One year after Trump tariffs, Canada’s labour market shows signs of strain

(Horizon Media) – One year after U.S. President Donald Trump launched his so-called “Liberation Day” tariff regime, early signs of resilience in Canada’s labour market are giving way to stagnation, with economists warning of broader economic spillover effects.

In a report by The Canadian Press, new data suggests the country’s job market is increasingly constrained by both external trade shocks and internal demographic pressures.

Figures from Statistics Canada show that while Canada has avoided a sharp employment downturn, job growth has slowed significantly. Economists now describe the labour market as largely static, rather than resilient.

Manufacturing has borne the brunt of the impact, shedding more than 50,000 jobs over the past year as U.S. tariffs targeted steel, aluminum and the auto sector. The losses have been concentrated in Ontario, where export-driven industries are particularly exposed.

Experts have cautioned that further contraction may be ahead, especially in the automotive sector, where fixed-term contracts could soon adjust to weaker demand.

Meanwhile, declining industrial capacity utilization suggests Canadian firms are operating below potential, a trend that often precedes additional job cuts. Gains in the services sector, particularly in health care, have helped offset these losses so far, with tens of thousands of positions added amid rising demand tied to an aging population. But that cushion may be weakening.

February’s labour data showed a sharp monthly decline in employment, led by losses in services, raising concerns that weakness in trade-exposed industries is beginning to spill into the broader economy.

Economists warn of growing “knock-on effects,” in which reduced income in manufacturing regions dampens consumer spending, impacting retail, hospitality, and other service industries. Provinces most affected by U.S. tariffs, including Ontario, Quebec and British Columbia, are already seeing slower growth across sectors.

At the same time, demographic shifts are compounding the slowdown. Canada recorded its first-ever population decline in 2025, while a growing number of baby boomers continue to exit the workforce. This shrinking labour pool limits job growth, even as it stabilizes unemployment levels.

Projections suggest Canada’s unemployment rate will remain around 6.7 percent through 2026, with modest improvement expected thereafter. Increased government spending in defence and infrastructure, along with a potential boost to domestic tourism, may provide some support.

Much now depends on the upcoming review of the Canada–U.S.–Mexico trade agreement. Economists say that maintaining current tariff levels could help stabilize manufacturing employment.

For now, however, the outlook points to a labour market that remains steady on the surface, but increasingly constrained beneath, shaped as much by global trade tensions as by Canada’s own demographic realities.