For context, a score of around 60 on the CFIB’s Business Barometer index is considered typical for a healthy economic climate. The current level of 23.4 points underscores the severity of the challenges facing small businesses in Ontario. Julie Kwiecinski, CFIB’s director of provincial affairs for Ontario, emphasized the uncertainty gripping the sector. “It’s impossible to make decisions on hiring, expanding, and other operational matters against the backdrop of ever-changing tariffs,” she said.
The ongoing trade war between Canada and the United States has been a significant factor in this decline. U.S. tariffs have disrupted supply chains and increased costs for Ontario businesses. However, the impact extends beyond U.S. trade policies. Canadian agribusinesses are also struggling under Chinese tariffs, including 100% tariffs on canola oil, peas, and oil cakes, as well as 25% tariffs on pork and aquatic products like lobsters.
The CFIB survey revealed several concerning trends among small businesses in Ontario. For 19 consecutive months, inadequate demand for products and services has been the biggest obstacle to sales or growth. Additionally, 31% of businesses still carry pandemic-related debt, with a median debt of $80,000. Looking ahead, 16% of businesses plan to lay off employees in the next few months, while only 11% are interested in hiring.
Certain sectors are particularly hard-hit. Business confidence is lowest in the hospitality (17%), manufacturing (18.6%), transportation (21%), and agriculture (21.3%) sectors. These industries are grappling with a combination of reduced demand, higher costs, and ongoing trade uncertainties.
To address these challenges, the CFIB is urging the Ontario government to implement several measures. These include lowering the Small Business Tax Rate from 3.2% to 2%, with a gradual reduction to 0%, and increasing the threshold to access the Small Business Tax Rate from $500,000 to at least $700,000, with annual adjustments for inflation. The CFIB is also calling on the government to fulfill its campaign commitment to provide $3 billion in Employer Health Tax and WSIB surplus funds relief as part of the province’s tariff mitigation measures.
Kwiecinski underscored the urgency of the situation, stating, “Small businesses urgently need all the help they can get to weather this storm.” As Ontario’s small businesses navigate this economic turmoil, the CFIB’s call for action highlights the critical need for policy changes and support to help them survive and recover.
Among the key recommendations is a proposal to lower the Small Business Tax Rate from 3.2% to 2%, with a gradual reduction to 0%. This measure is intended to provide much-needed relief to small businesses struggling to stay afloat amid rising costs and reduced demand. Additionally, the CFIB is advocating for an increase in the threshold to access the Small Business Tax Rate, raising it from $500,000 to at least $700,000, with annual adjustments for inflation. These changes are designed to ensure that more businesses can benefit from the tax relief, helping them to reinvest in their operations and retain employees.
The CFIB is also calling on the Ontario government to fulfill its campaign commitment to provide $3 billion in Employer Health Tax and WSIB surplus funds relief. This financial assistance is seen as critical for helping small businesses navigate the ongoing trade uncertainties and recover from the lingering effects of the COVID-19 pandemic. With many businesses still carrying pandemic-related debt, the need for targeted relief has never been more urgent.
The sectors most affected by the current economic climate include hospitality, manufacturing, transportation, and agriculture. In the hospitality sector, confidence has dropped to a staggering 17%, as businesses grapple with reduced demand and higher operational costs. The manufacturing sector fares slightly better at 18.6%, but companies are still struggling to adapt to supply chain disruptions and fluctuating tariffs. Transportation businesses are also feeling the pinch, with confidence sitting at 21%, while the agriculture sector, heavily impacted by Chinese tariffs, stands at 21.3%.
These industries are not only dealing with reduced demand but also facing significant cost increases due to tariffs and supply chain issues. For instance, the agriculture sector is particularly hard-hit by China’s 100% tariffs on canola oil, peas, and oil cakes, as well as 25% tariffs on pork and aquatic products like lobsters. These trade barriers have made it increasingly difficult for Canadian agribusinesses to compete in international markets, further exacerbating the economic challenges faced by small businesses in Ontario.
With small businesses forming the backbone of Ontario’s economy, the CFIB’s call for immediate action is a stark reminder of the critical role that policy changes and financial support must play in helping these businesses survive and recover. As the trade war with the U.S. and ongoing tensions with China continue to create uncertainty, the need for decisive action has never been more pressing.
Conclusion
The plummeting small business confidence in Ontario, as highlighted by the CFIB report, paints a dire picture of the economic landscape. With confidence levels dropping to historic lows, small businesses are facing unprecedented challenges, including trade uncertainties, reduced demand, and lingering pandemic-related debt. The CFIB’s urgent call for tax reforms and financial relief underscores the critical need for immediate government action to support these businesses.
Sectors such as hospitality, manufacturing, transportation, and agriculture are particularly hard-hit, with confidence levels well below the national average. The ongoing trade disputes with the U.S. and China have exacerbated the situation, disrupting supply chains and increasing costs. To help small businesses survive and recover, the Ontario government must consider the CFIB’s recommendations, including tax rate reductions and financial relief measures.
Small businesses are the backbone of Ontario’s economy, and their survival is crucial for the province’s economic recovery. Without swift and decisive action, the challenges facing these businesses may become insurmountable, leading to further economic decline. The time for policy changes and support is now.
Frequently Asked Questions
Why is small business confidence in Ontario at a record low?
Small business confidence in Ontario has dropped due to trade uncertainties, reduced demand for products and services, and lingering pandemic-related debt. The ongoing U.S.-Canada trade war and Chinese tariffs have further exacerbated the situation, disrupting supply chains and increasing costs for businesses.
Which sectors are most affected by the economic downturn?
The hospitality, manufacturing, transportation, and agriculture sectors are the hardest-hit, with confidence levels significantly below the national average. These industries are grappling with reduced demand, higher costs, and ongoing trade uncertainties.
What measures is the CFIB recommending to support small businesses?
The CFIB is urging the Ontario government to lower the Small Business Tax Rate from 3.2% to 2%, with a gradual reduction to 0%, and increase the threshold to access the Small Business Tax Rate from $500,000 to at least $700,000, with annual inflation adjustments. Additionally, the CFIB is calling for $3 billion in Employer Health Tax and WSIB surplus funds relief.
How are trade tensions impacting Ontario businesses?
Trade tensions, particularly with the U.S. and China, have led to tariffs that disrupt supply chains and increase costs for Ontario businesses. For example, Chinese tariffs on agricultural products like canola oil and pork have made it difficult for Canadian agribusinesses to compete in international markets.
Is there hope for small business recovery in Ontario?
While the current situation is dire, there is hope for recovery if the Ontario government implements the CFIB’s recommended tax reforms and financial relief measures. Addressing trade uncertainties and providing targeted support to hard-hit sectors will be critical for helping small businesses survive and recover.
What can individual small businesses do to navigate this economic climate?
Small businesses should focus on managing costs, exploring new markets, and seeking financial assistance where available. Staying informed about policy changes and trade developments is also crucial. Businesses should also consider reinvesting in their operations and retaining employees to build resilience for the future.
