US-Canada Trade War Leaves Small Firms Facing Heavy Losses

Published: 24 August 2026 | The English Chronicle Desk | The English Chronicle Online

Small businesses on both sides of the US-Canada border are bracing for higher costs, falling sales and potential job losses after trade talks between Washington and Ottawa collapsed and both governments moved towards imposing 50% tariffs on selected goods.

For some companies, the dispute threatens a large share of their business almost overnight.

In Calgary, Alberta, jewellery maker Cindy Baldassi depends heavily on customers in the United States. About 75% of sales at her company, CindyLouWho2, come from American buyers purchasing products made from materials including amethyst, sea glass and agates.

Many of the products she sells are covered by the new US tariffs.

Baldassi says that if she absorbs the additional costs, her business may become unsustainable. If she passes the full cost on to customers, she fears American buyers will simply stop purchasing.

“I expect that at least half of my business will be gone,” she told the BBC.

Her predicament illustrates the dilemma facing thousands of businesses whose supply chains and customer bases have developed around decades of relatively open trade between the two neighbouring economies.

The latest escalation threatens to disrupt that relationship at a particularly difficult time for businesses that have already spent more than a year dealing with uncertainty over tariffs.

Businesses caught between two governments

The latest US tariffs came into force after negotiations between President Donald Trump and Canadian Prime Minister Mark Carney broke down.

Trump has imposed new levies on a range of Canadian goods, including wine, dairy products, cement, clothing and hockey equipment. The measures add to existing US tariffs on Canadian steel, aluminium, automobiles and lumber.

Carney has said Canada will respond with tariffs on US products from 8 September, promising that the measures will match Trump’s tariffs “dollar-for-dollar”.

The immediate measures affect roughly $20bn (£15bn; C$28bn) of Canadian exports to the United States, equivalent to around 5% of Canada’s annual exports to its southern neighbour.

But the potential consequences are much wider.

Around 70% of Canadian exports go to the United States, leaving Canadian manufacturers, retailers and exporters particularly vulnerable to any prolonged deterioration in the trading relationship.

For smaller companies, there is often little room to absorb a sudden increase in costs.

Furniture company fears another shock

Lind Furniture in Ontario has experienced the effects of tariff uncertainty before.

The company has operated for almost six decades and has supplied major retailers including Sears and Costco.

Michael Saifer, the company’s general manager, said sales weakened after Trump returned to office in 2025 and tariff threats began affecting purchasing decisions.

“As soon as there were tariffs in the air, people put purchases on hold,” he said.

Now the company faces another period of uncertainty.

Saifer said Canadian businesses are at a disadvantage because American buyers have access to suppliers from around the world.

“Everyone wants to sell to the Americans – they can buy from whoever they want,” he said.

His assessment of the dispute is stark.

“I don’t know that we’re going to win a war with them; we may get killed.”

For companies already operating with narrow margins, even a temporary disruption can create significant financial pressure. A prolonged trade conflict could force businesses to reconsider suppliers, prices and markets.

Clothing orders face unexpected tariffs

Toronto-based menswear company Outclass is also confronting the difficulty of tariffs arriving after commercial agreements have already been made.

Founder Matteo Sgaramella explained that clothing companies typically receive orders months before products are delivered.

US stores placed some orders with Outclass in January, but the goods are scheduled to arrive in September, when the new tariffs will apply.

That creates a problem because neither the Canadian supplier nor the American customer necessarily planned for the additional cost.

“If I contact them now and tell them, hey, you know, you may get an extra 50% bill from UPS on top of what you need to pay me for this shipment, they’re all going to say, ‘no way, don’t ship it,'” Sgaramella said.

He estimates that about 20% of his wholesale sales and 20% of his e-commerce business come from the US.

While that exposure is lower than Baldassi’s, he says the wider impact on small businesses could still be severe.

“There’s going to be a lot of people that go out of business because of this,” he said.

His concern is that larger companies have more resources to restructure supply chains or absorb short-term losses, while smaller businesses have fewer options.

American businesses are also exposed

The economic consequences are not limited to Canadian companies.

In Portland, Oregon, Mike Roach and Kim Osgood run Paloma Clothing, a business that has operated for 51 years.

One of their best-selling products is a pillow featuring designs produced through a Montreal-based company.

The pillow currently sells for about $59. With tariffs and a conventional retail markup, the couple estimates the price could rise to between $86 and $90.

That could make the product much harder to sell.

“Gift items are really price-point sensitive,” Osgood said. “People have in their mind what they’re going to pay for a gift, and they’re not going to pay more than that.”

The couple may therefore absorb some of the additional cost rather than immediately increase the retail price.

Roach said the sudden introduction of tariffs made planning particularly difficult.

“It would be one thing if we had three months’ notice,” he said. “But when it happens literally overnight you’re really stuck.”

Wine exporters remain trapped

Some American businesses have already spent more than a year dealing with the consequences of the wider trade dispute.

Bill Easton, owner of Terre Rouge Wines in Plymouth, California, has been unable to ship his wine to Canadian customers for about 18 months because of a Canadian boycott of US alcohol.

His stock has remained in storage while he waits for the possibility of the Canadian market reopening.

The warehouse costs him around $2,400 a month.

“The wine has just gotten better in the warehouse,” Easton said, but he cannot simply add all of those accumulated storage costs to the price if he eventually resumes exports.

His experience demonstrates how trade disputes can create costs long after goods have been produced.

For businesses dealing with perishable products or goods tied to seasonal demand, prolonged restrictions can be even more damaging.

Border communities feel the pressure

Businesses close to the US-Canada border are facing another problem: fewer Canadian shoppers.

Heather Seevers owns Northwest Yarns and Mercantile in Bellingham, Washington, only about 25 minutes from the Canadian border.

She says the number of Canadian customers visiting her shop has fallen by roughly 20% since the tariff dispute began more than a year ago.

Some Canadian customers have told her they no longer feel comfortable shopping in the United States because of political rhetoric surrounding the dispute, including Trump’s repeated comments about Canada becoming the 51st US state.

Seevers said her business understood their decision.

But the decline in customers, combined with higher costs, has placed additional pressure on the shop.

The business recently sought community support through a fundraising initiative to help it remain open.

The latest tariffs have added another layer of uncertainty.

“It’s going to get worse before it gets better,” Seevers said.

She believes repairing the relationship between the two countries could take years.

A deeply integrated trading relationship at risk

The experiences of these businesses illustrate why the latest trade confrontation is about more than tariffs on individual products.

The US and Canada have built one of the world’s most integrated economic relationships, with manufacturers, retailers and consumers on both sides depending on cross-border trade.

Products can cross the border multiple times during manufacturing, while businesses routinely rely on customers, suppliers and distribution networks in the neighbouring country.

Tariffs therefore have the potential to affect businesses that may never have considered themselves part of a trade dispute.

A company can face higher costs even when its direct supplier is not subject to a tariff if components or finished goods cross the border before reaching consumers.

That uncertainty can also discourage investment. Businesses may delay orders, expansion plans and hiring because they cannot predict what their costs will be several months from now.

Small firms face the greatest uncertainty

For many small businesses, the central question is whether tariffs can be passed on to customers.

Raising prices may protect profit margins but reduce demand. Absorbing the costs may preserve sales but threaten the company’s ability to remain profitable.

Finding alternative suppliers is another option, but that can take months or years and may not be possible for specialised products.

As the US and Canada prepare for further retaliatory measures, business owners are therefore hoping that political leaders eventually return to negotiations.

For now, however, companies are being forced to make decisions in an environment where the rules can change with little warning.

From a Calgary jewellery maker dependent on American customers to an Oregon gift shop relying on Canadian suppliers, businesses on both sides are confronting the same problem: a trade relationship that once provided stability has become a source of uncertainty.

If the tariff confrontation continues, the damage may extend well beyond the value of the goods directly targeted by the new measures. For small businesses in particular, the biggest cost could be the loss of customers, confidence and the ability to plan for the future.

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