Canadian businesses brace for turbulence as confidence slumps again in Q2

Firms brace for cost spikes, policy uncertainty, threat of trade disruptions

With inflationary pressures rising again and trade tensions casting a long shadow, Canadian businesses are increasingly on edge. According to Business Insights Quarterly (Q2 2025) from the Canadian Chamber of Commerce’s Business Data Lab (BDL), firms are bracing for a volatile economic landscape defined by cost spikes, policy uncertainty and the constant threat of trade disruptions.

The report reveals that business sentiment has deteriorated for the fourth consecutive quarter, driven by persistent trade tensions, resurging inflation concerns and weakening consumer demand. Exporters — typically among Canada’s most confident firms — have experienced a dramatic drop in optimism, reaching their lowest outlook in years.

“This quarter marks a critical inflection point. Rising costs, tariff threats and policy uncertainty are creating a more volatile landscape for Canadian businesses,” said Patrick Gill, Vice President of the Business Data Lab. “Mid-sized and large companies — key anchors of our supply chains — are feeling the squeeze from both shrinking demand and increasing costs.”

Among the key findings from the Q2 2025 report:

• Business confidence remains below the neutral benchmark of 100 for the fourth straight quarter, signaling a sustained lack of short-term optimism.
• Exporters now trail all other firms in confidence, with tariff anxieties, supply chain disruptions and softening consumer demand driving the sharp decline.
• Trade policy uncertainty has surged to its highest level since CUSMA negotiations, pushing firms to diversify markets, bolster inventory and seek new suppliers.
• Debt constraints are rising, especially among mid-sized firms, as high borrowing costs and limited repayment capacity curb investment plans.
• Inflation concerns are resurging, with a quarter of businesses citing high costs as the main obstacle to growth. More firms now anticipate raising prices in the coming months.
• Canadian counter-tariffs pinch being felt by exporters slightly more than the U.S. measures they were designed to answer. A higher share of Canadian businesses reports medium-to-high exposure to Canada’s retaliatory tariffs (37%) than to U.S. tariffs (35%).

Consistent with research in our tariff-vulnerable cities report, business sentiment in regions expected to be more adversely impacted continues to show higher levels of concern.

While most businesses have not yet taken direct action in response to U.S. tariff threats, many exporters are proactively adapting — expanding into non-U.S. markets, increasing use of CUSMA preferences and shifting supply strategies elsewhere to mitigate exposure.

“Canadian businesses continue to demonstrate resilience,” Gill added. “But the path ahead is more complex. Strategic planning, policy responsiveness and access to timely data will be essential for navigating this new era of economic volatility.”