Effects of the US trade war on Canadian small businesses and Canadian GDP

[cottagewoman]

Simple math (and open to correction please):

StatsCan reported in 2023 that small businesses contributed 35.1% to GDP generated by the private sector.

The Canadian Federation of Small and Independent Businesses states that in their recent findings, 38% of small businesses will close due to the tariff situation in the next 12 months, this includes the effect of the end of de minimis

35.1% x 38% = 13.34% LOSS of GDP in Canada based on businesses closing

Now to make this more fun, let's say the remaining small businesses that survive rely on 10% of their business to the US, and they will loose 1/2 of their profit of those sales, for a hit of 5%.

100% - 38% = 62% small businesses remaining active

35.1% * 62% = 21.76% of GDP contributed by the remaining small businesses.

21.76% * 5% = 1.1% GDP loss

So added together:

13.34% + 1.1% = 14.44% GDP LOSS due to small business closures due to tariff and trade impacts

2024 info, compiled by ChatGPT based on various government and financial resources/data sets:

Steel and aluminum sector percentage of Canadian GDP: 0.5%
Auto sector percentage of Canadian GDP: 0.8%
Forestry sector (includes ALL forestry based industries) percentage of Canadian GDP: 1.2%

Percentage of Canadian GDP of these headline making industries: 2.5%

Traditional media is missing the point here, that's for sure!

[cottagewoman]

Total caveat to these numbers - it doesn't take into account new small businesses opening to take the place of those lost, I understand that.  Still, the numbers are pretty darned frightening.

[ypdc_dennis]

One big problem with that calculation is it assumes all small businesses have the same value.   It assumes that other businesses won't pick up some of the slack when their competition disappears.

Another problem is that profit has nothing to do with GDP.

USA data: 23% of businesses fail in their first year of operation. With 48% not making it past 5 years. So while tarrifs can be directly blamed for some of the failures, it's often just another straw on the camel's back that contributes to a business closing.

[cottagewoman]

True the value weighting. Let's say the amount is 1/2 of the numbers I gave. That's still north of 6.5%. Still almost 3x the value of the headline sector GDP contribution.

The numbers on businesses that will close are based on surveys done by the Federation, asking the specific question regarding tariffs.

[femmefan1946]

How is "small business" evaluated?
 In the USA a small business is one with fewer than 400 employees.   I don't know the Canadian definition.

I suspect most eBay sellers are micro-sellers with gross incomes under $100,000 annually.

[cottagewoman]

Stats Can defines as 100 employees or less.

Ok, so let's say the hit will be 3% GDP. Approximately the same as the sum of the three sectors that are the focus of the media combined, if they all shut down completely.