As economic storms gather on the horizon, Canada’s nonprofit sector may be facing one of its greatest challenges yet. While businesses brace for the financial fallout of new U.S. tariffs, nonprofits—already stretched thin—are staring down a crisis of skyrocketing demand and shrinking resources. If history has taught us anything, it’s that economic downturns don’t just hurt bottom lines; they unravel the social safety nets that millions rely on. With Canada and the U.S. teetering on the edge of a tariff war, nonprofits could soon find themselves caught in the crossfire. The question isn’t if they will feel the impact—it’s how hard they will be hit.
While challenging times test the resilience of the nonprofits, they also highlight the crucial role they play in our communities. This short article explores how past economic shocks can offer insights into the potential impacts of tariffs on Canadian nonprofits.
The Resilient Nonprofits
Nonprofits have been reliable in delivering social good in times of crises. The sector’s ability to navigate systemic shocks through innovative strategies is well-documented. Recent examples include the COVID-19 pandemic and the subsequent cost-of-living crisis fueled by inflation.
By 2020, nonprofit organizations contributed 8.9% to Canada’s gross domestic product (GDP), employing approximately 788,000 individuals and accounting for 4.5% of all jobs in the country (Statistics Canada, 2021). Despite the significant economic challenges posed by COVID-19, nonprofits performed better than the overall Canadian economy.
The years 2023 and 2024 were critical turning points during the post-pandemic cost-of-living crisis and inflation, prompting projections of severe challenges for nonprofits by 2026 (Ontario Nonprofit Network, 2023). In 2023, 46.1% of nonprofit organizations reported an increase in service demand, yet only 24.3% saw a corresponding rise in their capacity to deliver services (Statistics Canada, 2024). Despite these challenges, the sector’s innovative responses highlighted its essential role in supporting communities during difficult times.
Although the COVID-19 pandemic and subsequent crises underscored the resilience of nonprofits, it is crucial to recognize that the sector has long been “under-resourced and precariously situated.” This condition arises from neoliberal policies that have shifted the responsibility for service delivery from the state to nonprofits (Shields, Joy, & Cheng, 2024). The sector remains in a state of crisis.
The Potential Impact on Nonprofits
The Bank of Canada (2025) recently analyzed the potential effects of tariffs on Canada’s economy, businesses, and households. A 25% tariff would likely slow global trade activity, leading to reduced demand for Canadian exports. Canadian businesses exporting to the U.S. would experience declining revenues and productivity, resulting in layoffs. Households would face reduced purchasing power as domestic demand declines due to rising prices. Additionally, a continuous decrease in business investment would lower GDP growth, while inflation could rise as the economy contracts.
The combination of low GDP and high inflation would pose significant challenges for charities and nonprofits. Indigenous communities and low-income families, who often rely on nonprofit support would be disproportionately affected. For example, Pillar Nonprofit Network connects approximately 178 member nonprofits and charities, 21.9% of which directly serve Indigenous communities and low-income households. These groups are likely to face increased financial pressures, further driving up demand for nonprofit services.
In 2024, a study revealed that 61% of First Nations peoples living off-reserve struggled to meet their weekly food expenses, while 22% could not afford basic necessities (Statistics Canada, January 17, 2025). Similar struggles were observed among Métis (up 1%) and Inuit (up 11%) populations. Additionally, 59% of Canadians in the lowest income bracket struggled to meet daily needs (Statistics Canada, August 15, 2024). A tariff war would likely exacerbate these issues, pushing demand for nonprofit services to unsustainable levels.
On the funding side, we observe that government and corporate funding, as well as individual donations, fluctuate based on economic conditions. The combined effects of low productivity, high inflation, stagnant wages, and declining GDP would reduce revenues for nonprofit funders, increasing operational costs and limiting service delivery. A low GDP growth scenario could result in funding cuts and decreased donations from individuals and corporations, as these entities grapple with declining productivity and purchasing power. This would also hinder nonprofits’ ability to recruit and retain staff and volunteers, further straining their capacity to serve communities.
Recommended Actions to Ensure Readiness
Recently, Ontario Premier Doug Ford announced funding initiatives to help businesses navigate the potential tariff impact. However, it remains unclear whether similar measures will be extended to the nonprofit sector.
Given the resilience and value of nonprofits during times of crisis, Maureen Cassidy, CEO of Pillar Nonprofit Network, argues that there is sufficient evidence to encourage governments to integrate nonprofits as a viable model for delivering social services. Nonetheless, restrictive funding policies remain a significant barrier. A 2024 survey found that 55% of nonprofits and charities struggle to access unrestricted funding (Charity Insights Canada Project, 2024). Overhauling funding policies to provide nonprofits with the flexibility to respond effectively could be vital for ensuring a resilient Canadian economy and nonprofit sector amid a tariff war.
The time for governments to show greater faith in the nonprofit sector is now. Increased funding is needed to revitalize at-risk social programs, enhance nonprofit capacity, and support workforce development, volunteerism, and advocacy efforts. Investing in the nonprofit sector is not just a moral imperative but a strategic move to ensure stability and growth in uncertain times.
References
Bank of Canada. (2025, January 29). Monetary Policy Report.https://www.bankofcanada.ca/publications/mpr/mpr-2025-01-29/in-focus-1/
Charity Insights Canada Project. (2024). 2024 Report on organizational funding and insights.
Imagine Canada. (April 26, 2022). Forced to do more with less: The impact of inflation on charities and nonprofits. Retrieved February 9, 2025, from https://imaginecanada.ca/en/360/forced-to-do-more-with-less-impact-inflation-charities-and-nonprofits.
Ontario Nonprofit Network. (2023). 2023 State of the Sector survey – Policy Report. Ontario Nonprofit Network.
Shields, J., Joy, M., & Cheng, S. M. (2024). The limits of the community nonprofit sector resilience: Evidence from Canadian nonprofit sector surveys during the pandemic. Canadian Journal of Nonprofit and Social Economy Research, 15(1), 1–21.
Statistics Canada. (2021, December 6). Impact of COVID-19 on non-profit organizations in Canada, fourth quarter of 2021. Government of Canada. https://www150.statcan.gc.ca/n1/pub/45-28-0001/2021001/article/00042-eng.htm
Statistics Canada. (2024). Canada and United States: Numbers behind a unique relationship. Statistics Canada. https://www.statcan.gc.ca/o1/en/plus/3250-canada-and-united-states-numbers-unique-relationship
Statistics Canada. (2024). Table 33-10-0803-01: Change in level of demand and overall capacity for non-profit organizations to meet demand for services and products, 2023. Statistics Canada. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3310080301
Statistics Canada. (2024, August 15). Many Canadians report feeling the financial strain of higher prices. Retrieved February 9, 2025, from https://www150.statcan.gc.ca/n1/daily-quotidien/240815/dq240815b-eng.htm
Statistics Canada. (2025, January 17). Rising prices and financial pressures affecting Indigenous people in Canada.Retrieved February 9, 2025, from https://www150.statcan.gc.ca/n1/daily-quotidien/250117/dq250117b-eng.htm
Statistics Canada. (March 20, 2024). Table 33-10-0798-01: Revenues and expenses of non-profit organizations by type of activity. Retrieved February 8, 2025, from https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3310079801
Trading Economics. (2023). United States imports from Canada. Trading Economics. https://tradingeconomics.com/united-states/imports/canada