Canadian businesses stare down barrel of trade war ‘double hit’

WINDSOR, Ontario — After 142 years in the business of milling and packaging rice and rice flour, Dainty Foods was on a roll.

A surge in demand for precooked and flavored rice made for microwaving had suddenly lifted the fortunes of Canada’s only rice mill.

The company was modernizing its factory in Windsor, Ontario, and had plans to build a new plant across the border in Detroit to meet demand from U.S. customers.

Now all of that has been upended, and the company’s very existence is in question.

Dainty Foods’ dire outlook reflects a broader fallout from the trade war that has erupted between Canada and the United States. President Donald Trump’s on-again, off-again tariff measures and Canada’s retaliatory strikes are inflicting deep wounds on Canadian small- and medium-size businesses, which face escalating costs to move goods back and forth across the border.

Dainty Foods must pay 25% more to import rice from the United States and faces the prospect of paying higher costs to export products to the U.S. if Trump follows through on more tariff threats.

“We are potentially staring down a double hit, which no company can sustain,” said James Maitland, Dainty’s CEO. “We kind of chuckled when we heard President Trump say he’s doing this so that people are forced to build in the U.S. Well, we were going to do that. But you’ve crippled us financially.”

After rushing about eight weeks’ worth of rice pouches across the border before Trump imposed a 25% tariff this month, Dainty briefly suspended sending goods to American grocery chains, which account for 80% of its sales. Given Trump’s capriciousness, Maitland said, he has no way to make plans with any confidence. If U.S. tariffs are reimposed for any length of time, he added, “this company doesn’t become viable.”

Often operating with slim profit margins and thin financial cushions, smaller companies across Canada like Dainty, which has about 120 workers, are struggling to navigate the back-and-forth between the two countries over tariffs.

Many have been hit especially hard by Canada’s tariffs on U.S. goods. Of the roughly 100,000 small- and medium-size companies that are part of the Canadian Federation of Independent Businesses, nearly half import from the United States, according to Dan Kelly, the group’s president, who said that just the “uncertainty and economic impacts of the tariffs” has been damaging.

The Trump administration is expected to hit Canada with another round of tariffs April 2. The president pulled back on his more sweeping 25% tariff on Canadian goods but is still imposing levies on a significant number of exports, including steel and aluminum.

After decades of trading across an open border, smaller businesses also lack the expertise to decipher the complexities of a tariff system, said Trevor Tombe, a trade economist at the University of Calgary in Alberta.

“Walmart is going to figure it out,” he said. “They have people or they can hire people.” Small businesses “don’t have that option.”

To date, Dainty has spent about 25,000 Canadian dollars (about $17,300) on trade consultants and lawyers.

But that level of spending is impossible for Jon and Liz Chan, a husband-and-wife team that owns Wonder Pens, a stationery shop in Toronto, and, like Dainty, is feeling squeezed by both governments.

While Wonder Pens mostly relies on Canadian customers, Jon Chan said he worried that U.S. shoppers who buy from them online would stop if more tariffs were introduced and the cost of their goods rose. Canadian tariffs have also meant a higher price for envelopes and other items the shop imports from the United States.

Chan said he was also feeling the pain of the declining value of the Canadian dollar, which has been another casualty of the trade battle, resulting in higher prices on some products from overseas.

“We’re just sort of trying get by, pay our bills and keep our staff employed,” Chan said of the shop, which opened 12 years ago and has two full-time and five part-time employees in addition to him and his wife. “All of this uncertainty is stressful.”

Just down the road from a major car factory in Windsor is a discreetly marked storefront that Ron Sim, a cinematographer, has turned into an optical design and test center. It focuses on making kits that convert vintage still-camera lenses for use on digital motion picture cameras.

Sim has moved the production of precisely machined metal parts he relies on twice as a result of Trump’s fondness for tariffs.

When Trump imposed tariffs on China during his first administration, Sim shifted production to Thailand.

Then, before last year’s presidential election, Sim said he thought to himself: “This is going to get worse.” So, to try to protect sales to the United States, the source of three-quarters of his business, he brought his manufacturing closer to home and opened a small factory in Harrow, a farm town south of Windsor.

Now, it seems, that move may not save him from U.S. tariffs.

“I never thought that he’d do this to Canada,” Sim said after the 25% tariffs were briefly in place. “So that caught me off guard, especially after spending millions in machinery and bringing manufacturing to Windsor.”

It is unclear how his customers in the United States — which include a large photographic retailer in New York, several motion picture equipment rental and optical houses, and online shoppers — will react to whatever tariffs return April 2, Sim said. Vintage lens conversions compete in price with increasingly low-cost and high-quality new lenses from China.

“I feel like I’m walking this tightrope,” Sim said. “Right now I’m just standing still, maintaining my balance and seeing where everything is going for as long as I can.”

Across the city, the microwave packet operation at Dainty Foods, which replaced an aging line that made canned rice, is housed in a renovated, gleaming space. But it is also half-empty.

The workers there manually box up finished pouches bearing the names of U.S. retailers, including Aldi, Walmart and Whole Foods. As part of an expansion and modernization, Dainty had purchased robots and was going to add a second production line.

But Maitland said the company was unsure if it would move forward with its plans, given that there is no clarity over what will happen with existing tariffs or new ones that may be coming.

“Nobody has a crystal ball,” Maitland said. “Nobody knows if this is going to be a few weeks, nobody knows if it’s a few months or if this is the new life. There’s no clear path.”

This article originally appeared in The New York Times.

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