The imposition of tariffs of over 25% on a wide range of Canadian products exported to the U.S., although postponed for 30 days, remains a tangible threat to the Canadian economy. What impact could this have on the philanthropic sector? How can organizations protect themselves against its negative effects?
The Impact of Tariffs on the Canadian Economy
Economists had anticipated 2% growth for the Canadian economy in 2025. However, the imposition of tariffs could lead to a recession, with an estimated decline of 2.5%, or even as much as 6% in the event of an escalating trade war between Canada and the United States. Such a situation could seriously disrupt the country’s economic stability (source: Statistical analysis of the impact of U.S. tariffs on Quebec economy | BCF Business Law).
Compared with past recessions, such as 1981-1982, when the economy shrank by 5% in terms of output and jobs, a trade war could have even more serious repercussions (source: Slowdowns during periods of economic growth). The 2008-2009 recession led to a 13.2% drop in philanthropic contributions, as Forbes magazine points out (How To Strategically Engage In Philanthropy During Crisis).
Consequences for the Philanthropic Sector
Philanthropic organizations, already fragile in the face of funding cuts, could find themselves facing a significant reduction in income due to falling private contributions. In times of recession, companies, individuals and even private foundations, whose revenues are impacted, are likely to reduce their donations. This could be particularly worrying for organizations that rely on voluntary contributions.
The impact would be particularly felt in regions where the economic sectors most affected by these tariffs are present. For example, the automotive industry in southern Ontario or the manufacturing regions of Quebec (Saguenay-Lac-St-Jean, Chaudière-Appalaches and Central Quebec) could face job losses, reducing people’s ability to support philanthropic causes.
How Can Philanthropic Organizations Prepare for an Economic Crisis?
In the face of this economic uncertainty, it’s crucial for philanthropic organizations to take proactive steps. Here are some key strategies to help you prepare:
- Communicate with your partners and donors: It’s important to inform your current donors of the impact of tariffs and the trade war on your revenues, but also on the services your customers need.
- Diversify your sources of funding: If individual donations are declining, it may be worthwhile to make greater use of private foundations, companies and wealthy individuals, who will not be directly affected by the crisis.
- Capitalize on appeals for solidarity: Donors are often more generous when asked to support a cause in times of crisis. Clearly explain the urgency of the situation and how their contributions can have a direct impact.
Economic Uncertainty and Its Impact on Giving
Uncertainty linked to the trade war and fluctuating tariffs is likely to disrupt the economy for several years. In times of recession, the impact on philanthropic contributions is often immediate. Individuals and companies affected by the crisis reduce their donations. However, organizations can benefit from a heightened awareness among more affluent donors, ready to compensate for the drop in contributions from others.
Past recessions, such as 2008, have shown that contributions can fall. However, they can also rebound as soon as a solution appears on the horizon. In the meantime, it is imperative that organizations communicate transparently about their needs and the direct impact of the crisis on their activities.
A Period of Uncertainty but also of Solidarity
It is to be hoped that this conflict can be resolved through negotiation, but it is undeniable that we will be entering a period of uncertainty and economic instability. Philanthropic organizations must start preparing for this eventuality now, by putting in place communication and funding strategies adapted to the upcoming crisis.
Lessons learned from past recessions show that, in difficult times, donors are often all the more generous when we appeal to their solidarity. In this dynamic, every action counts in mitigating the negative effects of this impending economic crisis.
