A new report from the Business Development Bank of Canada (BDC) has found that Canadian entrepreneurs have become more optimistic about the economy in the months since the United States trade war began.
“They are not sitting there and waiting to see what the economy is going to do.”
Pierre Cléroux, BDC
Confidence among domestic small and medium-sized businesses (SMBs) dropped when the US suddenly announced tariffs on Canada and other countries near the beginning of 2025. But as those SMBs have grown more accustomed to operating in this business climate, they have also become more optimistic about the future, despite continued headwinds.
Forty-five percent reported feeling confidence during the third quarter, compared to 33 percent in Q2, according to BDC’s State of Entrepreneurship 2025 report.
In an interview with BetaKit, BDC vice-president and chief economist Pierre Cléroux attributed this uptick to SMBs now having “less uncertainty” regarding the impact of these tariffs and the steps that they have taken to ensure their survival and competitiveness in this “new reality.”
“They are taking action … They are not sitting there and waiting to see what the economy is going to do,” he added. Cléroux noted that 74 percent of the Canadian entrepreneurs surveyed have implemented measures to increase their productivity over the past year in response to economic pressure.
Many have switched suppliers or pursued new markets, he said, noting that after thinking “north-south” for most of the last 30 years, more Canadian SMBs are looking further east or west to diversify their businesses.
Nearly one-third have also turned to new technologies like artificial intelligence (AI) to do more with less and ensure their profitability, the report found, while 20 percent have adopted existing solutions.
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But some big challenges remain, and the majority (55 percent) of the approximately 2,500 entrepreneurs surveyed by BDC remain skeptical that conditions will improve anytime soon.
All this pressure appears to have taken a toll. While 86 percent of SMB owners say they are in good health, 54 percent also reported having experienced emotional or mental exhaustion over the past year. “That’s a high number,” Cléroux said.
“The year has been difficult,” he added. “There’s no doubt that there’s pressure on these entrepreneurs. There’s a lot of uncertainty. Things have been changing very quickly since the beginning of this year.”
As this study is the first of its kind, Cléroux said he is interested to see how that share evolves over the coming years.
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But Cléroux also takes some solace in knowing that 92 percent would choose to become an entrepreneur again. He argues that this speaks to the passion, dynamism, and resiliency of Canadian SMB owners in the face of continued challenges, following an already tough stretch that has also featured a global pandemic and rising inflation.
Cléroux said Canadian SMBs face two main headwinds: cost pressure (thanks to inflation, US tariffs, and a low Canadian dollar) and soft or declining demand.
Twelve percent of SMBs are preparing for a radical transformation of their business, the report found. Despite these headwinds, more than half (55 percent) still expect to see moderate or strong growth this year, a very good sign given the slowing economy, Cléroux said.
While Canadian SMBs are still investing in growth projects, Cléroux said the amount of investment has dipped. He noted that the priority at the moment is on improving (or maintaining) profitability, retaining customers, and staying competitive.
Feature image courtesy Freepik. Photo by DC Studio.