and what you can do to protect your business. 

What’s the economic impact of these tariffs? 

The Canadian Imperial Bank of Commerce (CIBC) estimates that Canada’s GDP could shrink by up to 3.25%. The job market isn’t immune either. Roughly 1.5 million jobs may be at risk, particularly in sectors like automotive, energy, and retail. In Ontario alone, 500,000 positions could be lost in the auto industry. 

For SMEs, this could mean a drop in competitiveness, lower consumer spending, and the need to cut back on operating costs just to survive. 

Carney’s U.S. visit: Hope or holding pattern? 

Earlier this month, Canadian Prime Minister Mark Carney met with President Trump to address the economic damage stemming from the trade standoff. Carney emphasized the heavy impact on small businesses and urged for the removal of tariffs, especially those targeting Canada’s auto and energy sectors. 

Despite the diplomatic efforts, President Trump publicly stated that “there’s nothing Carney could say to change the tariff policy,” reaffirming that the measures would stay in place to “level the playing field.” 

Carney’s visit, though unsuccessful in reversing the decision, underscored one critical truth: businesses must prepare to weather this storm on their own—at least for the foreseeable future.  

How does this affect you? 

If your business is already facing economic pressure because of the tariffs, you may be forced to make tough staffing decisions, like reducing employee hours or laying off nonessential staff. 

These decisions aren’t easy to make and may need to be made quickly in such turbulent times. But remember, without the proper HR documentation and procedures in place, these actions can expose your business to legal risks like wrongful or constructive dismissal claims.  

What’s more, employee morale often drops during times of uncertainty, which can lead to higher turnover, productivity loss, and operational disruption. 

What can you do to protect your business? 

Review your employment contracts 

Make sure all your employee agreements are up-to-date. Contracts should clearly outline layoff rights and include enforceable termination clauses that comply with provincial Employment Standards legislation.  

Without properly worded contracts, you may end up spending way more on termination costs—sometimes up to seven times higher under common law.  

Plan ahead 

Create a plan for contract changes, workforce reductions, or temporary layoffs. Keep a documented, fair process to help you decide which roles may be affected. Doing this could save you from potential claims of discrimination or bad faith.  

Communicate with transparency 

If your business is going through any changes clear, respectful communication helps reduce employee’s tension and supports morale. Provide advance notice of changes, and where possible, offer transition support like job placement, referrals or counselling services. 

Train your managers

 
If managers are handling layoffs or terminations, make sure they understand how to approach layoffs or terminations while staying compliant with employment laws. And if they don’t, arrange for them to receive the right training on respectful, professional conversations to reduce the risk of conflict or litigation.  

Need help staying compliant? 

The current trade tensions between Canada and the U.S. will bring challenges for businesses of all sizes. But with the right documentation and expert advice, you can navigate them confidently. 

BrightHR helps Canadian small businesses stay protected with watertight employment contracts, expert advice, and smart software—at a fraction of the cost of traditional legal support. 

If you need support navigating this turbulent employment landscape, call us at 1 833 220 4924 or book a FREE no obligation demo to learn how we can help protect your people and your business.