Businesses seek federal support as economy slows amid Trump tariffs

CTV News

a day ago

As Canadian and American businesses grapple with tariff uncertainty, a national advocacy group wants the federal government to support Canadian businesses while an investment executive anticipates slow economic growth for publicly traded companies.
The head of the Canadian Federation of Independent Business (CFIB) is calling on the federal government to offer monetary relief to Canadian companies affected by tariffs from the United States.
'We do think it is high time that the government start to use some of the retaliatory tariff revenue that it has collected over the last number of months,' Dan Kelly, president of the CFIB, told BNN Bloomberg in a Tuesday interview. 'There's at least a couple of billion dollars that has been collected in Ottawa on the tariffs that exist on U.S. imports into Canada, and that money should be released.'
U.S. President Donald Trump recently signed an executive order increasing tariffs to 35 per cent from 25 per cent on Canadian goods not covered by the U.S.-Mexico-Canada Agreement (CUSMA).
Canada previously imposed 25 per cent reciprocal tariffs on a list of products totalling $29.8 billion, according to a report from the Department of Finance. It has since then included automobiles in April.
The CFIB, an advocacy group representing approximately 100,000 Canadian business owners, says nearly seven in 10 (67 per cent) small importers are paying Canada's full retaliatory tariffs on goods from the U.S. without any price adjustment from suppliers, according to a report. For exporters, 63 per cent of small firms shipping to the U.S. are covering at least some of the tariff costs, with 34 per cent sharing them with customers and 29 per cent absorbing them entirely. The median cumulative cost to-date for a typical business exporting to the U.S. is $22,500.
'There was talk, of course all of those dollars would be used to support Canadian businesses and workers through the emergency period that we're in and yet, there's been very little of that happening,' said Kelly. 'I think there are some announcements on a sectoral basis, but businesses in general are hurting hard as a result of this. Nearly three quarters of small firms that said that they've had some effect. So, putting that money back into the economy through some kind of either tax cut or direct tariff related rebate would be super helpful.'
Mid-cycle economic slowdown expected
Unpredictability from tariffs and Canada's countermeasures is a concern, however Clay Khan, managing director of Neuberger Berman< anticipates businesses will grow slightly. He foresees share prices for publicly listed companies will rise on both sides of the border.
'Our view is that we're heading into a mid cycle slowdown, which is an environment that companies can continue to perform well,' Khan told BNN Bloomberg in a Tuesday interview. 'Just to put some numbers around that, the first half of this year in the U.S., GDP numbers on a real basis were about 1.1 per cent. Earnings estimates for Q2 most companies reported... the consensus was about five per cent and earnings estimates beat at nine per cent. The growth has been there, and our view is that in the second half of this year, you'll see the economy perform at this sort of similar range, one to one and a quarter per cent growth, and then companies can deliver.'
The U.S. unemployment rate ticked up to 4.2 per cent as U.S. employers added just 73,000 jobs last month, according to the Associated Press. The U.S. Labor Department reports shaving off 258,000 jobs from May and June payrolls. Financial markets dropped to open the month before rebounding fuelling speculation of a rate cut from the U.S. Federal Reserve.
'Odds of a Fed cut going up in September went from 40 to 80 per cent in one day,' said Khan. 'Our view, and our fixed income team's view is that you'll see a cut in September and a cut in December. You'll see that sort of stimulus as it relates to monetary policy where you'll see easing and more dovishness from large central banks.
The White House says the one Big Beautiful Bill will boost economic growth with measures including full expensing for new American factories, factory improvements, equipment, and research and development, no taxes on overtimes or tips and boost take-home pay for a typical family by over US$10,000 a year.
'The big one is fiscal and on the fiscal side, in the U.S., you saw the passing of the triple B bill,' said Khan. 'There're some nice features in there for companies to boost cap backs, the full depreciation of investment spent today in that tax year is pretty powerful for companies.'
The bill also reinstates the use of an Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) approach in calculating the interest expense limitation, according to a report from Doane Grant Thornton.
Khan said a lot of lot of investors emphasize U.S. stock markets in their portfolios, saying they make up about two thirds of the All Country World Index. He did however say most investor portfolios dramatically under weigh markets in Canada, Europe, Japan and the U.K. and sees opportunities for growth for investors there with monetary policies from governments embroiled in trade wars.
Non-CUSMA complaint businesses hit by 35 per cent tariffs
The recent hike of tariffs on Canada will only impact some businesses as 95 per cent of goods sent over the border are covered under the CUSMA trade agreement, according to the Bank of Canada's monetary policy report. Kelly acknowledged the deal but said some businesses in his organization are not covered.
'It's good news, of course, for all of us that the CUSMA exemption looks like it's intact, that's the most critical piece of this trade negotiation is trying to create to keep that zero-tariff advantage on a huge swath of Canadian goods. But I've got to tell you that there's a heck of a lot of commerce that is non-CUSMA compliant,' said Kelly. 'I know some of the numbers that have been suggested are 90 to 95 per cent. I think that's the potential for goods to be CUSMA compliant, but that's not the case at this moment for businesses, particularly my members, small business owners. Only about half of small business exports, and about 16 per cent of our members, do exports to the United States, but only about half of them do that through a CUSMA exemption. The other half are right now potentially paying the 35 per cent tariff, and that's really, really harmful.'