Canadian Business Optimism Steady as 40% Plan to Pass on Tariff Costs to Consumers

Survey finds 40% of businesses expect to pass on tariff costs to consumers in the year ahead.

Despite persistent cost pressures and the high probability that many businesses will transfer the impact of tariffs to their customers in the coming year, new data from Statistics Canada indicates that optimism remains resilient among Canadian companies.

The latest quarterly survey on business conditions for the fourth quarter found that over half (61.2%) of companies anticipate facing cost-related challenges in the next three months. These challenges include inflation, rising input costs, higher debt and interest costs, and elevated real estate costs.

• Key Obstacles: The survey, which was conducted in October and November, specifically identified that 41.1% of businesses expect inflation to be a primary obstacle during the quarter, followed by the challenge of recruiting skilled employees (26.4%).

Concerns regarding inflation follow data showing an acceleration in the prices of raw materials and labor costs in October. However, worries about financing costs have slightly eased. The proportion of businesses expecting debt and interest costs to pose a challenge in the next three months fell to 22.9%, down from 24.8% in the previous survey, correlated with continued interest rate cuts by the Bank of Canada.

Tariff Transfer and Marketing Shifts

Statistics Canada reported that 39.9% of businesses indicated they were either “very likely” or “somewhat likely” to pass tariff-related cost increases onto their customers within the next 12 months. Another 31.4% stated they do not expect to raise prices due to tariffs, while the remaining 28.8% were either unsure or unlikely to implement such price hikes.

Escalating trade tensions have also impacted sales strategies, particularly in the retail sector. Statistics Canada found that just over half (50.5%) of retail companies reported shifting their marketing over the past six months to promote Canadian-made products. This trend was also observed in the accommodation and food services sector (33.1%) and in the manufacturing industry (27.4%).

Furthermore, nearly a third (30.3%) of businesses in the retail sector reported an increase in sales of their Canadian products, along with 22.2% in manufacturing and 22.1% in wholesale trade.

Optimism Holds and Wage Expectations Solidify

Against this complex backdrop, business optimism remained virtually unchanged in the fourth quarter. 66.3% of businesses reported being “very” or “somewhat” optimistic about their outlook for the next 12 months, a figure that is comparable to the 66.7% recorded in the previous survey.

Wage expectations also appear firm in this environment, with 39.3% of businesses anticipating an increase in their average wages over the next 12 months, and 44.5% expecting average wages to remain the same.