Trump's Tariff War and Impact on Canadian Employment Law

In Context: Trump’s Tariffs and Their Impact on Businesses

In recent years, businesses across Canada will now have to navigate the fallout from the Trump administration’s trade policies, especially the imposition of 25% tariffs on a wide range of goods imported to the U.S. (as well as Canada’s reciprocal response). These tariffs were implemented as part of former President Trump’s broader economic agenda, which aimed to reduce the U.S. trade deficit on the pretext of a national health emergency (an excuse that most have argued does not even pass a basic credibility test). However, for many employers, these tariffs will mean higher costs, supply chain disruptions, and more challenging business environments for both employers and employees.

It will become increasingly likely that the economic pressures might lead many employers to reduce their workforce, resulting in potentially massive layoffs or terminations. While legitimate business challenges could certainly require such actions, there is also the potential for employers to leverage these external economic factors to justify layoffs or terminations that in the normal context be deemed unjustifiable. This raises important questions about whether businesses can lawfully use tariffs as a reason to dismiss employees, and what legal recourse employees have when faced with such situations.

In this blog post, we will explore how the imposition of Trump’s tariffs and Canada’s retaliatory response can be used as justification for layoffs and terminations, what this means for employees, and how workers can protect their rights with the help of a wrongful dismissal lawyer.

The Impact of Trump’s Tariffs on Businesses

While the new U.S. government has billed Trump’s tariff as an economic strategy to “make America rich”, they will far-reaching consequences for businesses in both U.S. and Canada. Many companies, particularly those in manufacturing, retail, and technology, will see their production costs rise due to higher prices on imported raw materials or finished goods. Likewise, other businesses will face delays and disruptions in supply chains as a result of the tariffs. Generally speaking, most experts agree that most businesses will have no choice but to pass those costs onto consumers, raising the price of goods or services.

As a result, as companies find themselves squeezed financially, one of the first expense they may look to for cutting costs is labor and downsizing. In certain cases, an employer might argue that layoffs or terminations are necessary to maintain the financial health of the company, especially in the face of rising costs due to tariffs.

Using Tariffs as Justification for Layoffs or Terminations

As an Ontario employment law firm, we dealt directly with the serious impact of the COVID-19 pandemic, especially the chaotic response of employers resulting in massive temporary layoffs and employment terminations. As we saw in the widespread response by industries across the economy, there are multiple ways that an employer might use the Trump-era tariffs as justification for temporary layoffs. Beyond restructuring or simply downsizing, one circumstance that may arise is that the employer can claim that the tariffs led to a frustration of employment, making the continuation of an employee’s role unfeasible.

Frustration of Employment

Under employment law, frustration of employment occurs when external factors beyond the control of either the employer or the employee make it impossible for the employment contract to continue. In this context, employers may argue that the “trade war” caused by Trump’s tariffs cause substantial disruptions to a business’s operations (whether through increased costs or supply chain issues), resulting in insurmountable challenges that effectively”frustrated” the terms of employment.

For example, a manufacturing company in Canada that faces a 25% increase in the cost of goods it exports to U.S. sellers due to Trump’s tariffs, may experiencing a drop in customers and revenue. If this impact on its business makes production unsustainable or significant revenue losses, and the company cannot adjust prices or cut costs elsewhere, it might claim that the economic pressures have made it impossible to continue employing workers in certain positions. In this case, employees might be told that their roles are being terminated due to the external economic pressures and offer them a fair severance package, or as a measure of avoiding a severance package, argue that the employment contract was frustrated by Trump’s tariffs and the employee was only entitled to receive the minimum amount of termination pay and severance pay under Ontario’s Employment Standards Act, 2000.

When Is It Wrongful Dismissal?

While employers can use external factors like Trump’s tariffs as part of their rationale (or a pretext) for terminations under the guise of frustration of contract to avoid providing an employee with a severance package, there could be significant legal consequences. Among other things, it is possible that if an employee is successful in challenging the termination in a wrongful dismissal claim, a court may find that Trump’s tariffs (or the resulting U.S.-Canada-Mexico trade war) does not constitute an event resulting in a legally frustrated employment contract. In which case, the employer would be responsible for providing employees a severance package.

Book a Consultation with an Employment Lawyer in Toronto

At Bune Law, we understand and are familiar the complexities of workplace law and are committed to helping both employers and employees navigate the significant challenges caused by Trump’s tariffs and Canada’s response. Whether you are an employer or employee dealing with temporary layoffs or termination of employment, need to respond to a wrongful dismissal or constructive dismissal, or simply need guidance on your rights and obligations for a severance package review and negotiation, our experienced employment lawyer is here to assist you.

Book a confidential consultation with our Toronto employment law firm to protect your legal rights to understand your options and protect your rights.

Why Choose Bune Law When You Need an Ontario Employment Lawyer?

Experience in all areas of workplace law, including wrongful dismissal claims, constructive dismissal claims, severance package reviews, severance package negotiations, discrimination and human rights disputes, and employment contract reviews, including navigating the important issue between just cause vs. wilful misconduct in Ontario employment law.
Proven track record of successfully resolving workplace disputes through negotiation, mediation, and employment litigation.
Compassionate and personalized approach to each case, ensuring tailored solutions that meet your specific needs.

If you need a Toronto employment lawyer who is committed to delivering strong results and proactive solutions, please contact Bune Law online or by phone today at 647-822-5492.