The Canadian Federation of Independent Business recorded its steepest one month drop of the year in September as tariff uncertainty and fuel costs bit into expectations. Relief money is flowing, but it is reaching only part of the affected base, and the firms most exposed to trade are the least confident of all.
TORONTO, September 25, 2026
Canadian small business confidence fell sharply in September, with the Canadian Federation of Independent Business reporting on September 24 that its long term optimism index dropped close to ten points to 47.9 while the short term index fell by a similar margin to 43.3. Both readings sit below the 50 point midpoint of the zero to 100 scale, meaning that more owners expect their businesses to perform worse over the coming period than expect them to perform better.
The association attributed the decline to two forces working in the same direction: renewed uncertainty over Canada United States tariff policy, and rising gasoline and oil prices. Both indices have now been sliding since July.
“The renewed tariff uncertainty, along with rising gas and oil prices, are keeping small business confidence in check,” said Andreea Bourgeois, the CFIB’s director of economics.
Simon Gaudreault, the organisation’s chief economist and vice president of research, put the monetary policy implication bluntly. “The odds of a rate hike before Christmas are higher than they were,” he said. In the association’s Alberta release, issued the same day, Gaudreault added that the persistent trade war and high oil prices could push inflation through the broader economy.
Those two observations sit uncomfortably together. A confidence collapse driven by trade disruption would ordinarily argue for monetary easing. A cost shock transmitted through fuel and imported inputs argues the other way. Canadian small firms are being squeezed from both directions at once, and the September Barometer is the clearest measurement of that squeeze to date.
What the numbers show
The headline indices are the most quoted figures, but the underlying cost and constraint data explain the mechanism.
On the cost side, 62 percent of small firms reported fuel costs as a significant pressure, 61 percent cited tax and regulatory costs, and 60 percent pointed to wage costs. That is an unusually tight clustering. In most months one category dominates. In September, three separate cost lines were each flagged by three fifths of respondents, which describes a general cost environment rather than a single identifiable problem.
On the constraint side, 49 percent of firms identified weak demand as limiting their ability to grow, and 41 percent named shortages of skilled labour. The coexistence of weak demand and labour scarcity is characteristic of an economy undergoing structural reallocation rather than a straightforward cycle. Firms cannot find the workers they need for the work they have, while simultaneously seeing softness in the orders they expected.
Average planned price increases rose to 3.3 percent in September from 2.6 percent in August. That is the number most likely to attract attention at the Bank of Canada. A seven tenths of a point jump in intended price increases across the small business base, in a single month, is a pass through signal. Firms that absorbed tariff and fuel costs through margin over the summer are now signalling that they intend to move those costs onto customers.
The CFIB reported that nearly all provinces and sectors posted a drop. The association’s Alberta release gave the clearest provincial detail available: the Alberta index came in at 52.3, down 2.5 points on the month. Alberta therefore remains above the 50 line while the national reading has fallen below it, but the province has been trending down since April 2026, and the decline has been concentrated among firms engaged in international trade. Alberta’s cost profile differs from the national one, with tax and regulatory costs and insurance costs each cited by 67 percent of firms, wage costs by 60 percent and fuel costs by 55 percent. Half of Alberta respondents cited skilled labour shortages and 44 percent cited weak demand. The Alberta figures rest on a survey of 581 CFIB members conducted between September 10 and 16, with an accuracy margin of plus or minus 4.1 percentage points, nineteen times in twenty.
The single most policy relevant finding in the release is the gap between traders and non traders. Businesses that import or export report materially lower optimism than those that operate only domestically. That gap is the tariff effect, isolated from the fuel effect and from general macroeconomic sentiment, and it is the strongest available evidence that the confidence deterioration is a trade policy phenomenon rather than a generalised slump.
Hiring, wages and the labour signal
Beneath the confidence indices sits a labour picture that has not yet broken but is showing strain.
The persistence of skilled labour shortages, reported by 41 percent of firms nationally and half of Alberta respondents, alongside weak demand reported by 49 percent nationally, is the defining tension in the current data. In a conventional downturn those two series move in opposite directions: demand weakens, firms shed workers, shortages ease. They are not doing that. Canadian small firms are reporting simultaneously that they cannot find people and that they cannot find orders.
The most plausible explanation is reallocation. Tariffs are shifting activity between sectors and regions faster than workers can move between them. A firm losing American orders in southwestern Ontario is not the firm that needs machinists in Sudbury, and the Northern Ontario Heritage Fund projects announced on September 24, which are expected to create roughly 80 positions across twelve manufacturers, illustrate the point precisely. Reshoring creates jobs in places and trades that do not correspond to where the losses are occurring.
For owners, this has an uncomfortable implication. Cutting skilled staff in response to a demand trough that may prove temporary risks being unable to rehire when orders return, because the people let go will have been absorbed by firms on the reshoring side of the ledger. That is one reason employment has held up better than the confidence indices would suggest, and one reason the wage cost pressure reported by 60 percent of firms is unlikely to ease quickly.
The policy backdrop
The survey window, September 10 to 16 in Alberta and comparable dates nationally, captured a specific moment. Canada’s counter tariffs on roughly $20 billion of American exports had taken effect on September 8. Washington had signed proclamations that same day escalating its Section 338 measures against Canadian alcoholic beverages, dairy derivatives and heavy motorcycles from a 50 percent duty to an outright import prohibition scheduled for September 29. The American tariff actions taken in August covered approximately $28 billion in Canadian goods.
Respondents were therefore answering in the window between the announcement of an import ban and its implementation. That timing matters for interpretation. The September reading measures anticipation as much as experience. If the prohibition takes effect on schedule, the October Barometer will measure something different and probably worse for the affected sectors.
The Bank of Canada published its own assessment of the same dynamic on September 24, in an explainer titled “Global trade is changing how the Canadian economy works.” The central bank framed the mechanism in deliberately plain terms. “A tariff is a tax on an imported good or service,” it noted. “Businesses often respond to tariffs by changing where they produce goods and services and who they buy them from.”
The Bank observed that Canada sells more goods and services to the United States than to all other countries combined, and that this concentration is the source of the vulnerability. It also described the behavioural response already under way. “Many exporters are looking for customers in new markets and emphasizing opportunities outside the United States to reduce dependence on a single market,” the Bank said.
Its sectoral assessment was more measured than much of the commentary. Automotive, steel, aluminium and lumber have suffered, the Bank acknowledged, but the effects have not been as severe as initially feared, in large part because CUSMA preferences have continued to shelter a substantial share of cross border trade. That judgment is important, and it carries a caveat that the Section 338 measures now test directly, because Section 338 duties and the coming prohibition apply regardless of CUSMA originating status.
To illustrate the physical scale of what is being reorganised, the Bank cited the Port of Vancouver, which handles more than 140 million tonnes of cargo and millions of containers annually, and the Blue Water Bridge, across which more than 2.1 million commercial trucks pass each year. Redirecting even a modest share of that volume is a multi year infrastructure and logistics undertaking, not a quarterly adjustment.
Relief money is moving, unevenly
Governments at both levels are pushing money out the door, and September 24 produced two concrete Ontario examples.
The Northern Ontario Heritage Fund Corporation announced $3.4 million for twelve manufacturers across Northern Ontario, supporting approximately 80 new jobs. The largest awards went to Jennmar Canada Ltd. in Sudbury at $400,000, R.F. Contracting Inc. in Sault Ste. Marie at $379,619, and Andy’s Trailers and Manufacturing Inc. in Timmins at $319,054. The stated aim is to increase production capacity while reducing dependence on outside suppliers. The Jennmar project is the most illustrative of the current policy logic: the company plans to relocate production of friction bolts used in mining ground support systems from the United States to Canada.
That is reshoring in response to tariffs, and it is the outcome policymakers say they want. It is also small. Eighty jobs across twelve firms is a rounding error against the employment at stake in the trade exposed manufacturing base, though the NOHFC’s broader record is more substantial: an annual budget of $110 million, and since June 2018 more than $1.1 billion invested across over 8,900 projects, generating an additional $3.4 billion in leveraged investment and supporting more than 13,850 jobs regionally.
Separately, Windsor Essex businesses were confirmed on September 24 as recipients of a share of $49 million in provincial tariff relief funding, in a region that has absorbed more direct automotive tariff exposure than almost any other in the country.
Federally, the government announced in May a new $1 billion Business Development Bank of Canada programme and an additional $500 million for the Regional Tariff Response Initiative delivered through the regional development agencies.
The distribution problem is where the story gets less comfortable. Reporting by CBC and Radio Canada this month documented tariff affected businesses waiting months for a response after applying for federal support. For a firm whose American order book closed in August, a support decision that arrives in December is not support. It is an autopsy. The CFIB has separately warned that the trade conflict places more than 50,000 Canadian small businesses at risk.
The mismatch between the pace of the tariff shock and the pace of the relief response is now the most actionable criticism available to business groups, and it is one that does not require agreeing or disagreeing with the government’s trade strategy.
Sector and regional texture
The national headline conceals meaningful variation. The CFIB reported that nearly all provinces and sectors posted a drop in September, which is itself a finding: broad based declines indicate a macroeconomic driver rather than a sectoral accident.
Alberta is the most instructive provincial case because the association published detail for it. At 52.3, the province remains marginally above the neutral line, which on its face looks resilient. The composition tells a different story. Alberta’s decline has been running since April 2026 and is concentrated among firms engaged in international trade, meaning the province’s aggregate figure is being held up by domestically oriented businesses while its exporters deteriorate. High oil prices that support parts of the Alberta economy are simultaneously the fuel cost pressure that 55 percent of Alberta firms cite as a constraint and that 62 percent of firms nationally identify as their leading cost problem.
The insurance figure in the Alberta data, cited by 67 percent of firms and tied with tax and regulatory costs as the province’s top pressure, is worth flagging because it does not appear at that level in the national breakdown. Insurance costs do not respond to tariffs directly, but they do respond to supply chain disruption, to higher replacement costs for imported equipment and to the general repricing of commercial risk. That is a second order tariff effect showing up in a line item that most tariff analysis never reaches.
For manufacturing specifically, the pressure is compounding. Input costs rise because tariffed components cost more. Output prices lag because contracts are fixed. Order books soften because American customers are managing their own tariff exposure. And the labour constraint, cited by 41 percent of firms nationally and 50 percent in Alberta, means that firms cannot readily flex capacity down and back up again without losing skilled people they will struggle to replace.
The diversification question
Underlying all of this is a structural argument the Bank of Canada made explicitly on September 24 and that the September Barometer measures indirectly.
Canada sells more goods and services to the United States than to all other countries combined. That concentration produced decades of efficiency. It now produces a specific vulnerability: a single counterparty can impose costs across the entire export base by administrative action, and no amount of operational excellence at the firm level offsets it.
The Bank noted that many exporters are already responding by looking for customers in new markets and emphasising opportunities outside the United States. That is the correct strategic response and it is also slow. New market entry requires certification, distribution, logistics and in many sectors regulatory approval. The physical infrastructure the Bank cited, the Port of Vancouver moving more than 140 million tonnes of cargo annually and the Blue Water Bridge carrying more than 2.1 million commercial trucks a year, was built around a north south trade axis. Redirecting volume eastward and westward is a capital programme, not a sales decision.
The Bank also offered a note of measured reassurance that deserves to be read carefully. Automotive, steel, aluminium and lumber have suffered, it acknowledged, but the effects have been less severe than initially feared, largely because CUSMA preferences have continued to shelter a substantial share of cross border trade. That assessment was accurate for the tariff measures in place when it was written. It is being tested directly by the Section 338 measures, which apply irrespective of CUSMA originating status and which move from duties to outright exclusion on September 29.
If the CUSMA shelter erodes further, the Bank’s relatively contained sectoral assessment will need revisiting, and so will the assumption embedded in many firms’ planning that origin certification provides a floor under their American market access.
The September Barometer, in that light, is not simply a confidence reading. It is a measurement of how quickly the operating economy is absorbing the conclusion that the shelter is thinner than it looked.
What it means for Canadian businesses
For owners reading the September Barometer, four practical conclusions follow.
First, the price plan figure is a permission structure. When planned price increases across the small business base jump from 2.6 percent to 3.3 percent in a month, a firm that has been absorbing tariff and freight costs in margin is not alone, and is not facing a market in which competitors will hold prices. Firms that have delayed repricing out of fear of losing share should re examine that assumption against current data rather than against last spring’s conditions.
Second, the trader versus non trader gap is a warning to firms that believe they have no trade exposure. Many domestically focused businesses purchase imported inputs, or sell to customers who export. Indirect exposure does not show up on a customs entry, but it shows up in demand. Owners should map second order exposure, meaning which of their customers depend on cross border sales, rather than assuming that an absence of import entries means an absence of risk.
Third, tariff classification and origin work has become a live cost centre rather than a compliance formality. The American Section 338 scope was revised on September 15, adding 122 Harmonized Tariff Schedule classifications and removing others. Firms operating on a classification review conducted before that date do not know their current exposure. Where lines were removed from scope, there may be recoverable duty. Where lines were added, there may be an exposure that no one has yet priced into a quote.
Fourth, the relief programmes require applications to be in the queue before the need becomes acute, given the reported processing times. Firms that expect to need support in the first quarter of 2027 should be applying now, not then. The regional development agencies, the BDC programme and the provincial funds each have separate eligibility criteria, and eligibility for one does not imply eligibility for another.
Reading the next print
The October Barometer will be the first reading taken entirely after the September 29 import prohibition takes effect, assuming it does. Three things are worth watching.
The first is whether the trader and non trader gap widens. If it does, the confidence effect remains concentrated in the trade exposed base and the broader economy is holding. If the gap narrows because domestic firms fall toward traders rather than because traders recover, the shock has generalised.
The second is the price plan series. If planned increases keep rising, the Bank of Canada will be weighing a genuine pass through problem against a demand slump, which is the least comfortable position a central bank can occupy. Gaudreault’s remark about the odds of a rate hike before Christmas is a straightforward reading of that tension, and it is worth noting that it came from a business association rather than from a bank economist, which suggests the concern is being felt in the operating economy rather than only modelled in it.
The third is the provincial spread. Alberta at 52.3 sits above the national figure, supported by energy prices that are simultaneously a cost problem for everyone else. If the spread between energy producing provinces and manufacturing provinces widens further, the federal relief architecture, which is largely national in design and regional in delivery, will come under pressure to differentiate more sharply than it currently does.
None of these will be settled in October. But the September reading has already established the shape of the problem: a trade shock that is measurably concentrated in the firms that trade, arriving at the same time as a cost shock that is not concentrated anywhere at all.