The Canadian economy has been dealing with the uncertainty and fallout from tariffs for over a year. However, most Canadian exports to the U.S. continue to be protected by exemptions within the Canada-U.S.-Mexico Agreement (CUSMA) - something that has contributed to more economic resiliency than we had forecast this time last year.

In this edition of the Twenty-Four, we examine the latest available data, specifically Statistics Canada's October merchandise exports release, to see if tariff impacts are noticeable. Our analysis focuses on the performance of sectors most impacted by the punitive U.S. tariffs during the first ten months of 2025, and we conclude by looking at the broader effects on GDP and employment. 

We find that industries affected by tariffs saw a decline in exports to the U.S. Although these industries managed to increase exports to non-U.S. destinations, this growth was insufficient to offset the losses incurred in the U.S. market.

Tariff Landscape

The primary metals manufacturing sector experienced significant impact from tariffs over the course of last year. Initial 25% U.S. tariffs on steel and aluminum were increased to 50% from June, while a 50% tariff was applied to certain copper exports to the U.S. from August.

Other sectors were also affected: combined anti-dumping duties on softwood lumber exports rose from 15% to 35% in August with further escalation around mid-October. Meanwhile the auto sector faced a 25% tariff on all non-CUSMA compliant content beginning April 3.

Export Trends and Market Diversification

As of October, year-to-date (YTD) exports to the U.S. across all these components showed substantial declines compared to the previous year.

While exports to the U.S. suffered, there were noticeable expansions into other international markets. YTD exports to non-U.S. destinations jumped across steel & aluminum (+12%), copper (+14%), autos (+13%), and wood products (+6%).

Although the U.S. remained the largest client base, its market share fell in all of these industries, especially in primary metals manufacturing. The auto industry preserved its strong North American integration despite export gains to certain markets like Israel and Nigeria through October.  

While the attempts to diversify were noteworthy, the YTD increases to other countries were insufficient to counteract losses due to U.S. tariffs. Overall, the value of exports for all these tariff-affected goods—namely steel, aluminum, copper, autos, and wood products—decreased by a combined 6.7% compared to the first ten months of 2024.

Regional Tariff Burden

The provincial distribution of the tariff burden remains largely consistent with our August analysis. Canada's average effective tariff rate rose slightly to 6.4% in October, but the impact is uneven. Ontario (steel, autos, copper), BC (lumber), and Quebec (aluminum, lumber) face a high burden. Alberta's exposure is low due to its key sectors being less concentrated in directly affected industries.  

Impacts on GDP and Employment

The broader manufacturing sector in Canada has borne the brunt of most tariffs imposed thus far.

By October, Canada's real GDP (output) showed YTD declines in several manufacturing areas: primary metals fell by 6.4%, and motor vehicles & parts dropped by 2.4%. Wood products manufacturing, however, remained largely unchanged. These same sectors have, as a result, seen corresponding employment losses. 

What’s next?

U.S. tariffs on Canadian exports of softwood lumber reached 45% while the same for upholstered furniture, bathroom vanities, and kitchen cabinets were subject to 25% tariffs starting October 14.

To mitigate dependence on the U.S., Canada is pursuing several strategies: renewing relationships with China, exploring new markets for softwood lumber in Japan and South Korea, and providing tailored, sector-specific federal assistance. In parallel, Canadian traders are closely monitoring the ongoing legal challenges against the U.S. tariffs.

The future of sectoral tariffs depends on the outcome of the scheduled review of the CUSMA later this year, which remains highly uncertain.

Answer to the previous trivia question: It’s true: Although Alberta has a smaller population than B.C., it added more jobs last year than its neighbour to the West (71,200 versus 32,200).

Today’s trivia question: On what day last year did President Trump announce the so-called Liberation Day tariffs?