Trade Diversification, Tariffs, and the Reality Facing Small Business

The past year has been one of the most turbulent periods small businesses have faced in a generation. While inflation, labour shortages, and taxation pressures continue to weigh heavily, the sudden escalation of trade tensions and tariffs has introduced a new and deeply destabilizing force: uncertainty.

That uncertainty was at the heart of a recent conversation with Ryan Mitton, Director of Legislative Affairs for British Columbia with the Canadian Federation of Independent Business (CFIB). The discussion was convened through the Peninsula Chamber of Commerce Trade Committee to examine how small businesses are responding to the trade war and what meaningful trade diversification should actually look like on the ground.

A Historic Collapse in Confidence

When tariffs took effect earlier this year, CFIB recorded the lowest small business confidence levels in its history. Confidence dropped to just 25 points — well below the break-even threshold of 50 and a far cry from British Columbia’s historical average in the 60s.

What makes this moment particularly concerning is not just short-term anxiety, but the collapse of long-term confidence. Unlike previous crises, including COVID, small business owners are struggling to see a predictable path forward. When policy shifts can occur overnight, planning even three months ahead becomes a challenge.

Small businesses do not fear change — they fear chaos.

Helping Businesses Navigate Complexity

CFIB’s response has been practical and focused. Through its advisory services and research capacity, the organization has worked directly with members to help them navigate tariff compliance, reduce exposure, and understand trade agreements that may offer relief.

For many businesses, compliance processes are complex, paperwork-heavy, and intimidating. Yet these steps can be the difference between absorbing devastating tariffs and maintaining viability. CFIB’s role as a guide through that complexity has proven critical.

Trade Diversification Starts at Home

Trade diversification is often framed as accessing far-off global markets. While those opportunities matter, the discussion emphasized a more immediate and lower-risk opportunity: strengthening Canada’s domestic market.

Small businesses across British Columbia are already pivoting away from U.S. suppliers and customers. Over half have adjusted supply chains or sales strategies to reduce exposure to U.S. trade volatility. Many are refocusing on Canadian suppliers, customers, and partners — one transaction at a time.

This shift is not ideological; it is practical.

Every dollar spent locally has a compounding effect. Approximately 66 cents of every dollar spent at a local business stays in the community, supporting jobs, families, and regional economic resilience.

Buy Local — With Nuance

The “Buy Canadian” conversation has gained momentum, but it comes with important nuance. Supporting local businesses isn’t about punishing retailers who still carry imported goods; it’s about recognizing where economic value actually lands.

Local stores employ local workers, pay local taxes, and anchor main streets — even when their supply chains are globally connected. CFIB’s “Proudly Canadian-Owned” campaign gives consumers an easy way to identify and support small Canadian businesses without oversimplifying the realities of modern trade.

Consumer preference, not just price, is increasingly shaping the marketplace — and that may be one of the few silver linings in an otherwise challenging economic environment.

Main Streets Matter — More Than Ever

The pandemic taught Canadians just how vital small businesses are to community life. When main streets fell silent, the loss went far beyond convenience. It affected social connection, identity, and local vitality.

That lesson appears to be carrying forward. Despite ongoing headwinds, consumers are showing up for their local businesses, reinforcing the idea that economic resilience begins at the community level.

Looking Beyond Borders — Carefully

While many businesses are prioritizing domestic markets, others are exploring alternative international opportunities. CFIB research shows growing interest in jurisdictions with stable and predictable trade relationships, including the European Union and Mexico.

The common thread is not geography — it is certainty. Businesses can adapt to new markets, regulations, and logistics. What they cannot adapt to is unpredictability.

The Need for Real Solutions

Small businesses are clear about what they need:

• Predictable trade policy

• Competitive tax structures

• Reduced red tape

• A serious commitment to internal trade

Endless discussion without action only erodes confidence further. Advocacy must lead to tangible policy change.

Trade diversification is not an abstract concept. It is about building resilience, restoring confidence, and creating an economic environment where small businesses can invest, grow, and plan for the future.

The message from this conversation was unmistakable: small business needs certainty — and it needs it now.