Pace of Manufacturing Sales Growth Eased in December

Key insights

As the threat of broad U.S. tariffs loomed over Canadian producers, manufacturing sales increased by 0.3 per cent in December. In 2024, annual manufacturing sales declined by 2.1 per cent. Weaker sales of motor vehicles and parts (which fell by 11.3 per cent) accounted for much of this decline. Statistics Canada noted the auto industry faced weak global demand last year and many Canadian assembly plants underwent retooling to produce electric vehicles, which interfered with production. In December, higher energy prices pushed sales of petroleum and coal products up even as sales volumes declined, helping to offset weakness in motor vehicle sales.

U.S. tariffs on Canadian steel and aluminum are set to take effect in March, which will be damaging to manufacturers in these sectors. Nearly all Canadian steel exports are sent to the United States as, due to its weight, steel is difficult to transport to Europe and Asia. Aluminum has greater potential for export market diversification, yet this process can’t happen overnight. The sudden imposition of U.S. tariffs provides little time to make changes before negative impacts take hold. The threat of broader tariffs on Canadian goods—and a cumulative tariff of 50 per cent tariffs on steel and aluminum—also hangs over the economy. (Read our exploration of the detrimental impacts of this policy on Canada’s economy.) And recently, U.S. President Donald Trump floated the idea of a tariff of 50 to 100 per cent directly on Canadian vehicle exports to the United States. Motor vehicle manufacturing in North America has developed for decades under relatively frictionless trade. Tariff barriers will bring debilitating disruption to the motor vehicle manufacturing industry—not only in Canada but also in the United States. This damage will be compounded if tariffs are applied each time a component crosses the Canada-U.S. border, which can happen several times in the automobile production process.

Economists generally agree that tariffs are not good policy. Barriers to free trade lead to market distortions and protect less efficient producers instead of putting resources to their most effective use. Producer costs and consumer prices rise, and these effects are compounded when trading partners retaliate (as Canada has announced it will). If the tariffs are intended to shield domestic manufacturers in the United States, many of these intended beneficiaries have spoken out against protectionist trade policies. The Aluminum Association in the U.S. has called for tariff exemptions for Canadian aluminum, arguing it would take “billions of investment over decades to make the United States fully self-sufficient for its metal needs.” Major automakers, including Ford and Volkswagen, have also warned about the harm tariffs would bring to U.S. manufacturers.

For more details about Canadian manufacturing and industrial trends, please explore our Industry Lens reports.