When Donald Trump rolled out his sweeping tariff package a year ago, Canadian manufacturers braced for impact. A year later, the damage is in: 51,800 jobs lost in manufacturing alone, a shrinking population complicating recovery efforts, and economists warning that the worst might not be over. What started as targeted duties on steel, aluminum, and auto parts has evolved into something more insidious—a slow bleed that’s now threatening service sectors once thought insulated from trade disputes.
The numbers tell a story of resilience meeting its limit. Canada’s unemployment rate has hovered around 6.7 percent through February, a figure that masks significant turmoil beneath the surface. Manufacturing-heavy Ontario bore the brunt of job losses, while healthcare added 92,000 positions nationwide. On paper, services gained 85,900 jobs while goods-producing sectors shed 34,200. But that arithmetic obscures a troubling reality: the firewall between trade-exposed industries and the broader economy is starting to crack.
Brendon Bernard, senior economist at Indeed, describes the past year as “static” rather than stable. That distinction matters. Static suggests an economy treading water, not building momentum. Monthly employment figures have whipsawed between gains and losses, with February delivering an 84,000-job decline led by services. The volatility reflects both genuine economic uncertainty and demographic shifts that would challenge any labour market, tariffs or not.
Trump’s Liberation Day tariffs, though recently ruled illegal by the U.S. Supreme Court, set in motion a trade disruption that began well before April 2025. Sector-specific duties on Canadian goods materialized in March of last year and remain in effect. For workers in automotive manufacturing, steel mills, and aluminum plants, the legal nuances matter far less than the pink slips and reduced shifts that followed.
Andrew DiCapua, principal economist at the Canadian Chamber of Commerce, points to a lagging indicator that keeps him up at night: contract recalibration. Many manufacturing work agreements operate on six- or twelve-month cycles. Companies that absorbed initial tariff shocks by eating costs or drawing down inventory are now reaching contract renewal dates. DiCapua expects a fresh wave of workforce adjustments as those agreements roll over and firms reconcile their labour needs with diminished export demand.
Industrial capacity utilization—a measure of how much Canadian factories are producing relative to their potential—hit 78.5 percent in the fourth quarter. That figure is down modestly from previous quarters, but the trajectory concerns economists more than the absolute level. When plants aren’t running at full tilt, they don’t need full crews. Empty production lines translate directly into surplus workers.
The spillover effect is where trade policy meets everyday life. DiCapua offers a vivid example: an auto parts worker in southwest Ontario loses a regular shift. That worker skips the morning Tim Hortons coffee. Multiply that decision across thousands of affected workers, and the coffee shop starts seeing softer sales. Eventually, Tim Hortons trims staff hours. Those employees cut back on discretionary spending. The ad agency that handles Tim Hortons marketing sees its contract reduced. The ripple spreads.
Ontario, Quebec, and British Columbia—provinces most exposed to U.S. tariffs—are showing weaker services growth than less trade-dependent regions. DiCapua hesitates to draw firm causal lines but notes the correlation is hard to ignore. Tariff anxiety and genuine economic headwinds are feeding on each other, creating a general malaise that’s dampening activity beyond the factory floor.
Kari Norman, senior economist at Desjardins, acknowledges the pain has been severe for individuals and specific sectors while noting the aggregate national impact has been less catastrophic than initial forecasts suggested. Her outlook hinges significantly on the upcoming review of the Canada-U.S.-Mexico trade agreement scheduled for later this year. If Canada emerges from those negotiations with tariff levels roughly where they stand today and some certainty restored, Norman expects manufacturing employment to flatten rather than continue its decline.
That scenario represents the optimistic case. It assumes no further escalation, rational negotiation outcomes, and enough time for supply chains to adjust. Those are substantial assumptions in an era where trade policy shifts with presidential moods and geopolitical calculations.
Healthcare’s robust hiring—92,000 jobs added—reflects a longer-term demographic reality colliding with immediate workforce needs. Canada’s population is aging rapidly. Provinces are investing heavily in staffing to care for that aging cohort. Those jobs exist largely independent of trade flows, though sustained economic weakness could eventually constrain provincial budgets and slow public sector hiring.
The February jobs report rattled economists not just for its headline losses but for where those losses occurred. Services were supposed to cushion manufacturing’s fall. When services start contracting, the safety net frays. Bernard suggests some of February’s weakness might be statistical noise. The monthly labour force survey is notoriously volatile. The survey of employment, payrolls, and hours—a less timely but more stable dataset—showed flat growth through the fourth quarter when the labour force survey was reporting surges. Averaging across data sources suggests slower but steadier trends than month-to-month headlines imply.
Beneath the tariff story lies a demographic transformation that would challenge policymakers regardless of trade policy. Statistics Canada reported that the Canadian population shrank in 2025, the first recorded annual decline. The combination of baby boomers retiring en masse and sharply reduced immigration is shrinking the labour force itself. When fewer people are looking for work, the economy doesn’t need to create as many jobs to keep unemployment stable.
Bernard argues this demographic reality will make monthly employment declines more common even absent economic deterioration. A flat trend line means more volatility around that flat number. Job growth that would have been considered weak five years ago might be adequate in 2026 simply because there are fewer new workers entering the market.
That demographic shift is both blessing and curse. It moderates unemployment rate increases during economic downturns. But it also constrains growth potential during recoveries. An economy with a shrinking workforce can’t expand production without productivity gains that Canada has historically struggled to deliver.
Desjardins forecasts the unemployment rate holding around 6.7 percent through 2026 before modest improvement in 2027. Norman sees potential bright spots. Increased government spending on defence and infrastructure could generate construction and related jobs. The Iran war’s impact on global energy prices might paradoxically benefit some Canadian workers. Soaring jet fuel costs are pushing airfare higher, making international vacations prohibitively expensive for many families. That could redirect tourism spending toward domestic destinations, supporting seasonal jobs in hospitality and recreation.
The summer jobs market for youth, which has seen elevated unemployment, could benefit from families choosing road trips to Canadian national parks over European flights. It’s a thin silver lining—leveraging geopolitical instability to marginally improve youth employment—but economists searching for growth pockets will take what they can find.
The trade agreement review looms as the defining event for manufacturing employment this year. A negotiated resolution that provides clarity and avoids further tariff escalation would allow companies to plan investments and workforce needs beyond the next quarterly earnings call. Manufacturing could stabilize, if not thrive. Failure to reach agreement or additional tariff layers would almost certainly trigger another round of job cuts and capacity adjustments.
Canada enters this negotiation from a position of weakness. The past year demonstrated that trade disruptions hit Canadian workers harder and faster than American ones, a function of relative economic size and export dependency. Trump’s team understands that leverage. Canadian negotiators will need to balance defending national interests against the reality that further escalation damages an already fragile labour market.
For workers in manufacturing, the abstract policy debates translate into immediate anxieties. Will my plant still be operating in six months? Should I retrain for a different industry? Is my pension secure if my employer can’t compete against tariff-protected U.S. rivals? Those questions don’t have easy answers, and labour market data can’t capture the psychological toll of sustained economic uncertainty.
The Canadian labour market is navigating a dual shock: external tariff pressures and internal demographic transformation. Either alone would present significant challenges. Together, they’re creating a static employment picture that could persist for years. Job growth has slowed not just because of trade policy but because there are fewer Canadians entering the workforce. Manufacturing has shed jobs not just from tariffs but from automation and global competitive pressures that predate Trump’s duties.
Disentangling these forces is nearly impossible in real time. But for policymakers and workers alike, the distinction might not matter. The result is the same: a labour market grinding forward without momentum, vulnerable to further shocks, and struggling to generate the kind of broad-based employment growth that characterized previous decades. A year after Liberation Day, Canada’s job market looks less liberated than stuck.
