Which sectors have been hit the hardest?
Canada’s economy has weathered a year of U.S. tariff shocks better than expected, but the impact on jobs, regions and sectors is highly uneven – creating fresh risks for employers and HR professionals.
The damage is concentrated in a relatively small set of tariff‑exposed industries that “have been disruptive” for Canadian producers, according to a RBC report.
Steel, aluminium, copper and derivative products, motor vehicles and parts, softwood lumber and selected consumer goods such as kitchen cabinets and vanities have “borne the brunt of trade actions.”
The report, authored by RBC’s Assistant Chief Economists Nathan Janzen, Cynthia Leach and Robert Hogue, and Senior Economist Claire Fan, highlights that exports of steel products fell by 30% in 2025, a drop that feeds directly into plant‑level revenues and future staffing decisions.
As orders and margins come under pressure, employers are more likely to freeze hiring, trim overtime or delay apprenticeship intakes, while also looking harder at automation and restructuring.
RBC also underscores that integrated North American supply chains amplify these pressures. Tariffed intermediate products “potentially cross the border multiple times in an integrated production chain in a way that doesn’t happen to the same extent with offshore partners.” A single tariff decision can therefore weaken the business case for multiple facilities, forcing HR and operations leaders to coordinate workforce changes and communication across sites and regions.
Canadian manufacturers in heavily tariffed industries have seen declining or stagnant employment despite mixed trends in output and rising prices, with auto, metals and forestry workforces under the greatest strain from the U.S. tariffs, according to a previous RBC Economics report.
Uneven regional impact reshapes HR risk
RBC’s analysis shows that the tariff shock is reinforcing regional divides. Ontario and Quebec have the highest effective tariffs on exports to the United States, both above 6%, reflecting their heavy exposure to autos, metals and other targeted products.
Provinces such as Newfoundland and Labrador, New Brunswick, Alberta, Saskatchewan and Prince Edward Island face effective rates below 1%.
“The lesson: Uneven tariff impact will continue to be reflected in diverging regional economies with GDP growth in Ontario and Quebec expected to be at the bottom of all provinces in 2026,” the report concludes.
Here’s how companies have been impacted by tariffs, according to a previous BDC report:
And here’s what they have done to cope:
CUSMA, dependence and job security
The authors of the RBC report underline how central the Canada‑U.S.‑Mexico Agreement (CUSMA) remains to Canada’s employment base. Almost 90% of Canadian exports to the United States remained tariff‑free in 2025, “largely thanks to an exemption for trade compliant with CUSMA.” That shield has kept many factories running and preserved thousands of jobs that might otherwise have been at risk from sweeping U.S. protectionism.
Even with that protection, Canada’s competitive position has slipped. The country’s share of U.S. imports fell from 12.6% in 2024 to 11.2% in 2025, the second‑largest decline among major partners after China’s drop. RBC warns that the specific Canadian products subject to tariffs carry “very high” rates, making them particularly disruptive for affected employers and their workforces.
A previous Boston Consulting Group (BCG) report urged Canadian companies to prepare now for possible disruption due to the first formal review of the CUSMA - scheduled to begin in July - could reshape rules in key sectors, including autos and digital services.
Global trade shifts, policy response and the long game for talent
RBC finds that U.S. trade policy in 2025 has been “highly unpredictable,” yet the overall economic impact has been “less negative than feared” when tariffs surged on “Liberation Day” in April 2025. Global trade excluding the United States expanded by 4.4% in 2025, nearly double the 2.3% pace in 2024, while U.S. imports rose 2.7% and the U.S. trade deficit widened slightly. The share of U.S. imports from China “fell sharply,” with demand shifting to other Asian suppliers such as Vietnam, Taiwan and Thailand.
On the Canadian side, Ottawa opted for a restrained response. The federal government’s initial retaliation in March 2025 covered “about a third of U.S. imports before being repealed by September,” except for tariffs on steel, aluminium and autos. RBC says this “kept consumer prices down, and gave the Bank of Canada flexibility to further lower its policy rate,” helping to limit wage‑price tensions.
The RBC experts caution that the episode has “underscored other economic vulnerabilities in Canada, including lagging productivity growth that makes economic shocks difficult to handle.” While exports to non‑U.S. economies rose and shipments to the U.S. declined, shifting trade “requires new supply chains, and major new infrastructure.”
In February, in a 6–3 ruling, the U.S. Supreme Court concluded it was not legal for U.S. President Donald Trump to use the International Emergency Economic Powers Act, better known as IEEPA, for his “Liberation Day” tariffs and fentanyl‑related duties on Canada, Mexico and China.
