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Economic Viewpoint

Shifting Trade Winds: Risks and Opportunities for SMEs That Export

October 21, 2024
Florence Jean-Jacobs, Principal Economist • Randall Bartlett, Senior Director of Canadian Economics
  • For the third consecutive year, Desjardins Economic Studies has identified a theme for Small Business Week that we believe is top of mind for small and medium-sized enterprises (SMEs) in Canada. We asked members and clients what’s on their minds, and they said the US presidential election and its potential economic implications are of enormous interest. For that reason, we have chosen to do a deep dive into the risks and opportunities facing SMEs in expanding their businesses across international borders in the face of uncertainty.
  • Canada is a trading nation, and SMEs play a big role in supporting that status. About 40% of Canadian goods exports come from SMEs. But more can be done to increase their trade engagement, particularly with countries other than the United States. Indeed, while Canada’s largest businesses are among the most trade-engaged in the OECD, many SMEs lag their advanced economy peers. They also tend to be more likely to trade with US companies as opposed to companies further afield for obvious practical reasons. That’s particularly true if they are owned by someone born in Canada. Hence, immigration will continue to play an important role in supporting Canada’s ongoing trade diversification.
  • It is encouraging that Canadian SMEs have increased their export intensity and propensity over the past 10 years, thanks in part to digitization and to a greater share of services exports. Small tech startups like software developers are often “born global” since they create products and services for a global market. Indeed, SME exports of information and communication technologies, as well as professional, technical and scientific services, surged in the last decade. This trend is expected to accelerate in the years ahead.
  • There are many benefits to SMEs engaging in international trade. SMEs that trade globally tend to be more innovative, productive and profitable. But they are also more likely to be exposed to risks posed by disruptions in global value chains, as occurred during the pandemic. Greater trade diversification is key to mitigating this risk, as is increasing trade across provincial borders. And while the barriers to exporting abroad are many, we believe they can largely be overcome through existing supports aimed at bringing Canadian entrepreneurship to the world.
NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.