Under the cloud of higher U.S. tariffs and rising uncertainty, Canadian business optimism is on the decline, according to the latest sentiment survey from Statistics Canada.
The national statistical agency reported that its latest survey of business conditions, carried out in April and early May, found that business optimism showed signs of faltering, with the share of respondents holding a positive outlook (“very optimistic” or “somewhat optimistic”) for the next 12 months dropping to its lowest level since the first quarter of 2024.
The decline in optimism comes against the backdrop of a deteriorating economic outlook and concerns about resurgent inflation due to rising U.S. tariffs and Canada’s trade retaliation.
The survey found that 18.1% of all respondents said they expect the U.S. tariffs to have a “high impact” on their businesses, whether they engage in trade or not — including 40.4% in the transportation sector, 38.5% in the manufacturing sector and 34.7% in the agriculture and forestry sector.
A similar share (18.5%) said that Canada’s retaliatory tariffs on imports from the U.S. will have a high impact on their businesses, led by the wholesale trade (37.1%), manufacturing (32.4%) and retail trade (32.1%) sectors.
About one-quarter of respondents said they don’t expect any impact from higher tariffs, another 20% weren’t sure about the effects, and the rest said they expect either a “medium” or “low” impact on their businesses.
In the face of higher tariffs, the survey found that the proportion of businesses expecting to face cost-related obstacles over the next three months — including inflation, rising input costs, debt service costs, real estate and transportation costs — rose to 65.4% from 62.5% in the first quarter.
Almost half (49.3%) of businesses said inflation will be an obstacle, followed by input costs — including labour, raw materials and energy — as the second-biggest concern (27.7%).
“When asked to indicate which expected obstacle would be the most challenging over the next three months, 13.8% of businesses reported inflation, 9.1% indicated cost of inputs, and 8.6% reported recruiting skilled employees,” Statistics Canada said.
Concerns about the cost of raw materials rose significantly in the latest survey, it also noted.
Higher operational costs were cited as the primary impediment to business growth, followed by a shortage of skilled workers, Statistics Canada reported. It also noted that just over a quarter (26.5%) of respondents expect to raise their prices in the next three months.