With all the noise of back-to-back provincial and federal election campaigns, you’d be forgiven for not hearing the cracking sounds coming from Ontario’s fragile economy since January, even before U.S. President Donald Trump’s tariffs began to bite.
- The unemployment rate in the province was 7.6 per cent in January, 7.3 per cent in February and 7.5 per cent in March, Statistics Canada reported. The only province with a higher unemployment rate right now is Newfoundland and Labrador.
- Ontario’s real GDP grew by just 1.2 per cent in 2024, Statistics Canada reported. The only provincial economy that grew more slowly last year was Manitoba’s.
- Only 15 per cent of businesses felt confident in the province’s economy in February, down from 26 per cent in December, according to a survey for the Ontario Chamber of Commerce.
It all paints a picture of an economy that was already rather feeble, just as Trump’s tariffs appear poised to kneecap Ontario’s export-oriented industries.
Daniel Tisch, president and CEO of the Ontario Chamber of Commerce, says roughly two-thirds of its business members expect to be affected negatively by U.S. tariffs.
“There’s a lot of anxiety, there’s a lot of concern,” Tisch said in an interview. “You see them [businesses] deferring decisions to expand, to invest and to hire people, none of which are good things.”
The Chamber highlighted this vulnerability in February in its 2025 economic report, with the image of a “FRAGILE” sticker slapped on its cover saying, “Ontario Economy: Handle With Care.”
“As we ended 2024, there were some encouraging signs, in that consumer confidence was rising, as was consumer spending, we saw interest rates and inflation coming down,” said Tisch.
Economic turnaround ‘snuffed out’
“We were beginning to see a turnaround, but it’s like a candle has been snuffed out,” he added.
Back in the fall, the 2025 economic growth forecasts for Ontario averaged 1.8 per cent.
The big banks have now slashed those forecasts, with TD predicting real GDP growth of one per cent, RBC forecasting 1.2 per cent and Scotiabank expecting 1.3 per cent growth.
Meanwhile, the province’s independent Financial Accountability Office predicted last week that U.S. tariffs and Canada’s retaliation could result in some 119,000 fewer jobs in Ontario by next year, pushing unemployment upward by another 1.1 percentage points.
While Premier Doug Ford has been vocal about the future threats that tariffs pose to jobs and the economy in this province, he’s been far quieter about the tepid growth and rising unemployment figures that predate Trump’s re-election.
At a news conference last week, CBC News asked Ford to explain why Ontario’s unemployment rate is so high.
Unemployment rate hits 2014 levels
“The tariffs are a major, major factor,” Ford responded, ignoring the fact that unemployment has risen steadily for the past two years.
“But let’s talk about since we’ve been elected,” Ford continued. “There’s over one million more people working today than there was seven years ago because we’ve created the climate and conditions for companies to come here and invest.”
Ford’s figure about the increase since 2018 in the number of Ontarians working is accurate, but it ignores the even greater growth in the population of would-be workers over the same period.
Statistics Canada figures show 7.2 million people employed in June 2018, when Ford’s PCs were first elected, rising to 8.2 million in March of this year. The size of the labour force was 7.7 million in June 2018 and rose to 8.9 million by March. (StatsCan’s jobs report for April is coming out on Friday.)
If Ford were to compare unemployment rates instead of job numbers, the picture would not look so rosy. When he first became premier, Ontario’s unemployment rate was 5.9 per cent. It’s currently sitting at 7.5 per cent.
Another way to look at it: The unemployment rate in Ontario has now exceeded seven per cent for eight consecutive months. Apart from the worst of the pandemic, the last time that happened in this province was 2014, way back when Kathleen Wynne was premier and leading her Liberals to a majority election win.
Why was Ontario’s economy sluggish before tariffs?
Armine Yalnizyan, an economist and the Atkinson Fellow on the Future of Workers, sees three key factors behind Ontario’s economic sluggishness that all pre-date tariffs.
She points to a decline in the tech sector, particularly when it comes to shedding jobs; the profound slowdown in construction, with interest rates suppressing people’s ability to buy homes; and last year’s drop in immigration numbers, a switch from how rapid population had previously helped fuel Ontario’s economic growth.
Yalnizyan is concerned about how layoffs in trade-exposed sectors such as the auto industry will ripple through the economy.
“As these people lose their jobs, they stop going out for dinner, they stop hanging out at bars and restaurants. And so consequently, the cascade effect into the hospitality sector will be very large,” Yalnizyan said in an interview.
A new report from Ontario’s Financial Accountability Office shows the potential impact of Donald Trump’s tariffs on the province, including possible unemployment and affordability.
Brian Lewis, the province’s former chief economist, now a senior fellow at the Munk School, says overall economic growth has been dampened in most western economies by central banks keeping interest rates high to rein in inflation.
“We were finally starting to see some light at the end of the high-interest-rate tunnel, inflation being brought down,” said Lewis in an interview.
Ontario budget coming May 15
“Fourth quarter (of 2024) growth in Ontario was the best quarter in a while. It looked like things were going to be pretty good. But now we have this tariff issue thrown at us, and that’s really changed people’s perspective,” Lewis said.
While the economic outlook for Ontario under Trump tariffs looks generally dismal, Lewis says federal and provincial government support for affected workers and businesses can soften the blow.
“Also, what are they going to do in the long run to reshape our economic composition and make our economic relationships less vulnerable?” he said. “I think that’s going to be something to really look forward to in what I expect to be a couple of really interesting government budgets over the next few months.”
The provincial budget is due to be tabled on May 15. The re-elected federal Liberals have not announced a budget date.
The big-ticket tariff response measures from the Ford government so far include a six-month deferral of about $9 billion in provincially administered business taxes and rebating $2 billion of Workplace Safety and Insurance Board premiums to employers.
The government has also tabled legislation to cut down interprovincial trade barriers and speed up approvals of mines and other resource projects.
Both Yalnizyan and Tisch see other ways the provincial government can help.
“The good news is that there is a lot that provincial governments can do, and there’s a lot that Ontario is doing right now,” said Tisch, the chamber of commerce CEO.
He says he wants to see a comprehensive review of taxation and regulations, as well as a boost to post-secondary investment “to better align the post secondary education system with the needs of the labour force.”
Yalnizyan says she wants the government to focus on keeping down the costs of basics, such as housing and child care.
She says the government has floated some “very strange” ideas about protecting Ontario’s economy, such as framing Ford’s idea of a tunnel under the 401 as a response to the tariffs.
“We’re not seeing an indication that they’re being very serious about making life more affordable on the basics, said Yalnizyan. “A $200 cheque just before the election isn’t going to cut it in a trade war.”
