Managing Your Workforce Amid Tariff Conflict: Considerations for Canadian Employers

U.S. tariffs on Canadian goods continue to be a source of concern for Canadian businesses. Ongoing trade measures strain U.S.-Canada relations, elevate costs, and change the competitive landscape. Volatility in our trade dynamics with the U.S. has intensified, creating even more uncertainty for Canadian businesses.

Breaking Down the Tariff Dispute: A Quick Timeline

• February 1, 2025: U.S. President Donald Trump invokes emergency economic powers and signs executive orders imposing sweeping new tariffs. The orders call for a 25% tariff on all imports from Canada (with a 10% rate on Canadian oil and energy) and 25% on all imports from Mexico, alongside a 10% tariff on imports from China, effective Feb. 4 (pbs.org). These measures were justified by the U.S. as a response to undocumented immigration and fentanyl smuggling, but prompted immediate outrage. Canada vowed to retaliate with equivalent tariffs - an initial 25% surtax on about $30 billion of U.S. goods, expanding to $155 billion after 21 days.
  
  
• February 3, 2025: Just one day before tariffs were to hit, both sides pulled back. President Trump agreed to a 30-day pause on the threatened tariffs against Canada and Mexico, while Canada put its counter-tariffs on hold. This temporary truce was intended to allow negotiations on border security measures.
  
  
• March 4, 2025: The truce expired. The U.S. proceeded to implement tariffs on Canadian exports, with 25% duties on most goods and a 10% duty on Canadian energy and potash (reuters.com). Canada simultaneously imposed its Phase 1 retaliatory tariffs of 25% on $30 billion in U.S. imports (pm.gc.ca). At the same time, the U.S. doubled its tariff on Chinese imports to 20%. Then Canadian Prime Minister Justin Trudeau announced plans for further countermeasures totaling $155 billion CAD (Phase 2) over the coming week. However, Canada paused its Phase 2 tariffs (the additional $125 billion list) until at least April 2 in hopes that diplomacy might prevail.
  
  
• March 5–6, 2025: Facing pressure from industry and allies, the U.S. offered limited relief. On March 5, President Trump announced a 30-day exemption for all automobiles and auto parts from Canada and Mexico. On March 6, this exemption was clarified to apply to products compliant with the Canada-U.S.-Mexico Agreement (CUSMA), essentially sparing vehicles/parts meeting North American content rules from tariffs until April 2. Goods failing CUSMA origin requirements still faced 25% tariffs, and non-CUSMA energy products 10%. In response, Canada maintained its initial 25% surtax on $30 billion of U.S. goods, but postponed its second round of retaliatory tariffs (the remaining $125 billion) until April 2.
  
  
• March 12, 2025: The trade conflict broadened. The U.S. imposed new 25% tariffs on steel and aluminum imports globally (including Canada; source: pm.gc.ca). Canada responded in kind the next day (March 13) with equivalent 25% tariffs on U.S. steel ($12.6 billion worth) and aluminum ($3 billion), plus other U.S. goods totaling $14.2 billion - matching the U.S. metal tariffs dollar-for-dollar.
  
  
• March 26, 2025: President Trump signaled further escalation in the auto sector. He announced plans for an executive order to impose a 25% duty on all vehicles not manufactured in the U.S., with effect from April 2. This raised the stakes for Canada’s vital auto industry.
  
  
• April 3, 2025: The U.S. followed through on the auto tariffs. A 25% duty on Canadian-built automobiles came into effect, directly targeting an industry that employs over 500,000 Canadians (pm.gc.ca). The U.S. also indicated 25% tariffs on certain auto parts would kick in by early May, with the tariff only applying to the non-American content of CUSMA-qualified vehicles and parts. Canada immediately hit back: it implemented a 25% surtax on imports of U.S.-made automobiles that do not meet CUSMA rules. Ottawa also unveiled steps to support the sector, including a framework to incentivize automakers to continue producing in Canada. Every dollar collected from Canada’s auto counter-tariffs will be directed to support Canadian auto workers and communities.
  
  
• April 9, 2025: Global markets struggled with the expanding trade war, prompting a dramatic U.S. policy shift. In the early hours, Trump’s promised “Liberation Day” reciprocal tariffs took effect, raising import taxes on dozens of countries. Hours later, the White House announced a 90-day suspension of most of these new tariffs in an attempt to calm markets. The U.S. rolled back planned increases, maintaining a baseline 10% tariff on nearly all global imports during the 90-day pause. However, Canada’s situation was unchanged - the 25% U.S. tariff on Canadian goods (and 10% on energy/potash) remained firmly in place (reuters.com). In other words, the U.S. excluded Canada (and Mexico) from this broad tariff pause, as those tariffs were enacted under a separate border-security rationale (toronto.citynews.ca). Canada’s retaliatory measures on U.S. goods likewise stayed in effect, now including the new 25% duty on U.S. automotive imports that had just been implemented.

(To summarize: after a temporary lull in February, tariffs have largely proceeded - the U.S. is taxing most Canadian exports at 25% (with some exceptions), and Canada is matching with its own 25% counter-tariffs on a wide array of U.S. imports. Autos enjoyed a brief reprieve, but are now very much in the crosshairs on both sides.)

Trade Negotiations and Post-Election Outlook

With tariff volleys escalating through April, attention turned to diplomacy and political change. In late March, Prime Minister Mark Carney - who assumed office after Prime Minister Trudeau’s early 2025 resignation - spoke with President Trump and agreed to begin “comprehensive negotiations” on a new economic and security relationship immediately after Canada’s federal election. Both sides expressed a willingness to find a longer-term resolution. In the interim, Canadian Minister Dominic LeBlanc and U.S. Commerce Secretary Howard Lutnick led working-level talks to address urgent trade concerns. (pm.gc.ca) Still, Canada made clear it would not back down: Carney informed Trump that Canada would proceed with retaliatory tariffs to protect its workers following the U.S. actions slated for April 2.

Canada’s federal election was held on April 28, 2025, amid this trade turmoil. The result maintained continuity in approach - Carney’s Liberal government won re-election, though with a reduced minority mandate. (reuters.com) Prime Minister Carney had explicitly sought a strong majority to bolster Canada’s position in tariff negotiations with Trump, but will now need support from other parties to navigate the conflict. In his victory speech, he struck a resolute tone on trade, declaring that “our old relationship with the United States, a relationship based on steadily increasing integration, is over”. He acknowledged that the postwar system of U.S.-anchored free trade can no longer be relied upon, and vowed that Canada will adapt to this new reality. This signals a policy shift toward diversifying trade partnerships and strengthening economic self-reliance. Allies such as the EU have rallied around Canada - EU officials emphasized defending free and fair trade together with Canada and other G7 partners - suggesting Canada will deepen ties with Europe and others as a counterweight.

Following the election, the Canadian government’s stance on the tariffs remains firm. All provincial and territorial premiers have presented a united front with the Prime Minister in opposing the U.S. trade actions. (pm.gc.ca) In a joint discussion in early April, Canada’s First Ministers condemned the U.S. tariffs for putting thousands of jobs at risk on both sides of the border. They agreed on a response strategy that “maximizes impacts in the U.S., minimizes impacts on Canadians, and avoids escalating a trade crisis”. Notably, the federal government has pledged to use all retaliatory tariff revenues to support Canadian workers and businesses hurt by the dispute. This approach underscores Canada’s resolve to stay retaliatory yet pragmatic - maintaining pressure on the U.S. while shielding its own economy as much as possible.

On the negotiation front, formal talks between Canada and the U.S. are expected to begin in earnest now that the Canadian election is decided. The goal of the negotiations will be to address U.S. security concerns (like northbound drug trafficking) in exchange for lifting the punitive tariffs. Canadian officials indicate they seek a “new economic and security partnership” with the U.S. that restores stable trade relations. It’s a high-stakes diplomatic effort that will likely unfold over the coming weeks after Prime Minister Carney’s visit to the Oval Office on May 6, 2025. In the meantime, both nations are absorbing the economic fallout from the tariff war.

Policy measures are also being enacted to bolster economic resilience. In April, the federal government introduced relief for industries caught in the crossfire. For example, on April 15, Finance Minister François-Philippe Champagne announced a performance-based remission program for automakers: companies that continue manufacturing vehicles in Canada will be allowed to import a certain quota of U.S.-made (CUSMA-compliant) vehicles tariff-free despite Canada’s counter-tariffs.(canada.ca) This incentive aims to keep production jobs in Canada - if an automaker cuts Canadian output or investment, their duty-free import allowance will shrink. Additionally, Ottawa provided a temporary 6-month tariff exemption on U.S. imports that are critical inputs for Canadian manufacturers or essential for public health and safety. This measure offers immediate relief to Canadian businesses that rely on U.S. materials (and to hospitals and others buying U.S. supplies) by giving them breathing room to adjust supply chains or find domestic alternatives. These policy adjustments illustrate how Canada is trying to mitigate collateral damage on its economy while the trade dispute persists.

It’s worth noting that the Canadian economy has faced significant volatility due to the tariff conflict. The stock market reacted sharply to each twist: for instance, in early April, the S&P/TSX Composite Index plunged nearly 10% over just a few trading days - its worst stretch since March 2020 - amid fears of an all-out trade war (pbs.orgpbs.org). Only after the partial U.S. tariff pause on April 9 did markets rebound, with major indices posting relief gains. Such turbulence underlines the challenge for business planning. With a newly elected government in Ottawa and high-level talks at hand, Canadian employers must remain prepared for continued uncertainty.

The following sections outline considerations and strategies to help organizations manage their workforces and operations through these volatile conditions.

Considerations for employers during U.S. tariffs unpredictability

While government officials work toward solutions, many Canadian workplaces are feeling the strain of the unresolved tariff conflict. The threat - and reality - of escalating tariffs on Canadian goods has created considerable uncertainty for businesses. Employers have been grappling with difficult decisions in this unstable environment. Common impacts include hiring freezes or revised hiring plans, postponed capital projects, tightened budgets, and in some cases layoffs and production cuts. Unfortunately, these scenarios have started to materialize. In early April, a number of companies announced workforce reductions citing U.S. tariffs as a driving factor. (bnnbloomberg.ca) For example, automaker Stellantis temporarily halted production at its Windsor, Ontario assembly plant for two weeks, putting approximately 3,200 employees out of work for the duration. The company directly attributed the pause to the newly imposed U.S. levies on imported vehicles and parts, which disrupted its cross-border supply chain. In another case, Winnipeg-based manufacturer Eascan Automation laid off about one-third of its staff in late February due to clients stalling projects amid economic uncertainty - the cost of aluminum for inputs was set to jump nearly 50% because of tariffs, eroding demand for new equipment. These examples underscore that the tariff war’s aftershocks are being felt on both sides of the border, hitting Canadian firms and workers in tangible ways.

Canadian businesses are also confronting operational challenges beyond staffing. The on-again, off-again nature of tariff announcements has been described as a state of “whiplash” for companies dependent on cross-border trade. Many supply chain managers have found themselves in stop-and-go scenarios - rushing shipments across the border before new duties land, then scrambling to reroute or hold inventory when policies change last-minute. Logistics and customs brokers report clients repeatedly pausing deliveries whenever a White House tariff announcement looms, then paying premium storage and transport fees to move goods quickly during brief reprieves. This erratic climate makes it extremely difficult for businesses to plan production, pricing, or inventory with any certainty. As the CEO of the BC Chamber of Commerce noted, “businesses need certainty in order to operate… and invest”, and right now certainty is in short supply. (bnnbloomberg.ca)

There may also be opportunities for certain sectors amid the turmoil. Some organizations are looking to repatriate processes or find domestic suppliers to reduce exposure to U.S. tariffs, potentially boosting Canadian supply industries. (For instance, a Canadian food manufacturer might source ingredients locally rather than from the U.S. to avoid import costs, creating new business for Canadian farms.) Conversely, other companies have made the hard choice to relocate some operations into the U.S. to sidestep tariffs. Ahead of the April tariff hikes, a few Canadian manufacturers moved parts of their production south of the border to avoid steep export costs. While such moves might preserve a company’s access to the U.S. market, they come at the expense of Canadian jobs - a reality playing out in cases like furniture-maker Prepac, which shut its Delta, BC plant and shifted manufacturing to North Carolina (a decision the workers’ union criticized as “using the tariffs as an excuse”. In short, Canadian employers are caught in an extremely difficult balancing act: whether to absorb higher costs, adjust business models, or restructure their workforce, all under the cloud of trade uncertainty.

On top of everything, employees themselves are feeling vulnerable. Periods of economic uncertainty tend to heighten employee anxiety, and this trade conflict is no exception. Your workforce is likely aware of the headlines and may be worrying about the security of their jobs, especially in industries directly affected by tariffs. They’re also navigating the broader impacts of inflation and rising costs for their families, and watching the volatility in their retirement savings. Notably, recent volatility has hit retirement plans hard - for example, one Canadian seniors’ advocate admitted she’s “afraid to look” at what the tariff-induced market declines have done to her RRSP, fearing she could outlive her savings if the market keeps crashing. Some employees even express anxiety about extreme rhetoric (such as talk of annexation of Canada by the U.S.), which, while speculative, has been mentioned by leaders in the context of the dispute. All of this adds up to a workforce under stress.

In this climate, employers should assume that employee morale and focus may be impacted. Even staff whose jobs aren’t immediately at risk could be dealing with general economic stress or uncertainty about the future. It’s critical for Canadian employers to acknowledge these concerns and take proactive steps to support their teams.

Strategies for Navigating Workforce and Operational Challenges

In the face of ongoing trade disputes and economic volatility, Canadian employers can employ several strategies to steady their operations and workforce:

Plan for Multiple Scenarios and Stay Agile: In an unpredictable environment, scenario planning is essential. Businesses should develop contingency plans for various outcomes - from a full-blown tariff escalation to a negotiated resolution. This might include forecasting financial impacts under different tariff levels and having “trigger plans” for each (e.g. steps to take if tariffs double vs. steps if tariffs are lifted). As the BC Chamber CEO put it, companies must “rely on [their] skills again while focusing on what [they] can control”. That means staying nimble: be ready to pivot operations or redeploy resources on short notice. Many firms learned during the pandemic how to operate with agility, and those lessons are invaluable now. Encourage your leadership team and managers to regularly review and update action plans as new information emerges.

Optimize Costs and Preserve Cash Flow: Tighter cost management can help weather the storm. Scrutinize budgets for non-essential spending that can be paused. Consider deferring large investments or expansion plans until the outlook clarifies. It’s also wise to bolster liquidity - for instance, drawing on credit lines or building cash reserves - in case sales dip or input costs spike. “Reduce costs where possible,” advises Ms. Fiona Famulak of the BC Chamber. Some businesses are taking creative steps to protect margins. One Edmonton-based catering company created a dynamic cost-tracking system for its 100 most-used ingredients so it can implement a “tariff surcharge” on customer orders if input costs jump unexpectedly. This kind of responsive pricing strategy, while a last resort, can help a company survive by passing through some costs transparently. The key is to be proactive - identify pressure points in your cost structure and address inefficiencies now, so you have a buffer if conditions worsen.

Diversify Supply Chains and Markets: The tariff conflict is a stark reminder about over-reliance on any single trade partner. Wherever feasible, explore alternative suppliers outside the U.S. for critical materials or inventory - or source more domestically. Even if U.S. suppliers remain your primary partners, having secondary sources (in Canada or other countries) can reduce your vulnerability to tariff or border disruptions. Likewise, consider diversifying your customer base and export markets. If your growth strategy was heavily U.S.-focused, you might ramp up marketing in Europe or Asia to open new streams of revenue. Government trade promotion agencies like Export Development Canada can assist in identifying new market opportunities. In the long run, a more diversified trade footprint will make your company less exposed to any one country’s policies.

Leverage Government Support Programs: Ensure you take full advantage of relief measures offered by Canadian authorities. Both federal and provincial governments have introduced support to help companies and workers affected by the tariffs. For example, the federal government temporarily waived the one-week Employment Insurance waiting period for layoffs linked to the trade dispute and loosened EI rules so that severance payouts don’t delay benefits (pm.gc.ca) - this can soften the impact on employees if you absolutely must implement temporary layoffs. Business owners should also note the tax deferrals in place: corporate income tax payments and GST/HST remittances that became owing in the spring were deferred to June 30, 2025, providing up to $40 billion in liquidity to Canadian businesses. Additionally, new federal financing facilities and increased funding to regional development agencies are being deployed to support companies through this crisis. Keep informed about programs like the Work-Sharing Program (which allows staff to work reduced hours while receiving partial EI, avoiding layoffs) or any provincial grants for impacted industries. These supports can be critical lifelines to maintain operations and retain your workforce during tough times.

Maintain Open Communication with Stakeholders: Proactively communicate with your key stakeholders - including employees, suppliers, customers, and investors - about how your company is managing the tariff situation. Uncertainty is easier to tolerate when people are being kept in the loop. If you are adjusting orders or production schedules with suppliers, give them as much lead time as possible and collaborate on solutions. With clients, be transparent if you anticipate any delivery delays or need to adjust pricing due to tariff costs; many customers will be understanding if kept informed. Internally, engage your workforce (more on this in the next section) so they understand the steps being taken to navigate the challenges. Clear and frequent communication can preserve trust and confidence, which are invaluable in turbulent periods.

Supporting Employee Well-Being and Financial Health

During uncertain times, an employer’s duty of care toward employees becomes even more critical. Supporting your employees’ well-being and financial health isn’t just a compassionate response - it can help maintain productivity and loyalty when external stresses are high. Canadian HR leaders should consider several approaches to bolster their workforce through the tariff conflict:

Leverage your Benefits and Assistance Programs: Remind employees of the resources available to help them cope with stress or financial strain. For instance, most group benefit plans include an Employee Assistance Program (EAP) - ensure your staff know how to access it. EAPs often provide counseling services and self-help resources on managing change, anxiety, and uncertainty. They may also offer financial coaching or wellness tools. These can be invaluable for employees struggling with money worries or emotional distress related to the volatile economy. Additionally, review if your health benefits cover services that could support mental health (such as psychology sessions) and promote these to your team. Some employers are enhancing benefits in response to inflation, such as increasing coverage limits or adding wellness days - any steps that reinforce your support will be appreciated by employees.

Provide Financial Education and Market Guidance: Many employees are anxious about their financial futures - whether it’s daily budgeting as prices rise, or the hit to their retirement investments from market swings. Employers can play a role in improving financial literacy and resilience. Consider organizing financial wellness workshops or webinars for your staff. Topics could include budgeting under inflation, strategies for managing debt, or understanding RRSP/TFSA investment basics. You might partner with your retirement plan provider or a financial advisor to host these sessions; in fact, your group retirement plan providers likely have ready-made resources on managing market volatility and retirement planning tools (e.g. online calculators, investment seminars) - tap into those. By equipping employees with education on how to adjust their financial plans, you help them feel more in control. For example, explaining the importance of staying invested for the long term despite short-term market dips can calm those worried about their pensions or RRSPs. If your plan offers one-on-one sessions with a retirement counselor, encourage employees to take advantage. Market education tools and impartial financial advice can go a long way toward alleviating the fear of the unknown. Employees who feel more confident about their personal finances will be less distracted at work.

Communicate Transparently and Often: In turbulent times, leadership visibility and honesty are paramount. Make it a priority to communicate regularly with your employees about how the company is responding to economic conditions. This could involve monthly town-hall meetings, weekly email updates from the CEO, or departmental check-ins - any format that suits your organization, as long as the communication is consistent. Share what you can about the situation: for instance, if the U.S. tariffs have caused your input costs to rise, you might explain that the company is implementing cost-saving measures (travel freezes, etc.) to avoid impact on jobs. If business is slowing, address the elephant in the room and reaffirm your commitment to your team’s job security whenever possible. Employees don’t expect leaders to have a crystal ball, but they deeply appreciate candor. Transparent communication builds trust and credibility. It also quells rumors - in a void of information, employees might assume the worst. By updating them frequently, you demonstrate that management is on top of the situation and caring for the staff’s interests. Even if the news is difficult (say, a necessary reduction in hours), delivering it with openness and empathy will foster a more resilient workforce. Encourage two-way communication as well: provide channels (surveys, Q&As, anonymous suggestion boxes) for employees to voice concerns or ideas. Making people feel heard is a powerful way to boost morale when external events make them feel powerless.

Further, simply show empathy and flexibility. Understand that employees may be dealing with challenges at home - for instance, a spouse’s job could be affected by the tariffs, or they may be cutting personal spending. Whenever feasible, offer flexibility: allow remote work or adjusted hours if that helps an employee manage stress or save costs (e.g. on commuting). A supportive work environment will strengthen employees’ loyalty and mental well-being. Celebrating small wins and focusing on teamwork can also remind everyone that you’re all in it together.

We’re Here to Help

As the U.S.-Canada tariff dispute continues to evolve, we will keep providing updates and insights for Canadian employers. Our experienced team is actively working with insurance and investment partners to optimize coverage and financial solutions, helping organizations maintain cost-effective benefit programs amid uncertainty. Through proactive policy management and continuous market analysis, we’re here to help you navigate economic shifts with confidence.

Reach out to us today to review your current coverage and explore strategies for maintaining stability in an ever-evolving market. We understand the broader impact tariffs may have on your operations, workforce, and overall strategy, and we’re ready to help you adapt and thrive despite these challenges. Contact us at People Corporation today to find out how we can help.