64% of Canadian Businesses Are Passing Tariff Costs to Consumers as Trade Confidence Falls Behind U.S.: New Survey

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Tariffs rarely stay at the border. By the time imported products and materials reach Canadian stores, factories and households, the additional costs can already be reflected in prices.

New research released by Livingston International on October 29, 2026, reveals that 64% of Canadian businesses polled are passing at least some tariff-related expenses to their customers. Meanwhile, 25% of Canadian respondents lack confidence in the stability of North American trade over the next five years, compared with just 8% of their American counterparts.

The findings expose a growing challenge for Canada’s economy. Businesses are reconsidering suppliers, exploring overseas markets and adjusting prices while uncertainty surrounds their most important trading relationships. For Canadian consumers, the consequences could become increasingly visible in everyday purchases.

Nearly Two-Thirds of Canadian Businesses Are Passing Along Tariff Costs

Livingston International’s 2026 Trade Dynamics Report identifies a significant shift in how businesses are managing rising trade expenses. According to the research, 64% of Canadian businesses polled are passing some or all of their tariff-related costs to customers. This does not mean prices have increased by 64%, or that businesses are transferring exactly that percentage of each tariff. Instead, the figure represents the proportion of respondents that have adopted some degree of cost pass-through. The distinction matters because businesses face different pressures depending on what they import, manufacture or sell.

For example, a retailer importing household products may raise prices when its next shipment becomes more expensive, while a manufacturer might adjust prices only on products containing tariff-affected components. Other businesses may reduce discounts or renegotiate contracts instead of introducing immediate increases. These decisions can gradually distribute additional costs throughout the economy. For Canadian consumers, the result may be a higher checkout total without any obvious indication that international trade policy contributed to the change.

Canadian Businesses Are Significantly Less Confident Than U.S. Firms

Confidence in North American trade stability looks noticeably different on opposite sides of the border. Livingston’s research found that 25% of Canadian businesses polled expressed a lack of confidence in the trading environment over the next five years, compared with only 8% of American respondents. That represents a 17-percentage-point difference in pessimism. Importantly, the figures measure confidence between the two groups at a particular point in time, rather than demonstrating that Canadian confidence has fallen by 17 percentage points over a previous period.

The difference has practical implications for businesses making long-term decisions. A Canadian manufacturer considering an expensive equipment purchase must assess whether cross-border demand, tariffs and regulatory requirements will remain manageable. An exporter planning to expand into the United States faces similar uncertainty about future access and costs. Although American companies are also confronting trade disruptions, the results suggest Canadian businesses are less comfortable with the outlook. That uncertainty can encourage firms to delay commitments, preserve cash and reconsider their dependence on existing trading relationships.

Some Businesses Are Absorbing Costs Rather Than Raising Prices

Not every Canadian business is responding to tariffs by charging customers more. Livingston’s findings indicate that 20% of respondents are absorbing the entire cost of tariffs and related trade expenses. Another 14% reported being minimally affected or unaffected by changes in trade policy. These differences illustrate how unevenly trade disruptions affect companies. Businesses with stronger profit margins may have more flexibility to absorb temporary increases, while those facing intense competition might be reluctant to raise prices for fear of losing customers.

Separate research from the Canadian Federation of Independent Business provides additional context. In a poll of 2,294 independent business owners conducted between August 28 and September 8, 2026, 42% expected to absorb most new tariff costs, while 39% expected to pass through most of them. Those results measure different responses from a different business population, so they should not be compared directly with Livingston’s figures. Together, however, they reveal a difficult balancing act: businesses must protect their financial viability without pushing prices beyond what customers are willing to pay.

American Businesses Are Passing Along Similar Costs

Canadian companies are not alone in transferring tariff expenses to customers. The U.S. portion of Livingston’s research found that 62% of American businesses polled were passing some or all of their tariff costs to consumers, compared with 64% in Canada. Another 17% of U.S. respondents reported absorbing all the costs. Despite the substantially different confidence levels between the two countries, their pricing responses appear remarkably similar. Businesses on both sides of the border face pressure to maintain profitability while adjusting to changes in trade policy.

The American findings also reveal that confidence does not necessarily translate into business certainty. Although 92% of U.S. respondents expressed confidence in North American trade stability, 77% said they would pause investment in North American supply chains until conditions became more predictable. This apparent contradiction demonstrates how companies can remain optimistic about the long-term trading environment while hesitating to commit money immediately. For Canadian suppliers serving American customers, those postponed decisions could affect future contracts, equipment orders and expansion opportunities, even when existing business relationships remain intact.

Consumers May See Additional Price Increases Over Time

Tariff-related price increases do not necessarily arrive all at once. Some businesses purchase inventory months before selling it, while manufacturers often negotiate supply contracts that remain in place for extended periods. This can delay the moment when additional expenses reach customers. The Bank of Canada’s October 28, 2026, Monetary Policy Report warned that businesses expect to pass through a greater share of higher input costs over the next 12 months. The central bank also identified tariffs, expensive imported materials and energy-related pressures as contributors to rising business expenses.

Consider a Canadian furniture retailer selling inventory purchased before a tariff increase. Existing stock might initially retain its original price, but replacement shipments could cost considerably more. The retailer must then decide whether to increase prices, accept smaller margins or change suppliers. Similar calculations can occur in electronics, building materials and manufactured goods. The Bank of Canada cautions that the timing and extent of cost pass-through remain uncertain and depend partly on consumer demand. Consequently, businesses reporting higher costs today do not automatically imply an immediate or equally large increase in household expenses.

Tariffs Can Raise Prices Even When Finished Products Are Not Taxed

One of the less visible consequences of tariffs is how additional expenses spread between businesses before a product reaches consumers. An October 2026 Bank of Canada working paper examined how retaliatory tariffs affect consumption prices through domestic production networks. Using Canadian import records and economic input-output data, researchers estimated that approximately two-thirds of the resulting price response came indirectly through higher costs for intermediate materials and components. This was a modelled economic effect, not a measurement of how many companies raised their prices.

The implications extend well beyond products directly affected by tariffs. A Canadian manufacturer purchasing more expensive imported machinery, for example, may eventually incorporate those costs into the prices charged to retailers or other manufacturers. Those customers may face further pricing decisions of their own. The research helps explain why tariff costs can affect domestic supply chains even when the final product is assembled in Canada. It also highlights why businesses cannot always eliminate price pressures simply by purchasing Canadian-made products, particularly when domestic manufacturers depend on imported equipment and materials.

Nine in Ten Canadian Importers Are Looking for Alternative Suppliers

Canadian businesses are increasingly reconsidering where their products and materials originate. Livingston’s research found that approximately 90% of Canadian importers were exploring alternative sources of supply. That finding is especially significant because established supplier relationships can involve years of negotiations, quality testing and logistical coordination. Reconsidering those arrangements suggests businesses are taking the possibility of continued trade disruption seriously. However, searching for alternatives does not necessarily mean companies have already moved their purchasing operations or reduced their costs.

The Bank of Canada’s third-quarter Business Outlook Survey supports the broader trend. Companies interviewed by the central bank described changing suppliers, sourcing materials from different jurisdictions and seeking efficiency improvements to reduce their exposure to trade restrictions. Such adjustments can be complicated. A manufacturer considering an overseas component supplier must assess product quality, transportation expenses, delivery times and regulatory requirements. A lower purchase price may not produce savings once shipping and administrative costs are included. Consequently, supplier diversification may initially be more about protecting operations against future disruptions than securing immediate price reductions for consumers.

Canadian Exporters Are Pursuing Markets Beyond the United States

Diversification is also becoming increasingly important for Canadian businesses selling products internationally. Livingston’s research indicates that 85% of Canadian exporters surveyed were looking at alternative markets. Asia emerged as a particularly attractive option, with 82% of respondents identifying countries in that region as potential export destinations. The European Union and United Kingdom were cited by 58%, while 50% identified Central and South America. These percentages represent overlapping market preferences rather than exclusive choices, indicating that companies may be evaluating several regions simultaneously.

Recent trade data provides evidence that Canada’s international sales patterns are already changing. Statistics Canada reported on October 28 that merchandise exports to countries outside the United States increased 19.4% during the first half of 2026 compared with the second half of 2025. Exports to the United States rose 11.6% over the same periods. Higher shipments of precious metals and energy products helped drive the non-U.S. increase. Although these figures do not prove that the companies identified in Livingston’s research caused the shift, they demonstrate that opportunities outside the American market are becoming more economically significant.

Bringing Manufacturing Back to North America Is Not a Simple Solution

Moving production closer to home might appear to be an obvious response to tariffs, but Canadian businesses seem less enthusiastic about the idea than American companies. Livingston’s research found that 68% of Canadian businesses were interested in moving production currently located outside North America back to the continent, compared with 84% of U.S. businesses. The difference suggests that Canadian firms are evaluating their options carefully rather than assuming regional production will always be more affordable or secure. Relocating manufacturing can require substantial investments in equipment, workers, facilities and supplier relationships.

For many companies, the challenge involves balancing predictable costs against the risk of future disruptions. A business that relies on specialized components manufactured overseas cannot necessarily replace those suppliers with Canadian or American alternatives at comparable prices. The Bank of Canada has also reported that trade uncertainty is affecting some companies’ investment plans, particularly in tariff-exposed industries. Meanwhile, Livingston found that although most Canadian respondents use the North American trade agreement, only about one-quarter viewed its existence as a reason to feel confident about the trading environment. Greater regional production may offer advantages, but businesses still need dependable rules before making expensive long-term commitments.

Customs Compliance Is Creating Another Financial Burden

Tariffs are not the only trade-related expense confronting Canadian businesses. Companies must also navigate increasingly complicated customs requirements, documentation and regulatory changes. Livingston found that 63% of Canadian respondents, compared with 76% of American respondents, described themselves as only somewhat prepared or poorly prepared for policy changes and struggled to verify their customs compliance. Additionally, between 71% and 73% of Canadian respondents reported difficulties finding qualified expertise, keeping pace with changing trade rules or using technology to automate compliance processes.

The administrative burden can become substantial even when companies qualify for some tariff relief. Canada’s Department of Finance requires businesses seeking exceptional tariff remission to provide detailed information about affected imports, supply alternatives and financial impacts. Depending on the request, companies may need supporting invoices, supplier correspondence and manufacturing cost breakdowns. These requirements help determine eligibility for relief, but preparing the documentation also consumes resources. Businesses may need specialized employees, external advisers or new software systems to manage their obligations. Such expenses can further strain margins, adding to the financial pressures already influencing pricing decisions. For smaller importers with limited administrative capacity, the challenge may be particularly difficult.

Broader Canadian Data Shows Why the 64% Figure Needs Context

The headline finding is significant, but it should not be mistaken for a definitive measurement of every business operating in Canada. Statistics Canada’s third-quarter 2026 Canadian Survey on Business Conditions found that 27.4% of businesses nationwide had passed tariff-related cost increases to customers over the preceding 12 months. Another 30.4% considered themselves somewhat or very likely to pass along such increases over the coming year. Unlike Livingston’s research, the Statistics Canada results include businesses regardless of whether they participate in international trade. The federal survey was conducted from July 2 to August 6, before the latest round of tariff changes.

The two sets of findings therefore cannot establish that the nationwide pass-through rate suddenly increased from 27.4% to 64%. Livingston examined companies across 12 industries in Canada and the United States between August 20 and September 9, with a focus on businesses engaged in international trade. Nevertheless, both sources indicate that tariff expenses are influencing pricing decisions. The Bank of Canada expects additional cost pass-through over the coming year, although the timing and magnitude remain uncertain. For Canadian households, the larger concern is that trade disruptions could continue influencing prices long after businesses begin adjusting their supply chains and governments work toward more predictable trading arrangements.

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