Business Economy · Historical report

Canadian employers flag costs and tariff effects in second-quarter survey

Statistics Canada’s latest business conditions survey found that cost obstacles were widely expected in the months ahead, while the share of businesses reporting optimism remained comparable with recent quarters.

By Grant Sullivan · Source dated May 27, 2026 · Published July 22, 2026

Key takeaways

Cost-related obstacles were expected by 64.3% of employer businesses over the following three months, compared with 58.9% in the prior quarter.
Inflation was the leading expected obstacle at 48.8%, followed by input costs at 28.4%.
Among all businesses, 34.0% expected U.S. tariffs on imports from Canada to negatively affect their operations during the next 12 months.
Businesses reporting they were very or somewhat optimistic about the coming year accounted for 66.8% of respondents.

Operating costs were a prominent near-term concern

The Canadian Survey on Business Conditions found that 64.3% of businesses expected at least one cost-related obstacle over the next three months in the second quarter of 2026. The comparable figure in the first quarter was 58.9%.

Statistics Canada defines cost-related obstacles as inflation, input costs, interest rates and debt costs, insurance, real estate, leasing or property taxes, and transportation costs. Inflation was the most frequently expected obstacle, identified by 48.8% of businesses, while 28.4% expected input costs to be an obstacle.

Accommodation and food services had the largest share of businesses expecting inflation to be an obstacle, followed by retail trade and manufacturing. Input-cost concerns were most common in agriculture, forestry, fishing and hunting, manufacturing, and accommodation and food services.

Businesses reported tariff impacts and pricing responses

U.S. tariffs on imports from Canada were expected to have a negative effect on business over the next 12 months by 34.0% of respondents, including businesses that did not engage in trade. Manufacturing, wholesale trade, and agriculture, forestry, fishing and hunting had the highest shares reporting an expected negative impact.

Over the 12 months before the survey, 28.3% of businesses said they had passed tariff-related cost increases to customers. Another 38.4% reported that they had not passed on such increases.

Looking ahead, 33.8% of businesses reported being very or somewhat likely to pass tariff-related cost increases on to customers during the next 12 months.

Outlook measure remained comparable with recent readings

In the second quarter, 66.8% of businesses were very or somewhat optimistic about their outlook for the next 12 months. Statistics Canada characterized this result as similar to the first-quarter 2026 reading of 72.3% and the fourth-quarter 2025 reading of 65.8%.

For the next three months, 19.4% of businesses expected sales to increase and 16.3% expected sales to decrease. A further 25.2% anticipated raising their selling prices.

The survey was conducted from April 1 to May 6, 2026. Its results apply to employer businesses in Canada, and respondents were asked about expectations for the following three months.