FAO RELEASES REPORT ON THE POTENTIAL IMPACTS OF US TARIFFS ON ONTARIO’S ECONOMY
TORONTO, April 30, 2025 – Today, the Financial Accountability Office of Ontario (FAO) released a report that examines Ontario’s trade relationship with the United States and estimates the potential impacts of US tariffs on Ontario’s economy, including Gross Domestic Product (GDP), employment and inflation.
The United States is Ontario’s most important trading partner. In 2024, the US accounted for 77 per cent of the province’s international goods exports and 60 per cent of its services exports. An estimated 933,000 Ontarians worked in US export-related jobs in 2024, about one in every nine jobs in the province, with 536,000 of these jobs in the goods sector. Ontario’s manufacturing sector is particularly reliant on US trade, with 40 per cent of its production exported to the US.
Starting in 2025, the US announced new tariffs on goods it imports from abroad, with many subsequent changes on their extent and timing. The FAO analyzed the potential economic impacts of a tariff scenario based on trade actions announced by the US and Canada as of April 17, 2025. This includes US tariffs on steel, aluminum, automobiles and automobile parts, and Canadian retaliatory tariffs.
If these tariffs remain in place, the FAO estimates that Ontario’s real GDP growth would slow to 0.6 per cent in 2025, less than half the 1.7 per cent growth expected in the absence of US tariffs. This implies that a modest recession would occur in 2025. In 2026, Ontario’s real GDP growth would be 1.2 per cent, compared to 1.9 per cent growth in a no tariff outlook.
Ontario’s manufacturing sector would be the most impacted by US tariffs. In 2026, the first full year of the tariff impact, the manufacturing sector’s real GDP level would be eight per cent lower than in the no tariff outlook. All other sectors, including services, would also be impacted through supply chain effects and broader economic impacts from lower incomes, profits, consumption and investment.
The FAO estimates that US tariffs would result in 119,200 fewer jobs in Ontario in 2026, compared to the no tariff outlook. Manufacturing would be the most affected, with 57,700 (-6.8 per cent) fewer jobs in 2026. The manufacturing sector’s supply chain industries would also be impacted, particularly labour-intensive service industries, including trade and transport, and professional services.
Finally, Ontario’s Consumer Price Index (CPI) inflation rate would be 0.2 percentage points higher in 2025 and 0.3 percentage points higher in 2026 due to US tariffs and Canada’s retaliatory response.
The actual impact of tariffs on Ontario’s economy is uncertain and will depend on the magnitude and breadth of tariff coverage, as well as how businesses, households and economies respond. If tariffs are lowered, the negative impact to Ontario’s economy would be more modest. However, if the US imposes more or higher tariffs, Ontario could experience a deeper recession than estimated in the FAO’s main tariff scenario.
For more information, read the full report here.
Quick Facts:
- Ontario’s exports to the US accounted for 13 per cent of the province’s GDP in recent years, more than double the contribution of Ontario’s exports to the rest of the world.
- Over the 2013 to 2024 period, Ontario recorded trade deficits with the US in each year (except for 2016), averaging a trade deficit of $8 billion. In 2024, Ontario’s US trade deficit was an estimated $4 billion.
- US tariffs on Ontario exports would negatively affect employment in all Census Metropolitan Areas (CMAs) in the province. Windsor is expected to be impacted the most, with employment 1.6 per cent lower in 2026, followed by Guelph (-1.6 per cent lower), Brantford (-1.5 per cent lower), Kitchener-Cambridge-Waterloo (-1.5 per cent lower) and London (-1.3 per cent lower). These CMAs are more exposed to export-focused manufacturing than other Ontario CMAs.
About the FAO
Established by the Financial Accountability Officer Act, 2013, the Financial Accountability Office of Ontario (FAO) provides independent analysis on the state of the Province’s finances, trends in the provincial economy and related matters important to the Legislative Assembly of Ontario.
Visit our website or follow us on X and LinkedIn for more information on our reports.
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For further information, please contact:
Sophia Zhu l 416 931 5498 l SZhu@fao-on.org l fao-on.org