A trade dispute between the United States and Canada is placing increased pressure on small businesses that rely on cross-border sales, with entrepreneurs highlighting rising costs and strained relations as key challenges. The latest round of tariffs, involving roughly $20 billion (CA$27.6 billion) in goods on each side, was triggered last week after President Donald Trump imposed import taxes on Canadian products. Canada responded by enacting retaliatory tariffs on an equivalent amount of U.S. goods. Subsequently, the U.S. announced plans to ban imports of select Canadian items including wine, whiskey, certain motorcycles, and the dairy ingredient whey.
Though these tariffs cover about 5.5 percent of bilateral trade between the neighboring countries, analysts suggest the overall economic impact will be limited. However, small business operators say they are disproportionately affected, particularly as soaring energy prices linked to the ongoing conflict in Iran further squeeze profit margins.
At Jasper Hill Farm, a Vermont-based artisan cheesemaker located near the Canadian border, co-founder Mateo Kehler described how the dispute has already led to canceled holiday orders from Canadian wholesale clients. Although cheese is not directly subject to the tariffs, Kehler attributes the drop in demand to heightened Canadian consumer animosity toward the United States’ trade actions and political rhetoric. He said, “The backlash on the market side is actually what’s affecting us the most,” referring to what he called a boycott inspired by political tensions.
Kehler also highlighted the compounding effects of rising fuel costs, noting that the Iran war has increased expenses for operating farm machinery and distribution trucks. Some suppliers have added surcharges to offset their own higher costs, exacerbating the inflationary pressures across the business, from production to finished goods.
On Canada’s west coast, Revival Stillworks, which manufactures distilling equipment on Vancouver Island near the U.S. border, has faced immediate impacts from the tariffs. Co-founder Darcy Lane explained that their products, including stills and fermenters costing from $250,000 to $2 million, can no longer cross into the U.S. duty-free as before under the United States-Mexico-Canada Agreement (USMCA). Instead, they now face a 50 percent tariff on exports, forcing clients in the U.S. to reconsider projects. Lane recalled a similar disruption last year, when U.S. customers canceled orders after initial tariff threats. He said the company holds millions of dollars in pending orders over the coming months, which are now at risk.
The trade tensions have also been accentuated by a series of provocative remarks and actions from President Trump, who has repeatedly criticized Canada and its leadership, including controversial comments about annexation and symbolic gestures such as renaming Lake Ontario to “Lake America.” These moves have further strained relations between the two longtime allies and fueled uncertainty for businesses dependent on amicable economic cooperation.
As the tariff dispute unfolds amid broader geopolitical challenges, including the escalating war in Iran that is pushing energy prices higher, small businesses on both sides of the border face a complicated and increasingly costly environment to operate within.