Canada’s auto, metals and lumber sectors hit hardest, finds RBC
Canadian manufacturers in heavily tariffed industries are seeing declining or stagnant employment despite mixed trends in output and rising prices, with auto, metals and forestry workforces under the greatest strain from the U.S. tariffs, according to an RBC Economics report.
With Canada-United States-Mexico Agreement (CUSMA) exemptions shielding most bilateral trade, “most U.S. tariff revenue collected on imports from Canada this year have come from product-specific (section 232) tariffs, imposed on autos, metals, and softwood lumber,” write report authors and RBC economists Claire Fan and Annie Zheng. “This has created a fragmented Canadian economy where a subset of sectors faces a significant trade shock, while most other exports continue to enter the U.S. duty free,” they said.
The analysis finds that autos account for 29% of U.S. duties collected on Canadian imports so far in 2025, aluminium and related products 23%, iron and steel 21%, and machinery and equipment 13, while softwood lumber faces combined countervailing, anti‑dumping and new tariff rates “exceeding 40%” on exports to the United States.
Motor vehicle and parts production is down 3% year to date; iron and steel mills’ output is down 5%; aluminium output has slipped 2% (with downstream manufacturing down 14%); softwood lumber production has fallen a further 4% from January to August after starting the year 20% below 2021; and employment is down 4% in forestry and logging, 3% in auto manufacturing, 1% in iron and steel-related subsectors, and 1% across machinery, computer and electrical equipment manufacturing.
For HR professionals, that combination of softer production, selective job losses and elevated prices points to restructuring risk, shifting skill needs and complicated wage and bargaining dynamics in exposed industries.
U.S. tariffs started having a negative impact on small and mid-sized firms across Canada early into 2025, according to a previous report.
Autos: supplier jobs under pressure, assembly holding up
In autos, where workforces are large and unionised, “trends in auto manufacturing employment mirror the 3% production decline with no signs of improving in fall,” according to RBC. The authors of the report note that “auto parts manufacturing has seen the most declines in jobs, while employment in finished motor vehicle assembly remained slightly above year-ago levels in August and September.”
Vehicle and parts manufacturers’ output prices are 1% to 2% above 2024 levels, even as U.S. import prices are “largely unchanged from a year ago as of September (-0.8%), suggesting little Canadian price discounting to share tariffs with U.S. importers.” The report adds that “U.S. auto manufacturers reported profit losses for the first time in three years…not due to weaker demand…but higher costs,” a profit squeeze that can flow back into hiring and wage decisions on both sides of the border.
Aluminium: employment growth despite lower output
In aluminium, RBC highlights a rare case where jobs have risen despite lower volumes. “Aluminum output edged down modestly by 2% this year to September with stabilization in Q3. Downstream aluminum manufacturing fell a larger 14%,” the report says.
Yet “jobs in aluminum manufacturing have improved despite lower production, and are up 5% year-to-date from 2024.” With aluminium manufacturers’ output prices up 16% on average this year through October, HR teams face pressure to manage rising wage expectations and retention in a sector still exposed to policy risk.
Iron and steel, softwood lumber
Iron and steel-related workforces are contracting modestly but face ongoing uncertainty. “Iron concentrate mining is down 3% this year through September compared to 2024 with a slight rebound in Q3 from Q2’s weakness. Production in iron and steel mills and ferro-alloy manufacturing is down 5% in the same period,” Fan and Zheng write.
“Jobs in iron and steel-related manufacturing subsectors contracted modestly by 1% on a year-to-date basis from 2024,” even as production of products made from purchased steel rose 11% and industrial selling prices declined 2%. HR leaders in mining and primary metals must weigh gradual downsizing and re‑skilling, while downstream manufacturers may be expanding on the back of cheaper inputs.
Softwood lumber and forestry, long a major regional employer, continue to see structural workforce erosion. “Jobs in forestry and logging fell 4% this year to September from 2024, extending multi-year losses. Employment in wood manufacturing fell a smaller 1%,” the report notes, alongside higher domestic prices for softwood lumber (up 7%) and downstream wood products (up 3%).
Machinery and equipment: small job declines amid resilience
Machinery and equipment show comparatively mild labour impacts. Employment across machinery, computer and electrical equipment manufacturing is “down moderately, about 1% this year to September,” even as output in machinery and computer and electronics manufacturing is rising.
“Industrial prices for machinery and related manufacturing sectors have generally risen this year, led by an 8% increase in electric equipment prices on average through October.
U.S. pre-tariff import prices for machinery, electric equipment etc., were unchanged in September from a year ago, no price discounts from exporters of these products on average,” the report said. For HR, this points to productivity and role redesign pressures rather than large‑scale layoffs.
Outlook: delayed price pass‑through, future HR pressure
Across all targeted industries, Fan and Zheng conclude that selling prices among Canadian manufacturers "have generally held up," with foreign buyers paying the bulk of initial tariff costs, but this has led to declining U.S. corporate profits this year.
While they haven’t seen systemically higher U.S. consumer prices, they still expect those will show up "more significantly in 2026” — a lag that signals further potential pressure on margins, headcount and compensation as the tariff shock continues to work through North American labour markets.
Many small businesses grappling with tariff-related costs could be out of business soon, according to a previous report.
