Foreign Affairs Committee on Oct. 21st, 2026

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

At present, everyone across Canada is affected, but Quebec and Ontario are suffering the most from the current trade war. Quebec's largest export is aluminum. Next comes the aerospace sector, followed by forestry. Do you agree with those who say that the revenue generated by the counter-tariff measures put in place by the government should be channelled to the businesses currently being hit hard by the tariff war?

There is another school of thought, as we heard earlier. Do you think that this revenue should simply go into the public coffers and not necessarily be channelled to the businesses suffering from the tariff countermeasures?

[Dan Kelly]

We've asked our members this exact question, and 90% of small firms believe that the money generated by countertariffs should be used to help businesses that are affected by the trade war. I will add this: Of those who are affected both directly and indirectly—because I would suggest that almost every Canadian business is experiencing some degree of impact, even if it is just the economic uncertainty that this has created—the top two ways that our members have suggested that governments use the countertariffs is, one, to fund some direct rebating of the tariffs in general on the smallest of companies. That's the $50,000 or $70,000 Canadian exemption that we have suggested. Secondly, we have suggested that this money be used towards a broad-based tax reduction for all small firms, especially those that are then getting some of the indirect impacts. That could be through a reduction in the small business corporate tax rate. We've suggested that be dropped from 9% to 6%.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

In that case, how do you explain that the economic sector which is currently making record profits and is not subject to customs duties is the one receiving the most money—whether in the form of tax credits or subsidies, direct or indirect—from the federal government? Let's be clear, because this is public knowledge and a matter of fact: It is the oil and gas sector. How do we explain this at present, given that it is a sector which faces no U.S. tariffs and which, by that very fact, is 60% American-owned, sells 90% of its product to the Americans, faces no tariffs and is making record profits, the likes of which we have never seen before? Do you, in front of your members, wonder how it is possible for the government to act in this way?

[Dan Kelly]

We have encouraged the government to look at ensuring that small firms are thought of in the tariff relief strategy. I don't think they are right now, perhaps with the exception of Atlantic Canada.

The Quebec program is equally bad at the federal level. At the provincial level, I will say that we have heard many comments from our members that Quebec's provincial programs for tariff relief are much better at supporting businesses of all sizes than the federal programs.

[The Chair, Liberal, Ahmed Hussen]

MP Duncan, you have five minutes.

[Eric Duncan, Conservative, Stormont—Dundas—Glengarry, ON]

Thank you, Mr. Chair.

Thank you to our witnesses for being here today. It's been enlightening here over the past while.

Mr. Kelly, I want to pick up on what you said earlier about questioning the efficiency of some of the countertariffs or the reasoning behind their being selected.

My family was in the trucking business. My father is happily retired now—but he was a long-time CFIB member, I should mention as well. An example in the transportation industry was that there was a countertariff placed on U.S.-manufactured car-hauling equipment and also some other types of trailers coming in from the U.S. that are manufacturer-based. The argument is that there's no Canadian alternative to those being purchased and, if there is, it's very limited and doesn't have the opportunity to scale up and replace that U.S. component very quickly or in time.

My question is this. Would you agree with me that this only adds to the cost in the trucking industry and transportation industry? When diesel prices are as high as they are and there's economic uncertainty, tariffs for long-haul trucking and even short-haul—this being a primary example in the sense of some of these countertariffs—are not an effective strategy, because all they're doing is driving up costs for Canadians.

[Dan Kelly]

I guess I'll respond with a couple of points.

One, to be sympathetic to the government, it is very challenging. I think Dr. Tombe shared this view as well. It is very hard to get the countertariffs right, and, especially when you have to move fast, we understand that government is going to make a few mistakes.

Where I think the government has been negligent is in addressing issues that industry has raised where there are no alternatives. If a countertariff is going to be effective, it should allow for—perhaps in an area where there are large numbers of domestic options or, at least, other international options—replacement at similar cost to some of the goods that would otherwise have been imported from the United States.

Our tariff remissions process is not working. You shouldn't have to wait a year and a half to have somebody pick up your file to determine whether that trucking part is something that should be exempted from the countertariffs. If we're in a true trade war, we should have a team, using AI, that is able to determine some of these products where there aren't a large number of Canadian alternatives. Then we should immediately eliminate the tariff treatment on those goods if we're going to use this as a policy going forward. That needs to be there. We have suggested that a small business unit be established within Finance to exempt some of these products after a convincing case can be made.

[Eric Duncan, Conservative, Stormont—Dundas—Glengarry, ON]

Certainly improving the service response time would be one thing, and hopefully having something to help small businesses that are under that $1-million threshold would be something the government will take into consideration and fix in order to help them. As you mentioned, you have thousands of members, and I've spoken to many in my community in eastern Ontario about that, so I appreciate your comments on that.

Another thing that I think relates to this is the PBO's assessment of the economic impact of the recent Canada-U.S. trade measures. The parliamentary budget office estimates that the trade measures introduced since early 2025 will reduce the level of Canadian real GDP by 1.4% over five years, and if the tariffs remain permanent, employment is estimated to decline by as much as 185,000 jobs.

There are some significant numbers there. The numbers in one table on the decline in business investment from the economic impact of trade measures worry me a lot. They are 3.4% in year one, and then 4.9%, 2.3%, 2.2% and 2%. As this trade war goes on without a deal and without having certainty, do you want to speak about what this does for business investment?

We're seeing those numbers, but maybe you could humanize it in terms of your members and quantify it a little bit. Everything is frozen right now. People aren't making those investments. They're not expanding their business. They're not growing. They're not buying new equipment, just from the fear of everything that's going on.

[Dan Kelly]

You're 100% right, and we have some pre-existing conditions in Canada that have made this a lot worse. We've had a choking level of economic uncertainty.

Even since the pandemic, it has been hard. Everybody should be celebrating every small business that's managed to last this long after all of the curveballs they've been thrown, but there are significant signs that there is an entrepreneurial drought, as we've been calling it, growing in Canada. We've had multiple quarters of shrinkage in Canada's small business community, with more business exits than business enters. Even in recessionary times, typically there are more businesses starting than ending, and that hasn't been the case for months and months.

We're really worried about this, and as my testimony indicated, it could get a whole lot worse if it continues. I deeply worry about the impact that gutting out some pretty key elements of the Canadian small business community is going to have, and this new round of U.S. tariffs and Canadian retaliatory tariffs that started in August is very much targeted at my members, small and medium-sized companies.

[The Chair, Liberal, Ahmed Hussen]

Thank you.

I will go next to MP Oliphant. You have five minutes.

[Rob Oliphant, Liberal, Don Valley West, ON]

Thank you, Chair, and thank you to both witnesses. The advice and thoughtfulness you both are giving us are very helpful.

To the CFIB, thank you, both for the support of your members and for your constant engagement with the government. It really is helpful. I do miss you now that the boundary has changed and you're no longer in my riding.

[Dan Kelly]

That's right.

[Rob Oliphant, Liberal, Don Valley West, ON]

You're 17 feet outside my riding, but I still care. I care about your members, and I talk to them regularly.

We have the disadvantage here that we're not the finance committee, we're not the industry committee and we're not the trade committee, so I think we will capture much of what you have offered today and pass it on to those areas, because they have more direct ability to engage in them. However, everything both of you have said is quite helpful.

I want to ask a question that's a little more from a foreign affairs standpoint, and both of you can respond to it.

Are you perceiving this as a profound long-term structural change in the North American economy—one that will mean large, medium-sized and small businesses will need to change significantly—or are you perceiving this as a short-term issue with one administration, and if we can do some band-aid activity, we can get through to the next phase and maybe go back to at least a new normal? How are you both perceiving it, maybe one from an academic point of view and one from a practical point of view?

[Trevor Tombe]

Maybe I'll jump in here.

Much depends on what happens legally in the United States on whether or not certain acts can be changed to limit the degree of unilateral presidential discretion on raising tariffs, as currently exists now. That would create a predictability and certainty that, even if we have a change in the administration in the United States, won't exist, because at any point you could change presidents, and therefore they could again unilaterally change the conditions of international trade between them and other countries. I think the uncertainty will be here for many decades to come, so there will be lasting implications.

Second, and perhaps more importantly for Canada, is the way policy has responded, in particular as it is directed towards expanding the capacity of infrastructure and transportation, and ports in particular. Our physical ability to exchange with countries beyond North America will grow as a result of this moment, and that growth will make it cheaper and easier to trade with others. Just changing the physical infrastructure that Canada has will have lasting implications as well, although that will take time to materialize.

[Dan Kelly]

From my end, I don't think my crystal ball is any better than anyone else's. What I can say is that the opportunity for Canada is that this has been a wake-up call. It caused both Canadian businesses and the Government of Canada—provincial governments, as well—to focus on doing what we can to take advantage of opportunities that exist for Canadian companies around the world.

There has been a lot of momentum. As much as I've just countered that there are some businesses that are just not in a position to pivot too dramatically right now—and a lot of that has happened—I will say that we should celebrate the amount that has happened. I am hoping that we get to a new normal. I am not one who predicts that this is going to go away in the United States. Regardless of the administration, we are likely to see some potential tariffs in place for a longer period of time, and we're going to have to get used to it and adjust.

However, we do have more opportunities internationally. We have made some progress interprovincially, finally. I've been doing this for 32 years, and I've seen more momentum on interprovincial trade than at any point in my career. That is all for the good.

I am hoping that if we can get to an improved status and a deal with the United States.... I suspect that the next administration, at minimum, is going to offer a bit more stability than we have seen in the last little while, and that would be welcome. If this has caused us to then take greater advantage of interprovincial trade and other international relationships around the world, Canada could find a pathway to come out stronger.

[Rob Oliphant, Liberal, Don Valley West, ON]

Thank you.

I would just say that I think it's both-and. The reality is that we have an emergency and a situation where we need to protect our businesses, and we need to be building the complete business infrastructure to capitalize in a new era.

Thank you both. We look forward to the ongoing partnership.

[The Chair, Liberal, Ahmed Hussen]

I want to second that. Thank you to both witnesses for their appearances today and for their testimonies.

Colleagues, our next meeting will be on Monday, October 26.

Is it the will of the committee to adjourn the meeting?

[Some hon. members]

Agreed.

[The Chair, Liberal, Ahmed Hussen]

The meeting is adjourned.