NEW YORK (AP) — A trade war between the United States and Canada is making it more difficult and expensive for small businesses in the economically entwined countries to operate, according to business owners caught in the crossfire.
Canada imposed reciprocal tariffs on about $20 billion (CA$27.6 billion) worth of U.S. goods last week after President Donald Trump placed import taxes on Canadian goods worth the same amount. In response to Canada's action, Trump said the U.S. also would ban imports of wine, whiskey, selected motorcycles and the dairy ingredient whey from Canada.
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The tariffs so far involve about 5.5% of the neighboring nations' bilateral trade in goods. Analysts say the overall economic impact therefore will be muted. But small business owners who depend on cross-border sales say a tax of up to 50% on their products and ill will created by the conflict have an outsize effect on them, especially when higher energy costs stemming from the Iran war are eroding their balance sheets.
The owners of four small businesses, two in the U.S. and two in Canada, spoke with The Associated Press about the ways the trade war is affecting their companies.
At Jasper Hill Farm, an artisan cheesemaker in Greensboro, Vermont, co-founder Mateo Kehler said Trump's opening salvo produced an immediate effect: canceled holiday orders from wholesale customers in Canada, whose border is only about 40 miles away.
Cheese wasn't among the products made subject to new U.S. tariffs last month. Kehler suspects his hopes for expanding business in Canada are stalling because residents there resent the way the president and members of his Cabinet treat their country, a longtime 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 needled America’s northern neighbor repeatedly since he returned to the White House. First, it was comments last year about wanting to absorb Canada as the 51st state. After trade negotiations broke down in August, he taunted Prime Minister Mark Carney and signed an executive order to change the name of Lake Ontario to Lake America.
The lost sales and higher prices for materials and equipment that Kehler buys from Canada are tough to swallow when the war with Iran has made fuel for Jasper Hill Farm's trucks and machinery more expensive too, he said. Some of his suppliers and distributors are adding surcharges to cover their costs, he said.
“It’s like death by a thousand cuts, because between the rising cost of energy and the tariffs, the inflationary pressure on the inputs across almost every aspect of our business — from the farming side all the way through to finished goods — is just being ratcheted up,” Kehler said.
Revival Stillworks makes equipment for distilling liquor like vodka, agave and whisky and helps design spaces for producing craft spirits from the company's base on Vancouver Island, less than 20 miles from Washington state's San Juan Island.
Until last month, the equipment could enter the U.S. tariff-free under the United States-Mexico-Canada Agreement, a trade pact Trump negotiated during his first presidency. Now, the company's stills, fermenters and other products incur a 50% tax for crossing the border, co-founder Darcy Lane said. The customs charges are considerable because the equipment costs $250,000 to $2 million, 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,” he said, recalling how a U.S. customer called off a project last year when Trump threatened to put tariffs on some Canadian products.
Clients in the U.S. make up about half of Revival Stillworks' business. With rising oil prices during the war driving up shipping costs, many already were evaluating whether they should move forward with projects that involve imported equipment, Lane said.
He and his partner are looking into other kinds of work. Since they employ engineers, welders and fabricators, their business could service the local marine industry, Lane said.
“Hopefully, cooler heads prevail and everything works out, and we can continue along as business as normal," he said. “But if not, we have to put a contingency plan in place anyway."
Cassandra Sotos is co-owner and CEO of AmpRx, a company in Nashville, Tennessee, that manufactures devices for musicians and recording studios to measure and adjust the voltage moving from a power outlet into a guitar amplifier.
Like Kehler, Sotos thinks the U.S.-Canada trade war is having a chilling effect.
Although the majority of her company's sales are within the U.S., Sotos counts musicians around the world as customers. The new U.S. tariffs do not apply to her bestselling product, a power adapter priced from $400 to $1,400, but demand from Canadian customers has fallen off anyway, she said.
Sotos said she isn't sure if customers are worried about unexpected import charges or if the stumbling block is “just optics with the United States” and how the country is perceived in Canada at the moment.
As a small business, "any piece of the puzzle that gets taken away from us is significant,” Sotos said. “There’s just as many guitar players in Canada as there are in the United States. And I’m currently only able to get to a tiny percentage of them because of all of this.”
She feels like trade policies are hampering AmpRx's growth at a time when fighting in the Middle East has brought unexpected expenses. Shipping costs for imported components are two to three times what they were before the war, Sotos said.
“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.”
A new tariff on Canadian honey that the U.S. started charging in August came as a blow to beekeepers like Peter Awram, CEO of the family-owned Worker Bee Honey Co. in Rosedale, British Columbia. The U.S. was the market for about 60% of Canadian honey export volume, he said.
The reciprocal 50% tariff that Carney's government slapped on American-made honey does nothing to help because an influx from India and China of fake honey diluted with rice syrup has created pricing pressure on both sides of the border, said Awram, who began beekeeping more than 50 years ago.
“Most of what Canada is now tariffing is not American honey,” he said. “It is other countries’ honey carrying American paperwork."
Most Canadian beekeepers will likely try to increase their domestic sales, which could flood the market with honey and further depress prices, Awram said.
“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.”
