The Impact of a U.S.-Canada Tariff Trade War on Canada’s Non-Profit Sector

The newly imposed/threatened 25% U.S. tariff on Canadian goods— except for energy resources, which will face a 10% tariff— has triggered a retaliatory response from Canada, setting off a cycle of economic uncertainty.  While much of the discourse has focused on direct economic consequences for businesses, the Canadian non-profit sector faces equally significant, albeit less visible, repercussions.  By examining the potential impact on Canadian corporations, we can draw conclusions about the challenges the non-profit sector will face, thereby helping us better understand its vulnerabilities and potential responses.  

We analyzed the potential impact on the non-profit sector using Beata Caranci’s (SVP & Chief Economist, TD Bank Group) assessment of Canada’s economic outlook for businesses[1], projecting the related effects on non-profits and proposing responses.

Economic Contraction and Rising Demand for Non-Profit Services

Trade War Impact:

-      The report suggests that if these tariffs last 5–6 months, Canada will enter a recession, with the unemployment rate exceeding 7%.

-      Inflation will rise, particularly in the cost of vehicles and goods, due to increased production and import costs.

-      The Canadian dollar is expected to depreciate, reducing purchasing power.

Non-Profit Sector Implications and Response:

-      Economic downturns historically lead to increased demand for social services, including food banks, shelters, and employment assistance.

-      Rising inflation and a weaker dollar mean that essential supplies for non-profits—such as food, clothing, and medical supplies—will become more expensive.

-      A higher unemployment rate will push more Canadians toward relying on non-profit organizations for support.

-      Similar to how businesses must navigate a changing economic landscape, non-profits will have to stretch their resources further while addressing a growing number of clients in need.

Reduced Funding and Financial Uncertainty

Trade War Impact:

-      The federal and provincial governments are considering financial supports to mitigate economic hardships, but these come at the cost of increasing fiscal deficits.

-      If the trade war persists, governments will face budget constraints, potentially reducing grants and funding to non-profits.

-      The private sector—often a major donor to non-profits—will experience financial strain, leading to fewer corporate sponsorships and philanthropic contributions.

Non-Profit Sector Implications and Response:

-      Charitable giving may decline as individuals and businesses prioritize their financial stability over donations.

-      Government funding cuts could force non-profits to scale back operations, reduce staff, or shut down programs.

-      Fundraising efforts may need to be more aggressive, as competition for limited donor dollars intensifies.

-      Just as Canadian businesses must rethink financial strategies in response to tariffs, non-profits will need to diversify funding sources and explore new revenue streams to remain sustainable.

Higher Operational Costs and Supply Chain Disruptions

Trade War Impact:

-      Tariffs will increase the cost of imported goods, making essential materials more expensive for Canadian organizations.

-      The uncertainty surrounding supply chains (especially with U.S. suppliers) may disrupt access to critical products and services.

-      Canadian businesses will need to find alternative suppliers, potentially at higher costs.

Non-Profit Sector Implications and Response:

-      Many non-profits rely on supplies from the U.S. (e.g., medical equipment, food, educational materials). Higher costs could force budget cuts elsewhere.

-      If supply chain disruptions worsen, non-profits may struggle to procure essential goods needed for service delivery.

-      Organizations that depend on cross-border partnerships may need to reconsider logistics and supplier relationships.

-      Businesses will look for alternative suppliers, while non-profits may need to shift procurement strategies, renegotiate supplier contracts, and find local alternatives.

Government Intervention and Policy Changes

Trade War Impact:

-      The Canadian government is expected to introduce financial supports to cushion the economic blow, similar to pandemic-era policies like wage subsidies.

-      Provinces may implement targeted policies, such as restricting U.S. firms from bidding on provincial procurement contracts.

-      Retaliatory tariffs will generate revenue for the government, which could be used to fund relief efforts.

Non-Profit Sector Implications and Response:

-      If financial supports are extended to non-profits, organizations may receive temporary relief, particularly for staffing costs.

-      Non-profits engaged in advocacy may find opportunities to push for new policies that protect their funding streams.

-      Some organizations may benefit from government contracts if policies favor domestic suppliers and service providers.

-      Just as businesses will adjust their strategies based on government intervention, non-profits must monitor policy changes and seek opportunities for support, funding, and advocacy.

Key Takeaways for Non-Profits

The U.S.-Canada tariff war is more than just an economic and political issue—it will have a major impact on Canada’s non-profit sector. Rising demand for services, financial instability, higher operating costs, and shifting government policies will all shape the sector’s future.

To manage these challenges, non-profits should:

• Diversify Funding: Seek new revenue sources through grants, corporate partnerships, and creative fundraising.

• Advocate for Support: Work with policymakers to ensure non-profits are included in financial relief efforts.

• Adjust Procurement: Use local suppliers to reduce supply chain risks and control costs.

• Engage the Community: Rely more on volunteers and grassroots fundraising to offset potential funding gaps.

Like businesses, non-profits must stay flexible in uncertain times. Those that adapt quickly will be best positioned to continue serving their communities.

[1] ‘Trump slaps 25% tariff on all products from Canada and Mexico, 10% on China’ – https://economics.td.com/ca-trump-tariffs-2025

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