First and foremost, business owners are dealing with an entirely new trade environment. Stable, long-lasting treaties can no longer be taken for granted, resulting in the need for greater adaptability and diversification.
Next, Canada’s anemic productivity is a threat to the long-term health of our economy, necessitating the need to increase capital investment and upskilling at home.
Finally, when it comes to our trade relations, unpredictability and complexity has become the norm. While businesses have always faced some level of uncertainty when it comes to governments’ plans—recall the back and forth on the proposed capital gains inclusion rate increase—they’ve been able to understand the general environment. No longer. Now, the need to react to actions south of the border has complicated businesses’ ability to plan and requires consistent adjustments as the situation changes.
Organizations that can adapt to a quickly evolving environment will have more options and a greater range of action than those that don’t. The approaches detailed below offer options to confront today’s most pressing challenges but also set businesses up to withstand changes in the future.
For businesses affected significantly by either US tariffs or by Canada’s retaliatory measures, the most immediate focus is on weathering the storm while deals are negotiated. The federal government has initiated remissions and customs programs to mitigate some of the imposed measures. For instance, specific qualifying goods (e.g., those acquired for qualifying use for public health, safety, defense, manufacturing of goods, food processing) will have a remission available to be applied at entry to the country and goods qualifying under the Canada-United States-Mexico Agreement (CUSMA) may be exempt from tariffs altogether if they meet the rules of origin (and adequate support is obtained/maintained). Additional remissions are available based on specific criteria and businesses affected by tariffs should work with an experienced customs and global trade professional to take advantage of them.
The challenge for organizations is to a) understand whether they qualify for such remissions and b) to provide support for their assertion that such remissions/exceptions should be granted. Those that qualify but paid duties before knowing so may be able to make a claim to get the duty back, though the process may be both lengthy and onerous after the fact. Those that are unable to provide adequate support may be required to pay tariffs at a later date. As with most customs and duties, the sooner you understand your situation, the better. And all organizations can expect additional scrutiny in this area on both sides of the border.
In recent years, there has been an increase in attention to Canada’s growing productivity problem. In 2024, Carolyn Rogers, Senior Deputy Governor at the Bank of Canada (BoC), sounded the alarm in a speech to the Halifax Partnership; once you take the time to dig into the data, it becomes clear why.
Prior to 2015, real GDP per capita generally rose in lockstep with the US, but since then Canada has fallen significantly behind to become dead last in the OECD. According to Canada’s State of Trade 2025 (SoT 2025), while our real GDP has increased in the aggregate, our GDP per capita saw decreases in 2023 and 2024. That difference can be explained by poor productivity growth driven by a ‘headcount economy’ in which businesses grow by adding labour instead of investing in capital improvements. According to the BoC, Canada has seen no productivity growth in recent years and is second only to Italy in the scope of our productivity decline among G7 nations. In terms of real GDP, the productivity decline has been masked by an influx of labour and population outpacing investment. Citing investments in economic growth and historic trends on integrating newcomers into the economy, SoT 2025 has classified the decline in per capita GDP as a temporary issue as opposed to a systemic one.
The long-term strength of our economy and our ability to maintain high standards of living is dependent on strengthening productivity across economic sectors. The BoC identifies three core elements to improving productivity: capital investment in machinery or technology that improves output; skill development for workers; and multifactor productivity. Businesses looking to improve and/or expand their operations or invest in upskilling their labour force may be able to access critical government support programs.
The rapid adoption of technology and prioritizing innovation is essential for any organization hoping to remain competitive in today’s marketplace. Federal and provincial governments have introduced various funding programs to support business innovation, expansion, and productivity across the country.
Tax credits and incentives allow businesses to claim a deduction against income and/or to earn a tax credit. Among the various programs, Scientific Research and Experimental Development (SR&ED) incentives stand out as a critical support for businesses engaged in research and development (R&D). Accessing these incentives can materially reduce R&D costs and accelerate innovation, enhancing productivity. In 2024/25, more than 20,000 businesses received a total of $4.5 billion in investment tax credits through the SR&ED program. Looking forward, the government is currently looking to enhance the program’s benefits and has published the proposed changes for consultation.
In contrast to tax incentives and credits, some government programs offer funding in the form of direct funding, investments or no- or low-interest loans. Such programs generally require that an organization complete an application to demonstrate how its work will contribute to achieving the program’s mandate. Each program has specific requirements to meet and often limited intake periods and resource intensive to create and submit a successful application.
For example, Canada’s Strategic Innovation Fund (SIF) helps businesses expand operations, commercialize new products, and advance technology in strategically important industries, such as clean tech, advanced manufacturing, health sciences, and digital industries. It offers streamlined access to capital for domestic growth and global competitiveness.
For more information on incentive and grant programs, please refer to the Government of Canada’s Business Benefits Finder.
Capital investments in innovation and expansion are a critical component of enhancing competitiveness, but to make the most of those investments, we require a skilled labour force ready to apply their knowledge. As with the investment side of the competitiveness equation, federal and provincial governments have introduced programs to support businesses in upskilling their employees.
For example, the Canada Job Grant, operated through provincial programs, allocates resources to reduce the cost of third-party training for new or existing employees. Additionally, sector specific training programs are being expanded to train domestic workers and integrate immigrants with much needed skills into priority industries.
Canadian businesses should take advantage of such programs and take additional, proactive steps to build accessible, future-ready workforce pipelines. According to the Doane Grant Thornton Atlantic Insights Report, businesses can create a future-ready workforce by building a positive culture that emphasizes balance and flexibility, investing in keeping top talent with a comprehensive retention strategy, and looking abroad when the skills you need aren’t available domestically.
With rising tariff risks, especially with CUSMA being up for negotiation in 2026, Canadian businesses are exploring their options, but the right choices will look different for each business depending on their specific situation. For export-dependent businesses with a heavy US presence, it’s not as if they can just flip a switch and redirect their product to Europe or Asia. In the long-term, entering new markets will help reduce their reliance on the US, but in the interim they may consider setting up or expanding operations within the US.
Those with less US-centric operations may instead consider taking advantage of new trade agreements (e.g., CPTPP, CETA) and exploring markets in Asia, Europe, and the global south to build resilience and spread risk. Additionally, there is renewed progress in bringing down interprovincial trade barriers, making it easier for Canadian companies to sell domestically. According to an International Monetary Fund working paper released in 2019, the tariff equivalent of Canada’s non-geographic trade barriers was 21%. Steadily eliminating those barriers will provide new opportunities to businesses looking for new markets and there seems to be a greater openness to such a move as a “Buy Canadian” movement has taken hold.
On the supply-side of the equation, companies can reduce exposure to retaliatory tariffs by increasing local sourcing, re-shoring critical inputs, and cultivating domestic partnerships to replace those with the US. Doing so can dampen external shocks caused by future trade actions and help to improve supply resilience.
No matter what approach you take, it’s important to consult a tax advisor with experience setting up businesses in different jurisdictions. Doing so will ensure you can properly structure your business to gain the greatest benefit and avoid potentially costly errors as you proceed.
The current dispute has forced many businesses to toss out long-held assumptions about how trade functions between Canada and our largest trading partner. In the absence of a predictable trade environment, it falls upon leaders to prioritize adaptability and make use of strategic planning that includes trade shock simulations, interest rate shifts, and supply disruption contingencies. Embedding organizational agility—staying on top of changes to the economic environment, data-driven decision making, and emphasizing risk management—increases resilience to shocks and can make stronger organizations in the long term. The governmental supports available to organizations can provide resources that will help organizations adapt and transition to the new normal, but success will be driven by the decisions made in the coming months and years.
Doing business in this environment isn’t easy, but we’ll work with you to find the right solution for your business. If you’re looking to build an organization that can adapt and thrive in today’s trade environment, our advisors can help. Contact your local advisor or reach out to us here.
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