U.S. tariffs on Canadian goods have dented manufacturing output and cooled the labour market, with some businesses now starting to pass tariff costs on to consumers, according to a Statistics Canada report released Monday.
After tariff threats temporarily boosted export volume from Canada to the U.S. in January, up 20% from the same month last year, exports fell 26% in April 2025 compared to April 2024 as the threats started to materialize. Exports to the U.S. rebounded in the months that followed, but remained 10% lower in August 2025 than the same month last year.
As a result, manufacturing output contracted in the second quarter of this year. Over half of manufacturers and one-third of wholesalers expect rising input costs for labour, raw materials or energy in the coming months.
In the third quarter, one-quarter of businesses reported they had passed some of the costs of tariffs onto their customers over the past six months. Nearly two-fifths (39.4%) of businesses said they were likely to do so over the next 12 months.
Employment growth has stalled in the first nine months of the year with 0.1% growth adding just 22,000 jobs. Since the end of 2024, employment fell in business, building and other support services (-59,000) and information, culture and recreation (-22,000), while employment has increased in finance, insurance, real estate, rental and leasing (57,000).
Hiring intentions have also weakened and many unemployed workers are struggling to find work, especially young workers and students. The unemployment rate was 7.1% in August, 0.5 percentage points higher than January. This was the highest rate since May 2016, excluding the pandemic.
In addition, foreign investors steadily reduced their exposure to Canadian securities from February to May 2025, divesting $22.6 billion during the first half of the year. At the same time, Canadian investors increased their exposure to foreign securities from February to June, leading to an outward investment of $63.3 billion.