Trading pressure is taking a toll, with more than half reporting emotional or mental exhaustion this year.
New report from the Business Development Bank of Canada (BDK) found that Canadian entrepreneurs became more optimistic about the economy in the months following the start of the U.S. trade war.
“They don’t sit back and wait to see what the economy will do.”
Pierre Cléroux, BDC
Confidence among domestic small and medium-sized businesses (SMEs) fell when the US suddenly announced tariffs on Canada and other countries in early 2025. But as these SMEs have become more accustomed to operating in this business climate, they have also become more optimistic about the future, despite ongoing headwinds.
According to the BDC, 45 percent of those surveyed said they felt confident in the third quarter, up from 33 percent in the second quarter. State of Entrepreneurship 2025 Report.
In an interview with BetaKit, BDC Vice President and Chief Economist Pierre Cléroux attributed this growth to the fact that SMBs now have “less uncertainty” about the impact of these tariffs and the steps they have taken to ensure their survival and competitiveness in this “new reality.”
“They're taking action… They're not sitting back and waiting to see what the economy will do,” he added. Cleroux noted that 74 per cent of Canadian entrepreneurs surveyed have taken steps to improve their productivity in the past year in response to economic pressures.
Many have switched suppliers or expanded into new markets, he said, noting that after a north-south mindset for much of the last 30 years, more Canadian small and medium-sized businesses are looking further east or west to diversify their businesses.
The report said nearly one-third also turned to new technologies such as artificial intelligence (AI) to achieve more with less and ensure their profitability, while 20 percent adopted existing solutions.
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But some serious challenges remain, and a majority (55 percent) of the roughly 2,500 business owners surveyed by the BDC remain skeptical that conditions will improve anytime soon.
Looks like all that pressure has paid off. While 86 percent of small and medium-sized business owners say they are in good health, 54 percent also reported experiencing emotional or mental exhaustion in the past year. “That’s a big number,” Cleroux said.
“It’s been a difficult year,” he added. “There is no doubt that these entrepreneurs are under pressure. There is a lot of uncertainty. Things have been changing very quickly since the beginning of this year.”
Because the study is the first of its kind, Cleroux said he's interested to see how that share changes in the coming years.
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But Cléroux also takes some solace in the fact that 92 percent of them would choose to become entrepreneurs again. He says this speaks to the passion, dynamism and resilience of Canadian SME owners in the face of ongoing challenges following an already difficult period that also included a global pandemic and rising inflation.
Cléroux said Canadian SMBs face two major headwinds: cost pressures (thanks to inflation, U.S. tariffs and the weak Canadian dollar) and weak or declining demand.
Twelve percent of SMEs are preparing to radically transform their businesses, the report found. Despite these headwinds, more than half (55 percent) still expect to see moderate to strong growth this year, which is a very good sign given the slowing economy, Cleroux said.
While Canadian SMEs are still investing in growth projects, Cléroux says the level of investment has slowed. He noted that the priority now is to improve (or maintain) profitability, retain customers and maintain competitiveness.
Image provided Freepick. Photo by DC Studios.
