A new report by the Canadian Federation of Independent Business says 49 per cent of automotive businesses in Ontario have paused or cancelled investment because of the trade war against the U.S., and government programs designed to help them will have little impact on the average small business.
"Uncertainty, market volatility, and increased costs are forcing auto business owners to make difficult decisions to keep their doors open," said the report's co-author, Joseph Falzata. "The desire to grow is there, but with such massive revenue losses, businesses are more focused on keeping their doors open than expanding their operations."
According to the report, a potential $2.9-billion in investment will be lost because of American tariffs over the next year.
Nearly two-thirds of businesses have been impacted, and the average operation has suffered a 13 per cent drop in sales.
The Ontario government has introduced programs to help auto businesses survive the trade war. The Ontario Automotive Modernization Program and the Ontario Vehicle Innovation Network were allocated a total of $85-million. However, only one or two per cent of small auto business owners expect to use them.
Only one per cent of small businesses overall expect to take advantage of the new $50-million Ontario Together Trade Fund.
"While these programs were created with good intentions, the reality is that many small business owners have never heard of them or are not eligible," said Falzata. "The Ontario government needs to focus its efforts on not just the major auto manufacturers, but also on the many small businesses that feed into the province's auto eco-system."
The report recommends that the provincial government improve access for small businesses, use some program funds to reduce the Ontario Small Business Tax Rate, or elevate the threshold to access the rate.
It had recommendations for the federal government, including quickly returning money collected through counter-tariffs to impacted businesses, and clear guidance on whether a product is compliant with the Canada-United States-Mexico Agreement.