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Six Quarters of Decline: Canada's Transportation Sector Sees Sustained Business Contraction

Canada's transportation sector crashed to -2.3% net entry rate while the country lost businesses for six straight quarters. Tariffs, red tape, labour shortages converge into crisis.

Sunday, April 26, 2026· By Jason York

Canada's transportation and warehousing sector is in freefall. The net business entry rate plunged to -2.3% in May 2025—the lowest point in the three-year dataset—while construction and manufacturing sectors hover near zero. This isn't a blip. It's a structural collapse that's been accelerating since early 2024, dragging down an entire pillar of Canada's economy. The decline represents a fundamental breakdown in one of the country's most critical industries, one that employs hundreds of thousands of workers and moves billions in trade across the continent. And the numbers suggest it's getting worse, not better.

Net business entry rates for construction, manufacturing, and transportation and warehousing sectors from January 2023 to June 2025 show transportation's steep decline from 0.9% to -2.3% while other sectors stabilize near zero.

The trajectory is unmistakable. Transportation and warehousing held positive entry rates through much of 2023, peaking at 0.9% in May before turning negative in July. By January 2024, the sector hit -0.4%, and the descent never stopped—plummeting through -0.9% in April and June 2024, breaking past -1.2% by July and October, and crashing through -1.9% in March 2025. Construction and manufacturing show their own struggles: construction slipped from 0.3% in early 2023 to -0.3% by January 2025, while manufacturing has oscillated between slight positives and negatives since mid-2023, mostly stuck below 0.2%. But neither sector experienced the transportation industry's dramatic vertical drop. The spread between the three sectors tells the real story—what was once a tight cluster has become a chasm, with transportation and warehousing breaking away into unprecedented negative territory.

The broader business environment confirms this isn't an isolated shock. Net business entrants across all of Canada swung from 3,274 new businesses in January 2021 to -3,488 in January 2025—a staggering reversal. The country added businesses steadily through 2021 and 2022, with occasional monthly dips, but the tide turned decisively in 2024. January 2024 recorded -1,057 net entrants, followed by sustained monthly losses: -1,858 in March, -3,902 in July, -3,328 in October. By early 2025, the hemorrhaging intensified—losses of 2,903 in February, 3,279 in March, and 2,930 in May. More businesses in Canada have closed than opened for six consecutive quarters, confirming what the sectoral data already showed: Canada is in what the Canadian Federation of Independent Business calls an "entrepreneurial drought".

Net business entrants across all of Canada from January 2021 to June 2025, showing a dramatic reversal from 3,274 new businesses monthly to losses exceeding 3,000 per month by early 2025.

The reasons behind the transportation collapse are multiple and mutually reinforcing. Businesses on both sides of the border could delay investments due to sudden uncertainty around trade relations, according to Canada's official tariff response documentation. Canadian business investment declined significantly due to weaker export activity and increased costs of imported investment goods from the United States, the Bank of Canada warned. Tariffs create uncertainty for Canadian businesses, impacting costs, supply chains, and long-term planning, industry analysts at Doane Grant Thornton noted. Trump's 25% tariffs on Canadian products, implemented in early 2025 with various exemptions and reversals, created chaos for cross-border logistics operators who depend on predictable trade flows.

But tariffs are only part of the problem. The combined cost of regulation to businesses from all three levels of government was estimated at $51.5 billion in 2024, with approximately $17.9 billion attributed to red tape, according to government acknowledgment of the CFIB's findings. The average business spent 735 hours (92 days) on regulation in 2024, 256 hours (32 days) of which was spent on red tape, the CFIB's 2025 Red Tape Report found. Transportation companies face additional sector-specific burdens: Workforce shortages and wage pressures continue, especially in rural and northern regions, making recruitment for truck drivers, equipment operators, and supply chain planners a persistent challenge, Job Bank data shows. Labour costs are climbing while revenue contracts—a death spiral for small operators. Despite 2025's projected 8% sector growth, 42,000 supply chain roles remain unfilled nationally, according to Macmillan Supply Chain Group, creating operational bottlenecks that make starting or expanding a business nearly impossible.

The convergence of tariff uncertainty, regulatory burden, labour shortages, and rising costs has created a perfect storm. When more than half of current small business owners tell you they wouldn't recommend starting a business—as the CFIB reports—you're not dealing with a cyclical downturn. You're watching the foundation of an economy crack. The transportation sector's collapse matters because it's the circulatory system of commerce: when logistics fails, everything else slows. Canada lost 35,000 businesses over two years, and the data suggests 2025 won't reverse that trend. The question isn't whether the entrepreneurial drought will end, but how much more damage it'll do before someone fixes the pipes.