Ontario should rejig its programs meant to support auto businesses through the impact of tariffs and associated economic uncertainty, as the way they’re currently structured is leaving small businesses in the lurch, an advocacy group says in a new report.
The Canadian Federation of Independent Business released a report Wednesday based on a survey of 187 small-to-medium-sized businesses in the automotive sector, from parts suppliers to repair shops, and found that tariffs are already having an impact.
Their revenue has declined by 13 per cent, on average, and half of them reported that they have paused or cancelled investments due to uncertainty caused by the Canada-U.S. trade war, which could lead to billions in lost revenue or missed investments, the report said.
“It’s impossible for a business owner to really know what’s going on these days,” Joseph Falzata, co-author of the report and policy analyst with CFIB Ontario, said of the whiplash trade policy news.
“I do this as my full-time job, and it’s always difficult for myself. So you can only imagine a business owner who’s working 50, 60 hours a week trying to keep track of things.”
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Their revenue is taking a hit in part because they are paying higher prices and there is confusion about which products are affected by tariffs, as well as due to costs associated with seeking out new supply chains, Falzata said.
Ontario has programs meant to help shore up businesses in the automotive sector, but while appreciated, they’re missing the mark when it comes to supporting smaller businesses, the CFIB report says.
In its spring budget the provincial government said it was putting $85 million into two programs: the Ontario Automobile Modernization Program to help parts suppliers upgrade equipment and the Ontario Vehicle Innovation Network for research and development.
“Though these programs have been created with good intentions, few small businesses plan to use them, and over a third of them are ineligible,” the CFIB report says.
“The programs focus on R&D innovation and large-scale manufacturing, while disregarding the reality that most automotive (small and medium businesses) either cannot afford or are not involved in these processes.”
A new $50-million Ontario Together Trade Fund meant to help businesses develop new markets and find domestic supply chains, requires businesses to show a revenue loss of at least 30 per cent and requires them to put up $200,000 of their own capital, which the report calls “a luxury most (small and medium businesses) cannot afford.”
The government said its programs have already helped hundreds of businesses, with the Ontario Vehicle Innovation Network supporting more than 600 small and medium businesses since its inception in 2019 and the Ontario Automotive Modernization Program has supported 215 projects since 2021.
“In the face of unprecedented global economic uncertainty, our government is protecting and building on the progress we have made to champion small businesses in the auto sector and across the economy,” Jennifer Cunliffe, a spokesperson for Economic Development Minister Vic Fedeli, wrote in a statement.
The best way to help small businesses would be to lower the small business tax rate from 3.2 per cent to two per cent, the CFIB said. The government lowered the rate from 3.5 per cent in 2020.
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