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WorkOntario alone is at risk of losing up to 500,000 jobs
Published Jan 21, 2025 • 4 minute read
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A sign informing job-seekers of no employment outside a store in Sydney, N.S. Photo by Darren Calabrese/Bloomberg files
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New year, new and bigger problems.
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The looming tariffs proposed by the incoming Trump administration represent an existential threat to Canada’s economy. A 25 per cent duty on all Canadian imports is not just a policy shift; it is an economic earthquake with the potential to obliterate jobs, cripple industries and leave millions of Canadians financially stranded. The sheer scale of likely job losses is staggering. As indicated by Premier Doug Ford, Ontario alone is at risk of losing up to 500,000 jobs.
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This is not just about auto workers or factory floors; the economic ripple effects would be felt across multiple sectors, from energy to retail, as consumer demand plummets. I have seen this movie before and I suspect I will see it again: when businesses struggle, the impact is never confined to a single industry. Secondary job losses will compound the problem, leading to a downward economic spiral.
Canada’s manufacturing sector is already operating under immense pressure. Competition, high operational costs and fluctuating export demand make it a fragile industry. The auto sector, in particular, is poised for absolute disaster. Given the deep integration between Canadian and American supply chains, tariffs of this magnitude would make Canadian products uncompetitive almost overnight. Who will keep their plants in Canada after this, let alone build them here? The inevitable consequences: production cuts, layoffs and potential plant closures.
Meanwhile, middle managers will find themselves among the early casualties, as businesses look for ways to immediately trim costs, attempting to do more with less.
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Troublingly, beyond the immediate job losses, there lies a more insidious issue that is not generally discussed outside the employment law realm — until it is already happening: many affected companies will be unable (or unwilling) to provide proper severance, at a time when the job market is tighter than ever.
Severance pay is a critical financial bridge for workers who suddenly find themselves unemployed. In normal times, businesses can plan for workforce reductions. However, a tariff-induced crisis is different. Companies are not just reducing headcount; they are fighting to survive. For many, severance obligations will become secondary to simply keeping the lights on.
Employers who can afford to absorb the blow will nonetheless reduce the value of severance packages offered, fearing worse times ahead.
Workers expecting financial cushion upon termination will find themselves waiting in line, forced to navigate unemployment with minimal support in the interim. With our courts continuously backlogged, terminated employees may be forced to accept discounted severance terms rather than wait years for their matter to reach a courtroom. Even then, a paper judgment doesn’t pay the bills or put food on the table, and the company may no longer be around to turn the judgment into dollars.
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The resulting economic contraction could take years to recover from — if a recovery is even possible — affecting not just workers but entire communities. Retailers, restaurants, and service industries rely on disposable income, which could all but evaporate, exacerbating unemployment levels. By the time jobs resurface, the damage will be done.
The response from policymakers needs to be carefully crafted and precisely implemented. If Trump’s tariffs come to pass, federal and provincial governments may be forced to step in with targeted support for affected industries.
Although retaliatory counter-tariffs may offer Trudeau short-term political satisfaction on his way out the door, they risk escalating tensions without protecting Canadians. In fact, the case could be made that counter-tariffs, which will undoubtedly drive up the price of goods for the end user and reduce purchases of Canadian products, will only exacerbate the pain for Canadians.
Long-term, Canada will be forced to reconsider its economic strategy. The overreliance on U.S. trade has left the country vulnerable to policy whims south of the border. Diversifying trade relationships, investing in innovation and creating more resilient industries should be national priorities going forward, as they will help insulate the nation from similar problems down the road.
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This is not just another trade dispute — it is a fundamental challenge to Canada’s economic viability. The inability of struggling businesses to provide severance will deepen the hardship for laid-off workers and push already strained social safety nets to their limits. Federal and provincial governments must recognize the gravity of the situation and act accordingly. If they misstep, the nation may find itself grappling with one of the most severe recessions in modern history.
Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta and British Columbia. He practises employment law in eight provinces and is the author of six books, including the Law of Dismissal in Canada. Gregory Sills is a partner at Levitt LLP.
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