Dropping Thousands of Positions in Canada as Trade Taxes Hamper Employment Plans
Canada's employment rate took a hit in July 2025, with a loss of 41,000 jobs, according to recent data. The decline was primarily due to a drop in full-time positions, with youth aged 15 to 24 disproportionately affected.
The employment rate dropped by 0.2 percentage points to 60.7%, while the unemployment rate remained steady at 6.9%. The sectors most affected were information, culture, and recreation, which lost 29,000 jobs, and construction, with a loss of 22,000 jobs. The provinces of Alberta and British Columbia were particularly hard-hit.
This employment decline is linked to renewed trade tensions and tariff-related headwinds affecting business confidence. Trade tensions with the U.S., including the imposition of a 35% tariff on some non-compliant Canadian goods exports starting 1 August 2025, and ongoing tariffs such as 25% on autos and 50% on steel, aluminum, and semi-refined copper, have added pressure on Canadian industries, including manufacturing.
The manufacturing sector has been negatively affected by these tariffs, leading to increased costs and uncertainty. This has contributed to subdued business confidence and volatility in the economy, resulting in job losses and weaker hiring, especially in full-time positions.
The number of people employed in manufacturing fell by nearly 10,000 in July from a year earlier. However, the layoff rate was virtually unchanged at 1.1 per cent in July compared with the same month a year earlier.
Despite the job losses, the unemployment rate did not increase as forecasted, remaining steady at 6.9%. This situation has fueled expectations of monetary policy easing by the Bank of Canada to support the economy amid these trade and labour market challenges.
The Bank of Canada has previously stated that US President Donald Trump's sectoral tariffs on steel, aluminium, and autos have hit the manufacturing sector hard, reducing hiring intentions. Sectors linked to steel, aluminium, and autos have scaled back hiring and carried out layoffs. Marty Warren, national director of the United Steelworkers in Canada, reported that about 1,000 members have been laid off.
Looking ahead, Oxford Economics' senior economist, Michael Davenport, expects more layoffs in the coming months, forecasting about 140,000 job losses. Davenport also expects the unemployment rate to rise to the mid-7 per cent range later this year.
This news comes as a setback for Canada's labour market, which had been performing better in previous months. However, some sectors have remained resilient despite tariffs. The Canadian economy will continue to navigate these challenges as it strives for growth and stability.
The decrease in business confidence is largely due to renewed trade tensions and tariff-related headwinds in the finance sector, specifically the imposition of tariffs on Canadian goods exports, which has negatively affected the manufacturing industry. Consequently, this has led to increased costs, uncertainty, and job losses, particularly in full-time positions within manufacturing, with the number of people employed in this sector falling by nearly 10,000 in July from a year earlier.
