US-Canada Trade War Creates Headwinds for Small Businesses Amid Rising Costs

A trade war between the United States and Canada is imposing significant costs and operational difficulties on small businesses, according to owners affected by the conflict. The dispute has escalated with reciprocal tariffs on approximately $20 billion worth of goods, adding pressure to businesses already grappling with increased energy costs tied to global events.

Canada imposed retaliatory tariffs on U.S. goods last week after President Donald Trump placed import taxes on Canadian products valued at the same amount. In response to Canada's action, the U.S. announced it would ban imports of wine, whiskey, selected motorcycles, and the dairy ingredient whey from Canada. While these tariffs currently affect about 5.5% of bilateral trade, their impact is disproportionately felt by small enterprises that rely on cross-border sales and face taxes of up to 50% on their products.

"The backlash on the market side is actually what’s affecting us the most," said Mateo Kehler, co-founder of Jasper Hill Farm, an artisan cheesemaker in Greensboro, Vermont. "It’s the rhetoric that has inspired a boycott." Kehler noted that canceled holiday orders from Canadian wholesale customers preceded his products being subject to new U.S. tariffs, suggesting that public sentiment and perceived national ill will are hindering business expansion.

He added that the rising cost of energy, exacerbated by the war in Iran, has led some of his suppliers and distributors to add surcharges to cover their expenses. "It’s like death by a thousand cuts, because between the rising cost of energy and the tariffs, the inflationary pressure on the inputs across almost every aspect of our business — from the farming side all the way through to finished goods — is just being ratcheted up," Kehler said.

Revival Stillworks, a Vancouver Island-based company that manufactures and designs distilling equipment, is also facing challenges. Co-founder Darcy Lane reported that its products, which previously entered the U.S. tariff-free, now incur a 50% tax. Given that the equipment can cost between $250,000 and $2 million, these customs charges represent a substantial financial burden. Lane recalled a U.S. customer canceling a project last year after Trump threatened tariffs on Canadian goods.

With U.S. clients accounting for about half of Revival Stillworks' business, rising oil prices are increasing shipping costs, prompting many clients to reconsider projects involving imported equipment. Lane indicated that the company is exploring contingency plans, including servicing the local marine industry with its engineering and fabrication expertise.

Cassandra Sotos, co-owner and CEO of AmpRx in Nashville, Tennessee, which manufactures devices for musicians, described a similar chilling effect on demand from Canadian customers. Although her bestselling product is not subject to the new U.S. tariffs, Sotos believes that concerns over potential import charges or the general perception of the United States in Canada are suppressing sales. "There’s just as many guitar players in Canada as there are in the United States. And I’m currently only able to get to a tiny percentage of them because of all of this," she stated.

Sotos also highlighted the impact of increased shipping costs for imported components, which she said are two to three times higher than before the war in the Middle East. "At times, this aspect of the global situation acts as a silent killer for small to medium businesses," she said. "Just as you figure out how to manage the increase from tariffs, you get the second punch to the gut with the shipping estimate."

The imposition of a new tariff on Canadian honey in August has also hit beekeepers hard. Peter Awram, CEO of Worker Bee Honey Co. in Rosedale, British Columbia, noted that the U.S. previously represented about 60% of Canadian honey export volume. He expressed concern that if the tariff remains, it could lead to a significant number of commercial beekeepers going out of business, especially as the industry was already in a precarious state due to pricing pressure from imported honey diluted with rice syrup.