Trump Tariffs Fuel Canada's Job Market Downturn: Unemployment Hits 6.9% in April

Canada’s labor market faced a stark reality in April 2025 as unemployment surged to 6.9%, its highest level since the pandemic era, driven by the lingering effects of U.S. tariffs imposed under former President Donald Trump. The jobless rate—up from 6.7% in March—signals a deepening rift in sectors reliant on cross-border trade, with manufacturing and regional hubs like Windsor, Ontario, bearing the brunt of the economic strain.

The Tariff Effect: How Trade Wars Translate to Job Losses

The unemployment spike coincides with the full implementation of 25% U.S. tariffs on non-United States-Mexico-Canada Agreement (USMCA) compliant Canadian exports, targeting industries outside the auto and agricultural sectors shielded by the trade pact. While exemptions spared key automotive jobs, sectors like steel, aluminum, and non-USMCA manufacturing faced steep headwinds.

The data underscores the toll:
- Manufacturing shed 31,000 jobs in April, with Ontario losing 33,000 positions, its sharpest decline since 2017.
- Windsor’s unemployment rate hit 10.7%, as U.S. auto tariffs disrupted supply chains and forced factory cutbacks.
- Wholesale and retail trade also lost 27,000 jobs, reflecting reduced consumer and business confidence.

Wage Growth Slows, but Hours Worked Rise—A Mixed Signal

Despite the job market’s struggles, average hourly wages grew 3.4% year-over-year in April, a slight deceleration from March’s 3.6%. However, the moderation masks underlying instability:
- Layoff rates rose to 0.7%, with 1 in 143 employed workers losing jobs in April.
- Hours worked increased by 0.4% nationally, suggesting companies retained staff but reduced hours—a trend economists warn is unsustainable.

Bank of Montreal’s chief economist Doug Porter called the report “a weak signal for the Canadian economy,” citing tariffs as “taking a material bite” out of growth. CIBC’s Ali Jaffery warned of a “buckling” labor market, predicting a 25-basis-point rate cut by the Bank of Canada in June to soften the blow.

Retaliation and Reciprocity: A Two-Way Trade War

Canada’s retaliatory measures—25% tariffs on $20.8 billion of U.S. imports, including agricultural equipment and oil—have intensified cross-border tensions. While these tariffs aim to balance the scales, they risk $740 billion in reduced trade volumes by 2025 and further strain bilateral ties.

The ripple effects are already visible:
- Agriculture faces dual pressures, as U.S. tariffs on non-USMCA goods and Canadian countermeasures disrupt export competitiveness.
- Steel and aluminum industries, burdened by U.S. Section 232 tariffs, now face a 25% tax on exports to their largest market.

Investment Implications: Navigating the Tariff Landscape

Investors should prioritize USMCA-compliant sectors like autos and agriculture, which remain shielded from the worst tariff impacts. However, broader economic risks persist:
- Regional exposure: Avoid overweights in Ontario’s manufacturing-heavy regions without hedging against tariff volatility.
- Wage inflation: Slower wage growth may ease central bank pressure but signals weaker demand—watch for hourly earnings data to gauge labor market health.

The Tax Foundation estimates the trade war could reduce U.S. GDP by 1.0%, with Canada’s GDP suffering proportional losses. With the Bank of Canada likely to cut rates, bond markets and defensive stocks may outperform as investors seek stability.

Conclusion: A Tariff-Driven Downturn with Long Shadows

Canada’s unemployment surge to 6.9% in April is not merely a statistical blip but a symptom of deeper trade-related fractures. With key industries like manufacturing contracting and regional hubs like Windsor reeling, the path to recovery hinges on resolving tariff disputes or adapting to a new normal of reduced cross-border trade. Investors must balance exposure to resilient sectors while preparing for prolonged volatility—a reality underscored by 24,000 projected Canadian job losses tied to tariff impacts and the likelihood of further policy shifts.

As the data shows, the cost of protectionism is steep: higher unemployment, slower wage growth, and a labor market teetering on the brink. For now, the best strategy is to tread carefully and diversify beyond tariff-exposed sectors.