The Talent Gap Canada Can’t Afford to Ignore: Underutilized Newcomers and Strained SMEs

Immigrant entrepreneurs make up 21.5% of Canada’s private-sector businesses (external link) , generating $218 billion in revenue and employing more than 800,000 people. Research shows immigrant-led small and medium-sized enterprises (SMEs) are more likely to export (external link)  than those led by Canadian-born entrepreneurs, creating strong multiplier effects in local economies and expanding Canada’s reach into global markets. But this global orientation also leaves them more exposed to external impacts, and recent U.S. tariffs have increased costs and disrupted supply chains, creating new challenges (external link)  for the entrepreneurs that drive much of Canada’s economic growth.

The Diversity Institute (DI) was a partner of the 8th Metropolis Identities Conference in Saskatoon, a national forum examining how issues of identity, diversity, racism, discrimination and prejudice, as well as social cohesion and migration, are reshaping Canada. The Diversity Institute researchers presented on several of their projects supported by the Future Skills Centre and its work as a research lead of Bridging Divides, a program dedicated to building a new understanding of the challenges and opportunities that migrant integration poses for Canada (and all countries) locally and across borders. They shared new data about the economic impact of tariffs and trade disruptions on the businesses led by Canadian immigrants. 

Canada can no longer afford to exclude or underutilize its immigrant talent and entrepreneurs. In Canada, newcomers are two to three times more likely than Canadian-born workers to hold a bachelor’s, master’s, or PhD (external link) , yet their employment outcomes do not reflect this advantage, with an 11.1% unemployment rate (external link)  compared with 5.6% for those born in Canada. New government efforts to address skills gap and labour force shortages aim to speed up the integration of internationally trained professionals and improve credential recognition, but significant gaps remain. Canada continues to lag in economic integration, with many immigrants earning well below the median income (external link)  for their field, a stark contrast to outcomes in peer countries like Australia. Despite their skills, systemic barriers contribute to higher unemployment and underemployment, pushing some into entrepreneurship when traditional job opportunities remain limited. The good news is that Canada, and some provinces, have introduced (external link)  immigration measures to make the path to permanent residence simpler for internationally trained high skilled professionals. 

However, turning to trade barriers, Canada’s heavy reliance on the U.S. has left small firms particularly vulnerable when the U.S. introduced a series of steep tariffs in 2025. Beginning with a 25% tariff on key Canadian goods and escalating to 35–50% on others, the measures triggered immediate disruptions (external link) : higher prices, slower customs processing and strained supply chains for SMEs tightly integrated with U.S. markets. While Canada responded (external link)  with its own countermeasures, the overall effect exposed how even short-term trade frictions can have a ripple effect through the economy. 

One of the presentations on DI’s research at the Metropolis Conference explored the impact was most pronounced in sectors where immigrants make up a large share of business owners (external link) , over half of whom are in restaurants, grocery and trucking, many of whom operate micro-enterprises with limited buffers against sudden cost increases. For these firms, tariff-driven input spikes or border delays can threaten viability overnight. Sustained tariff escalation could reduce Canada’s GDP by 2.6%, yet immigrant entrepreneurs may also be best positioned to adapt by drawing on international networks and alternative markets. 

Again, action by the federal government through a rapid rollout of support (external link)  and aimed at stabilizing the economy as tariffs escalated, may buffer the impact for some companies. However, these measures tend to be designed for large firms with finance teams and compliance officers who can navigate complex systems, leaving many immigrant-owned SMEs, often small and resource-strained, without meaningful access. A red tape reduction review (external link)  by the federal government recently initiated may address the barriers faced by immigrant and other diverse SMEs to accessing government supports. If Canada wants a more competitive, resilient and diversified economy, its policies and programs should be inclusive and accessible to  immigrant entrepreneurs who are already driving job growth, innovation and global market reach. 

The Diversity Institute’s research points to clear priorities for strengthening Canada’s economic resilience, beginning with an SME-first trade strategy supported by reduced interprovincial barriers and stronger supplier-diversity commitments. Immigrant entrepreneurs require comprehensive, wraparound support to fully leverage their global networks and economic potential, including expanded export training, improved access to capital, mentorship and digital and AI-enabled tools. As economic diversification becomes increasingly important, it is also important to recognize that women entrepreneurs are emerging as key contributors (external link) , outpacing men in exports to major non-U.S. markets such as the U.K., India, Brazil and China. Canada already has globally minded entrepreneurs; prosperity now depends on creating the conditions that allow them to succeed.

For more than a year, the Diversity Institute, which has been evaluating and researching Canada’s lagging AI adoption rates and providing research, policy recommendations and training to Canadian businesses, academics, industry associations and policymakers on how to catch up to other OECD countries in its AI and emerging technology adoption rates. One of its latest reports, Bridging the AI Gap in SMEs in Canada, was featured at Metropolis Conference. The report examines the widening divide between AI innovation and adoption, and calls for practical tools, ecosystem support and stronger guidance to help small firms use AI effectively and safely. Additionally, insights from the Technology Enabled Innovations in Language Learning Programs report, which reviews Canada’s language training systems and outlines recommendations to improve the integration and evaluation of technology in newcomer language learning was also presented. The report found that the use of multimedia in language learning deepens knowledge processing, facilitates retention, and promotes motivation. The DI’s report  on improving integration for internationally educated health professionals (IEHPs), drawing on national and international evidence to highlight barriers to integration and best practices for enabling IEHPs to contribute fully to Canada’s healthcare workforce, was of keen interest at the conference as health organizations, provincial and federal policymakers start to implement new immigration and inter-provincial trade agreements to fast-track IEHPs into the workforce. 

The Diversity Institute’s multi-year partnership with Metropolis is just one pillar of its broader work in entrepreneurship and inclusive economic immigration innovations, the Diversity Institute also leadsInclusive Innovation and Entrepreneurship Network (IIE-Net) (external link) , a global partnership advancing evidence-based strategies to support diverse entrepreneurs and strengthen Canada’s innovation ecosystem. The Diversity Institute is also a coinvestigator in Bridging Divides, funded through the Canada First Research Excellence Fund (CFREF), which focuses on understanding the challenges and opportunities that migrant integration poses for Canada, and all countries, locally and across borders. Combined, these efforts advance evidence-based solutions that strengthen Canada’s economy, support immigrant inclusion, and build a more resilient and competitive future.