The federal government last week announced its intention to combat a raft of threatened U.S. tariffs with counter measures and $6.5 billion in new or enhanced relief programs to support businesses and workers caught in the burgeoning North American trade war.
“Our supply chains are highly integrated, and our producers rely on fair access to the U.S. market,” Minister of Agriculture and Agri-Food Lawrence MacAulay said in announcing the measures. “These unjustified tariffs will have a direct impact on them.” That could be an understatement if proposed 25 per cent across-the-board tariffs—among others such as on dairy, aluminum, steel and lumber exports, along with potential reciprocal tariffs—are imposed as the Trump Administration has threatened. The effects on Canadian small and medium-sized businesses could be particularly severe. As such, the federal government’s initial response will likely not be the last set of measures tabled to help organizations across sectors weather the tariff storm.
The proposed relief package is built on four pillars and is designed to provide liquidity to companies with significant cross-border interests, many of which could face devastating consequences should U.S. tariffs be fully implemented and sustained for months or even years. The first is Export Development Canada’s Trade Impact Program, which would deliver $5 billion in funding over two years to help exporters access new markets and withstand financial challenges such as non-payment, poor cash flow, currency fluctuations and barriers to expansion.
To enable employers to retain workers but reduce overhead costs, Ottawa has proposed temporary changes to the EI Work-Sharing Program that would enhance worker access to employment insurance benefits over a longer period of time when employees agree to reduce their working hours amid business slowdowns. This wage supplement would be available to employers that face a direct and unavoidable reduction in business income due to tariff-related impacts, yet want to retain skilled workers and avoid layoffs.
A loan package totalling $500 million will be made available through the Business Development Bank of Canada. The six-year working capital loans of between $100,000 and $2 million may be lent at the BDC’s base interest rate minus two per cent, with principal payments potentially postponed for as long as 12 months. To support farmers, Ottawa is proposing $1 billion in new financing through Farm Credit Canada, including access to additional credit lines of as much as $500,000 and new term loans, along with to the option to defer principal payments for as long as 12 months on existing loans.
Other proposed measures include an extension of the $250,000 interest-free loan limit on the Advanced Payments Program (APP) for the 2025-26 program year. The measure provides loan advances to farmers to help improve cash flow. The government has also amended the Investment Canada Act to enhance scrutiny of foreign investment in, and/or takeovers of, Canadian companies or technologies deemed essential to national economic security.
With Mark Carney set to be sworn in as prime minister, a federal election likely on the horizon this spring and an unpredictable president in the White House, much could (and likely will) change on the Canada-U.S. trade front in the coming weeks and months. These are the first, but almost certainly not the last, business-support measures that Ottawa will table. And they may even be subject to significant changes pending the outcome of the next federal election. All we know for certain is that a great deal of uncertainty lies ahead for Canada’s economy.
Expect continued updates as tariff-related policies and support measures are proposed.
The Adams + Miles Team
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