US-Canada Tariff Spat Squeezes Small Businesses as Iran War Raises Costs

A fresh round of tit-for-tat tariffs between the United States and Canada is squeezing small businesses on both sides of the border, with owners reporting canceled orders, stalled expansion plans and rising input costs made worse by the war with Iran.

Canada last week imposed reciprocal duties on about $20 billion (CA$27.6 billion) of American goods, matching the value of Canadian products hit by US import taxes. In response, President Donald Trump said Washington would bar imports of Canadian wine, whiskey, selected motorcycles and the dairy ingredient whey.

The measures cover roughly 5.5% of the two countries' bilateral goods trade, a share analysts say limits the broader economic fallout. For smaller firms that depend on cross-border sales, however, taxes of as much as 50% on their products — and the ill will the dispute has generated — carry an outsized cost, particularly as higher energy prices linked to the Iran conflict erode margins.

At Jasper Hill Farm, an artisan cheesemaker in Greensboro, Vermont, co-founder Mateo Kehler said the opening US salvo brought immediate cancellations of holiday orders from wholesale customers in Canada, about 40 miles away. Cheese was not among the products newly taxed by Washington, but Kehler believes his plans to grow in Canada are stalling amid resentment over how the president and his Cabinet have treated a longstanding ally.

"The backlash on the market side is actually what's affecting us the most," Kehler said. "It's the rhetoric that has inspired a boycott."

Trump has repeatedly needled Canada since returning to the White House, from remarks about absorbing the country as a 51st state to taunting Prime Minister Mark Carney after trade talks broke down in August and signing an executive order to rename Lake Ontario. For Kehler, lost sales and pricier materials and equipment from Canada are harder to absorb as fuel for the farm's trucks and machinery grows costlier, with some suppliers and distributors adding surcharges.

"It's like death by a thousand cuts," he said, describing mounting inflationary pressure across farming and finished goods.

On Vancouver Island, Revival Stillworks builds distilling equipment for vodka, agave and whisky and designs craft-spirits production spaces. Until last month, its stills and fermenters entered the US duty-free under the United States-Mexico-Canada Agreement. Now they face a 50% border tax, a significant sum given equipment prices of $250,000 to $2 million, co-founder Darcy Lane said.

"We've got millions of dollars worth of orders that are supposed to be happening over the next four to six months, and then all of a sudden this happens again," Lane said, recalling a US customer who scrapped a project last year when Trump threatened tariffs on Canadian goods. US clients account for about half the company's business, and rising oil prices during the war have already pushed up shipping costs, prompting some customers to reconsider imported-equipment projects. Lane and his partner are weighing a pivot to servicing the local marine industry, drawing on their engineers, welders and fabricators.

"Hopefully, cooler heads prevail and everything works out," he said. "But if not, we have to put a contingency plan in place anyway."

In Nashville, Tennessee, AmpRx co-owner and CEO Cassandra Sotos said the dispute is chilling demand even though her best-selling product — a power adapter priced from $400 to $1,400 for musicians and studios — is not subject to the new US tariffs. Canadian orders have fallen off regardless, and she is unsure whether customers fear unexpected import charges or are reacting to how the US is perceived north of the border.

"Any piece of the puzzle that gets taken away from us is significant," Sotos said, noting Canada has as many guitar players as the US but that she can reach only a fraction of them. Shipping costs for imported components are now two to three times pre-war levels, she added.

"At times, this aspect of the global situation acts as a silent killer for small to medium businesses," she said. "Just as you figure out how to manage the increase from tariffs, you get the second punch to the gut with the shipping estimate."

Canadian beekeepers are also feeling the strain. A US tariff on Canadian honey introduced in August hit producers like Peter Awram, CEO of family-owned Worker Bee Honey Co. in Rosedale, British Columbia, who said the US previously took about 60% of Canadian honey export volume. The reciprocal 50% tariff Ottawa placed on American-made honey offers little relief, Awram said, because honey diluted with rice syrup from India and China is already pressuring prices on both sides of the border.

"Most of what Canada is now tariffing is not American honey," he said. "It is other countries' honey carrying American paperwork."

With many Canadian beekeepers likely to push domestic sales, the resulting glut could depress prices further. "The industry was in a precarious state before the tariff," Awram said. "If this tariff stays in place for long, it will put a large number of commercial beekeepers out of business."