On March 20, the Manitoba provincial 2025 budget was released. A provincial budget is an outline of the expected expenditures and revenues of a region. It often reveals the priorities of a region and how finances will be used to improve these areas of concern.
The 2025 budget includes contingencies in place as a response to potential tariffs from U.S. President Donald Trump on Canadian goods. Even though Trump ordered 25 per cent tariffs on Mexico and Canada on Feb. 1, two days later, he announced a one-month pause on these tariffs.
On March 4, the tariffs took effect once again, and Canada placed retaliatory tariffs on the U.S. in response. Two days later, Trump signed an executive order to temporarily pause tariffs on Canada until April 2.
The introduction of Trump’s tariffs has triggered a trade war involving Canada, Mexico, China and the United States. I am sure this trade war has disrupted trade relationships and created financial uncertainty for many Canadian companies — the most vulnerable of which are small businesses.
Small companies, especially those relying on exports to the U.S., will have a particularly difficult time deciding how to handle additional costs. They have smaller financial margins to work with in the case of sudden increases in exportation costs, so they will feel the blow of this trade war more harshly.
Already some small Manitoba businesses have had delayed shipments and cancelled contracts due to these tariffs. According to the Canadian Federation of Independent Business (CFIB), small businesses in Manitoba are hoping for a stable and predictable global tax landscape from the provincial budget. This is particularly important for businesses with lower revenues, as it enables them to manage risk and develop informed plans for the future. Small businesses can be financially fragile, so having accurate expectations in terms of taxes, regulations and policies lets them avoid unexpected expenses.
The CFIB has also expressed that a majority of its members want to see long-term affordability relief. Rather than just providing temporary assistance amidst the U.S. and Canadian tariffs, many business owners want a provincial budget to address the core factors contributing to affordability issues and establish a consistent and effective budget — one that can counter the potential negative effects of tariff placements and cause minimum damage to the financial health of Manitoban businesses.
The 2025 budget seems to have offered no such relief to small businesses. Despite a request from the CFIB to reduce the retail sales tax on products such as machinery and equipment, the provincial budget does not indicate that this request has been met.
In fact, retail sales tax revenue is projected to increase by $178 million. The increase in retail sales taxes could have a negative impact on consumer numbers. If products or services are more expensive, people may be less likely to buy them, which will affect the businesses’ revenues. Like most businesses, small businesses depend on customers so a reduction in customers can have significant effects on the profits of the businesses.
This disadvantage is heightened by the aspect of competition between small businesses and larger ones. In my view big businesses have more flexible margins and can often handle increases in taxes by shifting the cost to customers, but for small businesses who sell goods that are retail taxed, it may be more difficult to deal with increased prices. It may be more important for small businesses to maintain a competitive price, making it slightly more difficult for them to pass the retail sales tax on to customers.
Budget 2025 claims to show an increase in capital spending which will protect Manitobans from tariffs and stimulate the economy. More capital spending opens doors for more studies into new products and services. Investing in infrastructure and machinery advancement can encourage workforce efficiency and result in economic enhancement. With the threat of American tariffs as well as tariffs from China looming over the heads of Canadian companies, strategies to develop lasting economic growth are vital.
Right now, the relationship between Canada and some of her most important trade partners is uncertain. The Manitoba provincial budget seems to have accounted for these uncertainties, however, I do not believe that the measures detailed in the budget are enough to leave small business owners feeling secure. Small businesses are significant contributors to the Canadian economy, employing approximately 10.3 million individuals, as of 2022. Even in this time of price increases, I urge consumers to continue showing their support for smaller Canadian companies.
