Canadian businesses face rising costs and tariffs
Canadian businesses face a rising cost of doing business as oil prices surpassed US $100 a barrel in September and a new round of U.S. tariffs takes effect.
Scaling Small Businesses to Weather Global Shocks
Small businesses form the foundation of the Canadian economy. Operations with fewer than 100 paid employees make up 98 per cent of all Canadian enterprises, as noted by the Canadian Chamber of Commerce. While locally owned businesses drive local economies, small operations often struggle to boost productivity without scale.
Larger firms possess greater capital reserves to withstand external shocks and fund research, development, and talent acquisition. They also capture economies of scale by spreading fixed costs—such as software licences, legal teams, and human resources departments—across a broader output. For smaller operators, scaling up organically or through mergers provides the capital needed to drive productivity and resilience.
Foreign Investment Reaches Highest Level Since 2007
Chronic lacklustre business investment has weighed on Canadian productivity for decades. However, foreign direct investment into Canada reached nearly $100 billion CAD in 2025, the highest level since 2007. This figure stands to climb following Prime Minister Mark Carney’s Canada Investment Summit in September, which drew close to $500 billion in new investment commitments.
Federal initiatives like the productivity mega-deduction aim to lower Canada’s marginal effective tax rate for new business investment to the lowest in the G7. This incentive encourages spending on physical infrastructure, fibre-optic cables, software, and research equipment. Effective technology adoption does not require expensive upgrades. Businesses can achieve meaningful efficiency gains by digitising paper processes, automating bookings, and unifying inventory and invoicing systems.
Canadian Firms Diversify Supply Chains and Export Markets
Recent years demonstrated the profound risks of relying on just-in-time supply chains and single-source suppliers. Trade policy uncertainty and global energy shocks have made operational diversification an urgent priority for Canadian enterprises.
Firms are increasingly diversifying on both sides of the ledger. Domestically, the dismantling of interprovincial trade barriers opens new avenues for trade, such as shipping B.C. wine to Ontario shelves previously occupied by U.S. goods. Abroad, the federal government targets doubling non-U.S. exports over the next decade to generate an additional $300 billion in trade. Backed by a $5 billion trade diversification corridors fund over seven years, Canadian non-U.S. exports rose by $33 billion in 2025. Energy exports illustrate this shift clearly, with crude shipments to Asia and Europe via the Trans Mountain expansion rising from under 3 per cent to roughly 10 per cent of total crude exports.
Supply chain resilience also requires diversifying supplier inputs. While domestic suppliers or alternative international partners in regions like South America or Southeast Asia may involve complex logistics, they reduce vulnerability to single-market trade shocks. Scale, technology, and diversification help Canadian firms survive an increasingly volatile global economy.