Canada’s Small Businesses on the Brink of Crisis: Record Drop in Optimism and Recession Threat

Canada’s small and medium-sized businesses have faced an unprecedented drop in business optimism, the deepest in 25 years. The reason for this was the trade war launched by the United States against Canada, as well as rising inflationary expectations among entrepreneurs.

As Bloomberg reports, citing data from the Canadian Federation of Independent Business (CFIB), the CFIB business barometer fell to 25 points this month. This is a record low in the entire history of observations, which have been conducted since 2000, and signals serious problems for the country’s business environment.

Pessimism among businesses is increasing: almost 60% of surveyed companies expect their financial results to deteriorate over the next year. This level of uncertainty was last observed in March 2020, when the government introduced large-scale restrictions due to the COVID-19 pandemic, which led to the closure of enterprises.

In addition, inflation expectations have risen sharply. In March, the average forecast rose to 3.7%, compared with 3% in February, well above the historical average of 2.2%. This indicates growing pressure on the economy, which could lead to a further decline in the purchasing power of the population.

One of the key factors in the economic tension has been the tough tariff restrictions imposed by the administration of US President Donald Trump. From March 4, tariffs of 25% were imposed on most Canadian goods, and 10% on energy products. Later, the US imposed an additional 25% tariff on steel and aluminium imports from Canada.

In response, Canada took countermeasures, imposing tariffs on US goods worth a total of $41.9 billion. The list included steel, aluminium, consumer goods and food. This has only worsened the situation, causing further tension in economic relations between the two countries.

Economists warn that a prolonged trade war could trigger a recession in Canada. According to estimates by the Bank of Canada, if the conflict lasts a year, the country's exports will fall by 8.5%, while the weakening of the national currency and rising import costs will contribute to a further increase in prices.

The Canadian federal government has already announced a set of measures to support businesses. In particular, billions of dollars will be allocated through Export Development Canada to help exporters. In addition, businesses that have been most affected by US tariffs will have access to preferential loans in the amount of 500 million Canadian dollars.

Thus, the situation remains tense, and the future of Canadian small and medium-sized businesses will largely depend on the further development of trade relations with the US and the effectiveness of the government's anti-crisis measures.