Canada might be benefiting from a lower

tariff

rate due to its

trade

pact with the

United States

, but the number of its active businesses that depend on their southern neighbour is dropping.

The number of active businesses in Canada that depend on the U.S. fell 2.9 per cent from January 2024 to December 2025 compared with a drop of 0.7 per cent for businesses in other sectors, Statistics Canada said in a release on Monday.

“The gap between the two groups widened over time, becoming more pronounced in 2025, as the number of active businesses in sectors dependent on U.S. demand continued to decline, while that in other sectors fluctuated closer to its January 2024 level,” it said.

Among the sectors most hit were mining, quarrying, oil and gas extraction and

manufacturing

.

Statistics Canada said the decline in active businesses exposed to the U.S. started in 2024 — possibly due to changing global demand and shifting domestic industry dynamics — but continued last year as trade issues between the two countries rose.

“(This) just reinforces what we’ve seen for months, that the manufacturing sector is bearing a brunt of U.S. tariffs and trade uncertainty,” Alan Arcand, chief economist at Canadian Manufacturers & Exporters, said. “Those statistics match what’s happening with other key indicators like exports, employment, gross domestic products and sales. They all point to manufacturing struggling under the weight of U.S. tariffs and trade uncertainty.”

Employment in manufacturing has fallen by 52,000 positions year over year since February, according to the

latest jobs report

from Statistics Canada.

Exports to the United States

in January declined 3.8 per cent from the month before, the data agency said in a release on March 12.

Arcand said most of the losses in manufacturing occurred in Ontario and Quebec — Canada’s manufacturing heartland — and to some extent in British Columbia.

Overall, the number of active businesses in Canada slightly dropped in December, driven by losses in construction, professional, scientific and technical services, real estate, rental and leasing and manufacturing.

“We’ve been bleeding businesses since the start of 2024. We’ve called it the entrepreneurial drought that Canada is now facing,” Simon Gaudreault, chief economist and vice-president of research at the Canadian Federation of Independent Business, said. “This is concerning, and the numbers this morning just confirmed the trend. Again. We haven’t been able to invert the trend.”

CFIB said business exits in Canada have risen 18.8 per cent while entries have risen five per cent since the fourth quarter of 2019, before the start of the pandemic.

Gaudreault said CFIB members have been hit with wave after wave of economic challenges, including COVID-19, high inflation, supply chain disruptions, a trade war and, most recently, rising oil prices.

“Business owners are just basically really tired,” he said. “That’s what we’re hearing through our comments. A lot of them are saying, ‘I’ve been in business for 25 years and I’ve never seen anything like this.’”

In a sign of how tough things have been, the CFIB recently said 55 per cent of its members wouldn’t encourage their children to start their own business — something it called “a very concerning stat.”

Members also said they don’t feel governments are concerned enough about small business and are too focused on large-scale projects, such as those being promoted by the federal government through its Major Projects Office.

Gaudreault said small and mid-sized business account for 99.7 per cent of employment in Canada and are “the backbone of our economy.”

Arcand said the manufacturing companies accounted for in the business exits and entries are typically smaller enterprises.

All eyes in that sector are turned to the review of the Canada-U.S.-Mexico Agreement (

CUSMA

), formally starting in July.

“Everything depends on the outcome of the CUSMA review,” Arcand said. “The U.S. is our No. 1 trade partner and will always be our No. 1 trade partner. The best way to address the issues with the U.S. is to address those issues.

• Email: gmvsuhanic@postmedia.com

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