50%: How the New Tariff Round Reaches the Canadian Workforce

Ottawa has matched Washington's new duties and rolled out a $7.5 billion support package. The labour market effects will be narrow and uneven, and for staffing firms, very specific.

The latest escalation in the Canada-U.S. trade war arrived in two steps. On August 22, after more than two weeks of negotiations fell apart late on a Friday night, the United States imposed 50 per cent tariffs on a broad range of Canadian goods under Section 338 of the Tariff Act of 1930, a provision that had gone unused since 1949. Prime Minister Mark Carney vowed that Canada would "match those tariffs dollar for dollar." On September 8, it did. Canadian counter-tariffs of 15, 25 and 50 per cent took effect on $27.6 billion of U.S. imports, concentrated in steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics.

The breakdown compounds strain that was already visible. The trilateral trade pact with Mexico was not renewed when it came up for review in July.

Narrow, but not small

At the macroeconomic level, the damage is likely to be contained. Economist Trevor Tombe, in analysis for the Macdonald-Laurier Institute, notes that the new tariffs cover a relatively small share of what Canada sells to the United States, so the average tariff rate on Canadian exports rises by only about 2.5 per cent by his estimate.

The aggregate hides a great deal. Tombe estimates that more than 52,000 jobs are directly at risk in affected export sectors, with another 35,000 exposed among the suppliers and service providers that sell into them, for a total of a little over 87,000. Losses on that scale would push the unemployment rate from 6.4 per cent to roughly 6.8 per cent.

The geography is concentrated. Ontario carries the heaviest exposure at 36,100 jobs, followed by Quebec at 18,300 and British Columbia at 11,200. Alberta could lose roughly 9,000 jobs despite exporting little of the tariffed goods, because it hosts industries that supply the exporters. And once those indirect effects are counted, the sector facing the largest disruption is not a manufacturing one at all. It is transportation and warehousing.

The early evidence

The official data do not yet capture the new round. The August Labour Force Survey reflects the week of August 9 to 15, a week before the tariffs took effect. But Statistics Canada has been tracking the exposed industries separately, and the gap is already visible. In the 12 months to August, the layoff rate averaged 0.9 per cent for workers in industries dependent on U.S. export demand, compared with 0.7 per cent in other industries. The agency noted that the new tariffs compound an already uncertain environment for those sectors.

The economy-wide layoff rate, by contrast, was just 0.8 per cent in August, below the 1.0 per cent recorded a year earlier. Canada's labour market is not shedding workers broadly. It is shedding them in specific places.

What Ottawa is offering

Alongside the counter-tariffs, the federal government announced a $7.5 billion package of new and enhanced measures, on top of nearly $25 billion in tariff supports introduced over the previous 18 months. Its centrepiece for the labour market is $3.5 billion in Rapid Response Supports for Workers and Employers.

For workers, the package extends by one year the waiver of the one-week Employment Insurance waiting period, and by one year the measure allowing claimants to collect EI before exhausting severance or vacation pay. It extends by eight months the extra 20 weeks of regular benefits for long-tenured workers. It also introduces a one-year measure so that people who voluntarily left jobs in recent months are no longer penalized when applying for EI, provided their most recent job loss was through no fault of their own. Job matching on JobBank.gc.ca will be expanded, with an emphasis on major projects, Build Canada Homes and defence procurement.

For employers, the government is folding the EI Work-Sharing program and the Worker Retention Grant into a single Workforce Retention and Retraining Program, pitched as more accessible and more generous, with up to $1,000 per participant available for training and administrative costs.

Labour groups had pressed for exactly this kind of response. Before the package was announced, Bea Bruske of the Canadian Labour Congress urged Ottawa to extend and strengthen EI and to expand work-sharing so workers could stay attached to their jobs on reduced hours.