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With CUSMA exemptions protecting the bulk of Canada-U.S. 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.
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. Even among the sectors targeted with tariffs, the impacts have been uneven given varying abilities among Canadian exporters and U.S. importers to find alternative international trade partners or domestic sources.
It’s still early, but we now have enough data to begin to assess the impact of tariffs on Canadian industries behind key product groups (two-digit harmonized system codes) accounting for more than 80% of U.S. tariffs collected on imports from Canada this year.
Overall, we track moderately lower manufacturing production and employment in most of the highly tariffed sectors in Canada. These trends have also been much less volatile than international trade flow, that were heavily distorted around when tariffs were implemented (as U.S. importers front-ran purchases to build pre-tariff inventories in Q1.)
Selling prices among Canadian manufacturers have generally held up, with foreign buyers paying the bulk of initial tariff costs, but have led to declining U.S. corporate profits this year. We haven’t seen systemically higher U.S. consumer prices but still expect those will show up more significantly in 2026.
Here’s a breakdown of how five key Canadian industries have fared in their production, employment and selling prices, amid rising U.S. tariffs.
1. Auto manufacturing (29% of U.S. duties collected from Canada 2025 to-date)
Decades of unrestricted Canada-U.S. automotive trade have created deeply integrated supply chains that are difficult to adjust in a short timeframe. Tariffs have increased costs and led to production disruptions, although not as significantly as was earlier feared.
Production
Canadian value-added motor vehicle and parts production is down 3% year-to-date, but has improved in recent months with a first year-over-year increase (2%) in September since the end of 2023.
Capacity utilization rate among Canadian transportation equipment manufacturers has, for the most part, been running above a year ago in 2025.
Employment
Trends in auto manufacturing employment mirror the 3% production decline with no signs of improving in fall. 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.
Producer prices
Vehicle and parts manufacturers’ output prices are tracking above 2024 by 1% to 2%. U.S. import prices for motor vehicles and parts were largely unchanged from a year ago as of September (-0.8%), suggesting little Canadian price discounting to share tariffs with U.S. importers.
U.S. businesses have yet to pass on these increased tariff costs fully to consumers. Over the first half of this year, U.S. auto manufacturers reported profit losses for the first time in three years. Losses were not due to weaker demand—auto and light trucks sales in the U.S. were 4% higher on average than 2024—but higher costs.
2. Aluminum and articles (23% of U.S. duties collected from Canada 2025 to-date)
The Canadian aluminum sector has demonstrated resilience despite punitive 25% U.S. tariffs imposed in March, and a doubling of that in June.
The U.S. has limited aluminum production capacity to replace Canadian imports. But global demand for the metal has also kept prices high, helping to offset a drop in production and preventing a significant drop in employment.
Production
Aluminum output edged down modestly by 2% this year to September with stabilization in Q3. Downstream aluminum manufacturing fell a larger 14% in the same time frame.
Employment
Jobs in aluminum manufacturing have improved despite lower production, and are up 5% year-to-date from 2024.
Producer prices
Aluminum manufacturers’ output prices are up 16% on average this year through October. U.S. pre-tariff import prices for aluminum and articles declined 3% in September from 2024—not enough to offset the 50% tariffs on U.S. importers.
3. Iron, steel and articles (21% of U.S. duties collected from Canada 2025 to-date)
Unlike aluminum, Canadian iron and steel producers were already challenged by weakening global demand in recent years, and have seen persistent normalization in prices. Australia, the world’s largest iron exporter, shipped 24% less iron in 2024 from its 2020 high.
U.S. tariffs have amplified challenges for Canadian iron and steel producers, reducing both production and employment. However, lower global steel prices have also benefited Canadian steel buyers.
Production
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.
Fewer exports of steel on the slip side means more supply available to Canadian industrial buyers at lower costs. Production of products manufactured from purchased steel was 11% higher than a year ago from January to September.
Employment
Jobs in iron and steel-related manufacturing subsectors contracted modestly by 1% on a year-to-date basis from 2024.
Producer prices
Industrial selling prices for Canadian iron and steel manufacturing declined 2% this year.
U.S. steel import prices (excluding tariffs) were down 8% as of September from last year—likely in part indicative of weaker global demand rather than tariff sharing. The bulk of the 50% U.S. tariff imposed on steel imports from most countries has been absorbed by U.S. buyers.
Tariffs have raised costs substantially for downstream U.S. industries that purchase metals as inputs. Corporate profits for U.S. fabricated metal manufacturers fell 30% between Q4 2024 and Q2 2025.
4. Machinery and equipment (13% of U.S. duties collected from Canada 2025 to-date)
Canadian machinery manufacturing and related sectors have been relatively resilient despite rising U.S. tariffs. The average effective tariff on machinery, equipment and parts under HS84 was about 4% in August, much lower compared to tariff rates on auto and parts and metals.
Specific tariffed products, include turbojets and parts of oil rigs, are not directly targeted with U.S. Section 232 measures1. Part of the explanation for why tariffs are impacting these products could be that they are not compliant with CUSMA rules of origin requirements. That means contain lower Canadian value-added content (the definition of CUSMA non-compliance is limited North American production content), which in turns suggests a lower production and jobs’ footprint and less negative impacts from tariffs.
Production
Machinery manufacturing saw a 3% increase in the first nine months of 2025 from 2024. Computer and electronics manufacturing also rose 3%, while production in electrical equipment manufacturing edged 2% lower.
Employment
Employment in machinery, computer and electrical equipment manufacturing combined is down moderately, about 1% this year to September.
Producer prices
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.
In the first half of 2025, corporate profits for U.S. machinery manufacturers fell by 13% and contracted 11% for electrical equipment, appliances and components manufacturers. Profits rose 8% for computer and electronics’ manufacturers over the same period.
5. Softwood lumber (CTV/AD duties not measurable; additional tariffs imposed on Oct. 14)
New U.S. lumber tariffs from Oct. 14 stack on top of pre-existing countervailing and anti-dumping (CTV/AD) duties, leading to combined rates exceeding 40% on Canadian softwood lumber exports. Geographic constraints leave limited options for lumber exporters to diversify to non-U.S. markets.
Unlike Section 232 tariffs, CTV/AD duties do not show up in the U.S. Census Bureau data we use to track monthly U.S. tariff revenues, because of the way they are collected (through cash deposits set up by exporters with U.S. Customs and Border Protection.)
CTV/AD duties ramped up this summer but date back decades from a recurring trade dispute, and have led to persistent softening in related sectors including forestry, logging, and wood manufacturing in the past.
More recently, weak demand from moderating U.S. homebuilding activities following large U.S. Federal Reserve interest rate hikes in 2022 and 2023 also added to challenges.
Production
Softwood lumber production in Canada at the start of this year was already 20% below 2021, and dropped another 4% from January to August from a year ago.
Downstream wood product manufacturing rose 2% from January to September from 2024, thanks mostly to stronger fall activities.
Employment
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%.
Producer prices
Canadian industrial selling prices for softwood lumber, and downstream wood products were up 7% and 3%, respectively, this year to October from 2024.
U.S. import prices for lumber products are not available prior to 2025, but Canadian export prices of logs, pulpwood and other forestry products were down 4% this year, following prior years of declines.
- U.S. section 232 auto part tariffs include a number of products in HS 84, but exempt CUSMA compliant trade. ↩︎
About the Authors
Claire Fan is a Senior Economist at RBC. She focuses on macroeconomic analysis and is responsible for projecting key indicators including GDP, employment and inflation for Canada and the US.
Annie Zheng is an economist at RBC. She is a member of the macroeconomic analysis group, focusing on macroeconomic modeling.
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