Tariff-hit industries struggling as trade war drags into second year

Algoma Steel Inc., the second largest steel producer in Canada, along the St. Marys River in Sault Ste. Marie, Ont., Thursday, July 24, 2025. THE CANADIAN PRESS/Nick Iwanyshyn

TORONTO — From rolled steel to kitchen cabinets, Canadian businesses hit by targeted U.S. tariffs are struggling to respond as the trade war drags into its second year.

While most exports continue to flow tariff-free under the Canada-U.S.-Mexico trade agreement, industries like metal production, lumber and automobiles continue to face steep duties more than a year after U.S. President Donald Trump upended the global status quo. Companies have cut staff, pulled back on production and pushed for government action as the heavy duties continue to shake the crucial and long-standing trade relationship with the U.S.

Take Daniel Drapeau, CEO of Quebec-based custom cabinet maker Miralis. His company has invested $43 million since 2022 as it built two plants, with plenty of automation to boost productivity, but like so many others in the industry, it’s now operating well below capacity.

The problem, like with other sectors hit by the Section 232 tariffs, is not only the loss of the U.S. market, but that all the other countries blocked from the world’s largest economy are also looking for buyers, leading many to try and sell more into Canada.

“We were ready to grow after all those crises,” Drapeau said in an interview, citing the COVID-19 pandemic, interest rates and inflation.

“But now we’re being hit by the fact that there is a surge. There is too much product coming from other countries.”

To respond to the twin threats of headwinds in exports and increased imports, cabinet makers in Canada have teamed up with wood flooring and furniture makers to form the Canada Wood Products Alliance. The group is pushing the government to introduce barriers to foreign competitors sending goods into the country.

Drapeau says the action is needed because most of the members of the alliance have had to significantly cut back on operations.

“The manufacturers in Canada are running at maybe 50 per cent of their capacity, which is the strict minimum to stay alive.”

The federal government announced on March 13 that it is reviewing a request from the alliance for safeguard measures. The review comes after the sector was hit by 25 per cent tariffs in October, and was set for a further rise to 50 per cent in January until the Trump administration backed down at the last minute.

Other sectors like steel, which have faced tariffs since March last year, have already seen the government work to crack down on imports, especially those originating in China, in several rounds of increasingly strict limits.

The latest restrictions only went into place on Dec. 26 so it’s still too early to tell how well they’re working, said Catherine Cobden, CEO of the Canadian Steel Producers Association.

But she said there’s no doubt the help is needed.

“They, frankly, have had a significant impact on the Canadian industry. Thousands of jobs lost, loss of production and a significant drop in our shipments to the United States. A very, very challenging year.”

In December, Canadian steel exports to the U.S. were down 50 per cent from a year earlier, she said.

“Every month we see further drops, and that’s a direct reflection of just the loss of that market access due to the tariffs.”

Some of the effects are being felt this week in Sault Ste. Marie, Ont., where Algoma Steel Inc. is starting to lay off upwards of 1,000 workers.

The job cuts are part of a long-planned shift to more efficient equipment, but the company accelerated the plan because of tariffs.

Some companies have managed to avoid or reduce layoffs through the use of government initiatives like work-share programs, which allow companies to keep workers on reduced hours and have employment insurance help make up the pay difference.

Drapeau said they’re being widely used in the wood products industries, while Cobden said she thinks the steel sector is the largest user of the program, in part to avoid longer-term effects.

“If we lose our workers, will we ever get them back? And so people are really working hard to try to keep workers in place.”

The work share programs, along with the time it takes to unwind contracts and supply chains, help explain why the effects aren’t even more pronounced on these sectors already, though some cracks are starting to show.

The auto parts sector is one of the hardest hit. Statistics Canada reported there were 64,828 autoworkers employed on the parts side as of December, down 9.5 per cent from a year earlier.

The drop is despite manufacturing employment as a whole growing slightly last year, showing how specific sectors are bearing the brunt, said Claire Fan, senior economist at RBC.

“Because of the way that these tariffs are imposed ... five to six key manufacturing subsectors are really, really hurting versus the rest of the economy.”

And some have been hurting for a while. The softwood lumber industry was hit by harsh duties back in 2017, which Trump has since added to, resulting in production down over 25 per cent since the first round, she noted.

The result is 22 mills closed since 2022 and another 50 with reduced operations, the federal government said as it announced further industry supports last November.

While production and job cuts are some of the most obvious impacts, Fan said that the uncertainty around trade will also mean less investment, and less help for Canada’s wider productivity problems.

“There’s not going to be a huge amount of new investment flowing into these sectors, just because the outlook a decade ahead is perhaps not that optimistic.”

That uncertainty is also leading to fewer orders in the near-term.

While kitchen cabinets didn’t get hit by doubled tariffs, the potential alone creates its own problem.

“We’re still under this threat of adding 50 per cent,” said Drapeau.

“I believe that the Americans are seeing this as a risk, to order from Canada, because of this possible increase.”

He said that while there have already been impacts, worse could be yet to come.

“Hundreds of jobs have been lost, and thousands are in work-share, and there will be more unfortunately in the next months or years if we can’t find solutions.”

This report by The Canadian Press was first published March 24, 2026.

Ian Bickis, The Canadian Press