So-called Liberation Day is here, and one thing is certain: Canadian businesses can’t say for sure what tariffs await them.
The last three months have felt like endless whiplash for Canada, which has been caught in a trade war with an unpredictable United States (US) administration. Since taking office, US President Donald Trump has threatened 25-percent blanket tariffs on Canadian imports, agreed to a month-long détente, slapped duties on Canadian steel and aluminum, and then again delayed tariffs on Canadian goods covered under the 2020 Canada-U.S.-Mexico Agreement (CUSMA)—which was negotiated by Trump himself.
Jean-Simon Fortin
“Nothing hurts business more than ‘wait and see.'”
Paperplane Therapeutics
The ongoing uncertainty has had both direct and knock-on effects on Canadian businesses, which have been left struggling to strategize, devoting energy to hypotheticals, and facing rising costs. More than three-quarters of Canadian startups said they were impacted directly or indirectly by the tariffs, according to a survey by tech hubs MaRS and Communitech. Eleven percent said they planned to cut staff due to the trade war.
On Wednesday, the US is expected to impose between 20 and 25 percent tariffs on the remaining Canadian goods covered by the free trade agreement, as part of a broader protectionist policy rollout. But given past behaviour, what will come down the pipeline is anyone’s guess—and Canadian founders may have to redraw plans accordingly.
Back to the drawing board
For Canadian entrepreneurs, uncertainty is manifesting in myriad ways, reflecting the widespread economic reverberations of the trade war. One founder told BetaKit last month that after Trump delayed tariffs on some Canadian goods, the constant back-and-forth made it “impossible to plan.” Another called it “exhausting.”
Paperplane Therapeutics, a Montréal-based software healthtech company, is in a similar boat. Paperplane ships US hardware into Canada to install its virtual-reality software. Tariffs are causing supply chain “logistical headaches” that make long-term planning difficult, according to CEO Jean-Simon Fortin.
“While it’s possible to plan, it’s a huge drain on time and resources—and it creates a climate where hesitation and paralysis become the default,” Fortin told BetaKit. “Nothing hurts business more than ‘wait and see.’”
RELATED: How is Canadian tech responding to the trade war?
One of the biggest challenges, Fortin said, is the added financial burden. Fortin has had to work with an import-export agency and pivot the company’s supply chain to find alternative distribution channels.
“For us to maintain competitiveness, we need to eat the tariff costs.”
Josh Ogden
Aerial Vehicle Safety Solutions
Another Canadian software startup that ships hardware over the border says that there are no good resources describing how startups should deal with these circumstances, creating “a lot of extra work.”
For Aerial Vehicle Safety Solutions (AVSS), a New-Brunswick-based company that manufactures components for commercial drones, uncertainty around tariffs is a drain on resources.
“We are wasting time bouncing tariff and standard pricing multiple times a week,” AVSS CEO Josh Ogden told BetaKit. “For us to maintain competitiveness, we need to eat the tariff costs.”
Typically built on a stable relationship between the Canadian and US dollars, companies are also now confronting cross-border currency volatility. Early-stage telecom company Sweat Free Telecom says its biggest uncertainty is currency fluctuations, according to founder and CEO Chanakya Ramdev. The startup said that it is “hit twice as hard” by the weakening Canadian dollar, as it collects revenue in CAD but its billing costs are in USD.
And planning can only get a company so far in the face of an unpredictable administration. On The BetaKit Podcast in February, SRTX founder and CEO Katherine Homuth said that businesses should have plans “A through D” to deal with tariff uncertainty.
But the textile manufacturing startup, which produces its rip-resistant Sheertex tights in Canada, temporarily laid off 40 percent of its staff ahead of tariffs that it said could impose up to 41-percent duties on its product shipments into the US. Homuth said she would be stepping down last week as part of a condition on a crucial funding round, whose urgency was only accelerated by the trade war.
RELATED: Government of Canada commits over $6 billion to help businesses weather trade war
To mitigate the trade war fallout, the federal government has rolled out a multibillion-dollar aid plan to support businesses. Though entrepreneurs have welcomed the initiative, some are advocating for targeted trade and procurement policies to protect the Canadian economy.
Startups surveyed by MaRS and Communitech are calling for increased funding for business support programs, increased government procurement of Canadian goods, and more support for diversifying away from US markets. Fortin told BetaKit that stronger trade agreements and more domestic procurement opportunities in Canada would help companies currently at the mercy of US trade policy.
The Council of Canadian Innovators (CCI), an organization that represents Canadian scaleups, has been pushing for procurement reform since before the trade war began. It has argued for creating a federal target for small and medium-sized enterprise procurement targets.
“Our proximity to the US was always viewed as our greatest strength. Those positive attributes are no longer there in the way they previously were,” Bergen said. “Making sure we have a business climate that is hypercompetitive is essential to our survival and success as a country.”
Feature image courtesy Harry Spink via Unsplash.