A year into the tariff war, Quebec small businesses struggling with rising costs and shrinking margins

CFIB analyst Vincent Paquet explains that, a year into the tariff war, Quebec small businesses are struggling with rising costs and shrinking margins.

U.S. President Donald Trump issued his administration’s first 25 per cent tariff on steel and aluminum imports on March 12, 2025.

That marked the beginning of what’s commonly called the U.S./Canada trade war involving tariffs and counter-tariffs between the two countries.

In Quebec, reduced profits, higher expenses, reduced revenue and supply chain disruptions are the norm a year into the tariff trade war, and many businesses are looking for ways to navigate.

A new Canadian Federation of Independent Businesses (CFIB) study found that half of small businesses in the country no longer view the U.S. as a reliable trade partner and that the strain is showing up in everyday business dealings.

“When we look specifically at Quebec, small businesses are already experiencing several consequences from the US and Canada trade tensions,” said CFIB senior policy analyst Vincent Paquet. “The main story here is rising cost and shrinking margins at the same time.”

Paquet said, however, that the tariff impact is not the same across the provincial economy, with a quarter of Quebec small businesses saying they had not yet experienced an impact from the trade war.

“When we dig deeper, we see that certain industries are significantly more exposed, particularly natural resources, agriculture, manufacturing and also trade,” he said.

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Quebec hardest hit: BMO

BMO also produced a study that found that after solid growth in labour markets in recent years, economic performance started to fracture.

Nowhere was this more prominent than in Quebec, where steel and aluminum in particular were drastically affected by tariffs.

“Quebec is probably at the back of the pack right now, just given some of the impact that we’re seeing on especially the trade front,” said BMO senior economist Robert Kavcic. “The impact is falling disproportionately hard on Ontario and Quebec, and Quebec especially is facing technically the biggest actual weighted average tariff increase relative to what it trades with the U.S. right now.”

When it comes to Quebec, the study found the following impacts for small businesses:

• 37 per cent reported reduced profits.
• 36 per cent reported higher expenses.
• 31 per cent reported reduced revenues.
• 29 per cent reported supply chain disruptions.

CFIB president Dan Kelly said that Canadian small businesses say they faced massive uncertainty since the trade war began, with three-quarters saying it has strained their relationships with U.S. partners or clients. That number was 49 per cent in March 2025.

“Small business owners have been dealing with the whiplash of trying to keep up with sudden changes and threats, including many that don’t happen or are revised within hours,” said Kelly. ”With the Canada-U.S.-Mexico Agreement (CUSMA) coming up for review in the months ahead, the stakes are even higher.”

In Quebec, Paquet said that though both the federal and provincial governments have launched initiatives to help small businesses, awareness of the plans is low.

“Only 11 per cent of Quebec small business owners were aware of the program back in December when we surveyed them, and only three per cent actually applied,” said Paquet. “So while the initiative is positive, it is not reaching most of the businesses that could benefit from it.”

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Quebec introduced targeted relief

On the Quebec side, the government introduced targeted relief in its fall economic update, which, for 2026 and 2027, would exempt qualifying agricultural, forestry, and fishing employers from paying health service fund contributions, regardless of their payroll size.

“While this measure is helpful for the sector heavily impacted, we are encouraging the Quebec government to expand this payroll tax relief to unreasonably affected sectors, including manufacturing, transportation and also trade,” said Paquet.

An accompanying CFIB report on inter-provincial trade also suggests that the U.S./Canada tensions provided an opportunity for provinces to reduce barriers between each other.

“In the past, they were very reluctant to do it, and Quebec was one of the most reluctant provinces to do it,” said Paquet. “They made great strides in reducing interprovincial trade barriers in the past year... What we’re seeing from the ground is that business owners want to trade or expand their market outside of the United States and Canada is one of the top choice for them... Business owners are glad to see progress being made on this front.”

Kavcic added that scaling back on counter-tariffs “was probably the right move” and that the provincial and federal pro-growth agendas are helping.

“Policymakers basically saying, ‘Look, if the U.S. wants to put up trade barriers, well, we’ll just focus on providing the most stimulus we can for the Canadian economy domestically, and then we’ll kind of start looking for alternative avenues for trade going forward,’” he said.

Paquet said in summary that the outlook is challenging and that some economic forecasts suggest Quebec could see slower growth than other provinces.

This is “partly because its economy is more exposed to trade-sensitive industries like forestry, and aluminum.”

“That’s why it’s crucial for the government to focus on helping businesses diversify export markets, reducing regulatory and tax burdens and ensuring support programs actually reach small businesses,” he said.

U.S. Supreme Court ruling didn’t help Quebec

Kavcic explained that the U.S. Supreme Court ruling against Trump’s tariffs doesn’t impact Canadian and Quebec businesses that much.

“Because the tariffs that are hitting us hardest and hitting Quebec hardest are sectoral tariffs that are kind of in a separate jurisdiction anyway,” he said.

He said the more important development to watch is the renegotiation of the continental trade pact (CUSMA).

“There’s hope that some of those sectoral tariffs get scaled back, but as far as it goes right now, those are pretty strong chips that the U.S. still has to play with,” said Kavcic.