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Canada’s economy has handled a year of US tariffs better than expected, but the impact has not been equal across sectors and regions, according to a report by Royal Bank of Canada (RBC).
{alcircleadd}Industries such as steel, aluminium, copper, auto parts, softwood lumber, and some consumer goods have been the most affected. In 2025, steel product exports dropped by 30 per cent, hurting company revenues and hiring plans. Firms are cutting new hires, cutting overtime, and delaying training programs. Some are also shifting toward automation and changing how they run their operations.
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According to RBC, supply chains between Canada and the US are closely linked. But unfortunately, cross-border transactions do not happen the same way prior to tariff implementation, hitting businesses, factories, and jobs.
The impact also varies by region. Ontario and Quebec face higher tariffs of over 6 per cent because they depend more on cars and metals. Other provinces like Newfoundland and Labrador, Alberta, and Saskatchewan face tariffs under 1 per cent. So, growth in Ontario and Quebec should be among the slowest in 2026.
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The Canada‑United States‑Mexico Agreement (CUSMA) has helped limit the damage. About 90 per cent of Canadian exports to the US stayed tariff‑free in 2025, which helped protect jobs and production. But Canada’s share of US imports fell from 12.6 per cent in 2024 to 11.2 per cent in 2025, showing that Canada is becoming less competitive.
RBC found that globally, trade continued to grow. Trade outside the US rose by 4.4 per cent in 2025, while US imports increased by 2.7 per cent. Demand also shifted away from China to other Asian countries.
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Canada’s response to tariffs was limited. Some of the tariffs started in early 2025 but were later removed, except on steel, aluminium, and autos. This kept the prices in check and left space for flexible interest rates.
The report said Canada faces ongoing challenges, including slower productivity and the need to build new supply chains as global trade patterns change.
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