This article was originally published on The Conversation, an independent and nonprofit source of news, analysis and commentary from academic experts. Disclosure information is available on the original site.
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Authors: Andrew J. Karesa, Adjunct Professor, Indigenous Business, The King's University Canada; and Douglas A. Stuart, Assistant Teaching Professor of Accounting, Gustavson School of Business, University of Victoria
It’s a tough time for Canadians to start a new business. A looming recession, intensifying trade war with the United States and geopolitical uncertainty are making the economic landscape difficult for many business owners.
While all Canadian entrepreneurs face these risks to a greater or lesser degree, Indigenous entrepreneurs may be most affected.
Indigenous people make up only five per cent of the Canadian population despite being the fastest growing demographic, with 30 per cent growth compared to nine per cent for non-Indigenous people.
Indigenous people start entrepreneurial ventures five times more often than non-Indigenous Canadians. The Canada-U.S. trade war threatens the future of these Indigenous entrepreneurs across Turtle Island (North America), potentially undermining the pursuit of reconciliation.
Indigenous entrepreneurship in Canada
Indigenous-owned businesses contribute approximately $50 billion annually to the Canadian economy from an estimated 50,000 businesses. While this contribution is significant, starting a new venture can be difficult for Indigenous entrepreneurs due to a variety of barriers.
Unlike large businesses that may find workarounds or absorb costs, Indigenous businesses may find it harder to adapt to tariffs or an economic downturn due to poor access to capital, barriers to digital access, infrastructure challenges and a lack of financial slack (a company’s unused financial resources).
These constraints can increase Indigenous people’s dependence on external organizations and may weaken the control Indigenous people and nations have when making decisions about their money and economies. This is something Indigenous people have long been fighting for.
Industries such as oil and gas, forestry and mining are expected to be hit hard by the tariffs — industries that Indigenous communities are becoming increasingly involved in, through employment, revenue sharing and equity participation agreements.
The longer tariffs remain in place, the more Indigenous-owned small- and medium-sized businesses are likely to be disproportionately affected.
Trade agreements
Under the United States-Mexico-Canada Agreement (USMCA), which is set to be reviewed in 2026, there are rules that lessen the effect of trade barriers on Indigenous entrepreneurs dealing in textile and apparel goods.
Article 6.2 allows Indigenous handiwork, such as moccasins, to cross borders duty-free. While this offers some protection against tariffs, only 7.2 per cent of small- and medium-sized Indigenous businesses sell their products to other countries. On average, 12.1 per cent of Canadian small businesses are exporters.
Indigenous businesses come from many industries. Construction, retail trade and professional services make up almost 40 per cent of Indigenous small businesses in Canada. Because of this, Article 6.2 only applies to some Indigenous firms.
These provisions must stay in effect. Raw materials brought in for making products are not included under the USMCA’s Indigenous trade rules, leaving an important gap that must be addressed by the Canadian government.
Firms that pay retaliatory tariffs to the Canadian government on imports may apply for a remissions process. The federal government will provide relief to firms that pay import tariffs on a case-by-case basis. It will check whether there are Canadian alternatives to the U.S.-sourced raw materials. If the answer is yes, it may be harder to get money back for tariffs paid.
Indirect financial impacts could also be damaging. The Canadian economic outlook is not good, with expected job losses, reduced investment, weaker productivity and lower consumer spending. These economic effects are likely to impact Indigenous businesses, too.
There is also growing concern about the U.S. potentially sidestepping USMCA rules. Ratified trade pacts have not stopped Donald Trump’s administration from levying taxes on imports, such as those on steel and aluminium. Some experts argue these measures break World Trade Organization laws, raising concerns about future American actions that could erode the benefits of the USMCA for Indigenous businesses.
Social and cultural impacts
The Canada-U.S. trade war could lead to some Indigenous businesses shutting down. In turn, this could have significant sociocultural impacts on Indigenous entrepreneurs and their communities.
Many Indigenous entrepreneurs start businesses in line with their cultural practices, and as a way to contribute to their community’s economic and overall well-being. If a business fails, the entrepreneur may have to leave their community and work for a non-Indigenous firm. This may impact their ability to maintain cultural connection and support.
Many Indigenous businesses prioritize hiring Indigenous people, and closures can result in fewer culturally affirming work environments for Indigenous workers. For youth, this may present as fewer opportunities for community-based professional and interpersonal knowledge transfer through apprenticeships, mentoring and skill-building.
It can also further embed colonial economic structures in Indigenous communities by forcing them to rely more heavily on external businesses.
In addition, more non-Indigenous people are buying Indigenous products, such as hand-carved sculptures and jewellery. These sales are a way of sharing Indigenous culture more broadly. When Indigenous firms close, their owners lose an important way of sharing cultural knowledge.
Action is needed
The growing trade barriers resulting from Trump’s tariffs raise concerns about the future of Indigenous entrepreneurship as a tool for sovereignty and independence. If the right choices are not made, Canada risks undoing progress made towards reconciliation.
The Canadian Council for Indigenous Business has proposed steps to fix the unequal effects of the tariffs. These include more infrastructure investment in Indigenous communities and greater access to funding for Indigenous businesses. It also encourages Canadians to prioritize buying Indigenous products and services.
Removing trade barriers within Canada may also help grow local markets by making it easier for Canadians to trade and do business with one other.
The business community as a whole faces uncertainty and harm from ongoing geopolitical and trade risks. Weakened Canadian companies are easier targets for hostile takeovers by foreign corporations — a concern that recently prompted Ottawa to change the Investment Canada Act to block predatory investment behaviour.
Encouragingly, Gary Anandasangaree, the minister of Crown-Indigenous relations, recently pledged government programs and support to Indigenous businesses affected by the tariffs. However, some Indigenous leaders feel they are not receiving a seat at the table in negotiating a “Team Canada” response to trade challenges.
Indigenous voices need to be heard and considered in economic decision-making and policy development. Indigenous people and communities are up against unequal and harmful effects that are not only economic, but also social and cultural. Public policymakers, institutions and activists would do well to remember this.
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The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.
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This article is republished from The Conversation under a Creative Commons license. Disclosure information is available on the original site. Read the original article: https://theconversation.com/trumps-tariffs-threaten-indigenous-businesses-in-canada-the-government-must-take-action-251878
Andrew J. Karesa, Adjunct Professor, Indigenous Business, The King's University Canada; and Douglas A. Stuart, Assistant Teaching Professor of Accounting, Gustavson School of Business, University of Victoria, The Conversation
