Shifting Gears: Ontario’s Manufacturing Sector amid Tariff Turmoil

National manufacturing powerhouse Ontario is particularly exposed to shifting US tariff announcements and the attendant uncertainty. The automotive and primary metal manufacturing sectors are particularly exposed, but ripple effects are expected in the broader business ecosystem. 

The auto sector is capital intensive and regionally concentrated, making it vulnerable to prolonged tariffs. Amid tariff uncertainty and reduced demand, some automakers have already announced temporary shutdowns and layoffs at assembly plants in the province. Additional job losses are expected in the coming months. 

While the current trade environment poses significant challenges, modernization and diversification offer long‑term opportunities. Greater adoption of advanced manufacturing technologies shows promise and could enhance Canada’s current lacklustre productivity picture. All else being equal, increasing annual labour productivity growth by 1 percentage point in Ontario’s manufacturing industry would boost overall business sector productivity growth in Canada by 0.06 percentage points.

Boosting interprovincial trade and diversifying export markets can build resilience, but progress has been uneven across sectors and moderate over time. Encouraging examples include the computer and electronics and aerospace sectors, which have achieved a more internationally diverse customer base. 

Even with the right policies, the trade and economic transition will not be painless for Ontario, as diversification is a long‑term endeavour and productive capacity cannot be quickly reallocated without some labour and capital losses.