Canada’s escalating trade fight with the United States is moving from the negotiating table into workplaces, factory floors and household budgets. Prime Minister Mark Carney’s government has unveiled a $7.5-billion package ai after Washington imposed new 50% tariffs on $27.6 billion worth of Canadian goods on August 22.
The response goes well beyond retaliation. Ottawa is extending Employment Insurance protections, creating new liquidity for smaller companies, expanding regional business assistance, financing industrial diversification and making emergency loans more flexible for large employers. At the same time, Canada is preparing matching counter-tariffs on $27.6 billion of U.S. imports beginning September 8. The strategy reflects a difficult calculation: fight back against Washington while trying to prevent the resulting economic disruption from turning into layoffs, business failures and permanently lost industrial capacity.
Ottawa Builds a $7.5-Billion Economic Buffer
The centerpiece of Ottawa’s response is a $7.5-billion package of new and expanded worker and business supports. It comes on top of nearly $25 billion in tariff-related assistance that the federal government says it has introduced over the previous 18 months. The latest package spreads money across several different pressure points rather than concentrating it in one bailout fund. About $3.5 billion is directed toward workers and employers, $2 billion toward a new diversification fund, $1.5 billion toward regional business programs and another $500 million toward new Business Development Bank of Canada liquidity. Large companies will also receive more flexibility under an existing $10-billion federal loan facility.
That structure matters because tariffs rarely create only one type of economic problem. An exporter can lose orders while an otherwise healthy supplier suddenly waits longer for payment. A manufacturer may need cash to keep workers employed, while another company may need capital to retool machinery or find customers outside the United States. Ottawa is effectively trying to build several bridges at once: income support for displaced employees, short-term working capital for companies and longer-term investment intended to keep industrial capacity in Canada.
Employment Insurance Is Being Stretched Further
Workers who lose jobs because of the trade shock will encounter a more forgiving Employment Insurance system. Ottawa is extending for another year the temporary waiver of EI’s traditional one-week waiting period, allowing eligible claimants to receive benefits from the first week of a claim. It is also extending the measure that prevents separation payments such as severance and vacation pay from having to be exhausted before EI benefits begin. For long-tenured workers, the government is extending for another eight months a temporary program providing as many as 20 additional weeks of regular benefits.
Those changes build on measures already used during the earlier phases of the tariff dispute. When Ottawa extended the previous EI rules in March, the government estimated that 632,000 additional claims could benefit from waiving the waiting period, 136,000 from the treatment of separation payments and 43,500 from the additional weeks available to long-tenured workers. Under the existing framework, qualifying long-tenured employees can receive as many as 65 weeks of regular benefits. That longer runway could become particularly important in specialized manufacturing communities where replacing a lost industrial job can take considerably longer than finding work in a more broadly distributed occupation.
A New EI Rule Addresses Workers Who Previously Quit
One of the more unusual elements of the package concerns workers who voluntarily left an earlier job before subsequently losing their most recent employment through no fault of their own. Ottawa says a new temporary measure, lasting one year, will prevent those workers from automatically being penalized when seeking EI because of the earlier voluntary departure. The key condition is that their latest job loss must be involuntary. That change could matter in a labour market where workers increasingly move between employers, accept temporary positions or leave one workplace for what initially appears to be a more promising opportunity.
The adjustment illustrates how trade disruptions can collide awkwardly with benefit rules designed around more conventional unemployment. Consider a skilled employee who left a stable position for a new manufacturing job, only to have the new employer lose U.S. orders several months later and cut staff. Under normal EI rules, an earlier voluntary departure can complicate entitlement calculations. Ottawa’s temporary measure is designed to remove that obstacle for workers whose current unemployment was beyond their control. The government has not presented the change as permanent EI reform, however. For now, it is another emergency flexibility tied to the economic instability surrounding the tariff conflict.
Smaller Businesses Get a New Liquidity Lifeline
For businesses facing immediate cash-flow pressure, Ottawa is adding a second $500-million liquidity stream to the Business Development Bank of Canada’s Pivot to Grow program. Companies directly affected by tariffs will be able to seek loans ranging from $250,000 to $5 million, regardless of sector. The new stream is expected to offer interest-only payments for 36 months, while the application process is to be simplified. Ottawa is also lowering the minimum annual revenue threshold for BDC’s direct tariff-related programs to $1 million, potentially opening the door to substantially smaller firms than were previously eligible.
Cash flow can become the first casualty of a tariff shock even when a company remains fundamentally viable. An exporter may still need to pay employees, suppliers, leases and utilities while customers delay purchases or negotiate lower prices to compensate for duties at the border. BDC’s existing Pivot to Grow initiative was already designed around that problem, offering financing to businesses negatively affected by tariffs and related economic uncertainty. The latest expansion is therefore less about rescuing companies that were already failing and more about giving otherwise sustainable employers additional time to adjust before short-term disruption forces deeper cuts.
Regional Agencies Get Another $1.5 Billion for SMEs
Ottawa is also adding $1.5 billion to the Regional Tariff Response Initiative, which operates through Canada’s seven regional development agencies. Beginning in September, the maximum non-repayable contribution available through the initiative will rise from $1 million to $3 million. Companies will also be able to receive as much as $2 million specifically for demonstrated liquidity needs, rather than limiting assistance primarily to investment, productivity or market-pivot projects. The program is aimed particularly at small and medium-sized businesses facing tariff-related disruptions.
The regional approach allows federal support to reach companies whose problems can look very different depending on where they operate. A machinery producer in Ontario, a forestry supplier in northern Quebec or a specialized manufacturer in Western Canada may all face U.S. exposure without needing the same solution. Existing regional tariff programs have already financed individual modernization projects. Quebec-based Gilbert Products, for example, recently received $3 million in repayable assistance to increase production capacity and automate more of its operations. The expanded program gives Ottawa greater ability to combine those longer-term investments with the immediate liquidity businesses may need simply to keep production moving.
Ottawa Sets Aside $2 Billion to Keep Investment From Freezing
Not all of the new money is designed simply to keep companies solvent. The government is putting an additional $2 billion into a newly created Canada Strong Diversification Fund, administered through the Strategic Response Fund. The money will support tariff-affected companies with projects that are ready to proceed, including capital maintenance investments. Ottawa says applications will be coordinated with regional development agencies and subjected to a faster, one-step review and approval process in an effort to prevent viable investments from being shelved during the trade dispute.
The new fund expands a strategy that predates the latest tariff escalation. Budget 2025 established a $5-billion Strategic Response Fund to help trade-exposed companies adapt, retool, preserve Canadian production and enter additional markets. The economic logic is different from simply replacing lost revenue. A manufacturer that postpones replacing equipment for several years can emerge from a tariff dispute less competitive even if it survives financially. Similarly, a company overwhelmingly dependent on one American customer may remain vulnerable after tariffs disappear. The diversification funding attempts to use the crisis as a reason to modernize plants, broaden markets and reduce future dependence on a single export destination.
Keeping Employees Attached to Employers Becomes a Priority
Ottawa is also trying to prevent unemployment before it happens. The $3.5-billion Rapid Response Supports for Workers and Employers package will establish a Workforce Retention and Retraining Program combining the existing EI Work-Sharing program and Worker Retention Grant into a streamlined offering. Employers will be eligible for additional funding of as much as $1,000 per participant to cover training and administrative expenses. Job Bank will also be enhanced to connect displaced or underused workers with opportunities arising from major projects, housing construction and defence procurement.
There is evidence that work-sharing has already been used heavily during the tariff dispute. Federal figures released in March showed roughly 1,500 tariff-related Work-Sharing applications had been approved since the beginning of 2025, covering more than 54,000 workers and helping avert an estimated 20,000 layoffs. Work-Sharing allows employees to accept reduced hours while EI partially compensates for lost working time, letting employers retain experienced staff instead of dismissing them outright. That can be valuable in specialized industries where rebuilding a workforce after demand returns is difficult. Ottawa’s latest move tries to add retraining to the equation so reduced working hours become time for acquiring new skills rather than simply waiting for orders to recover.
Big Employers Get Longer Emergency Loan Runways
Large companies are receiving a different type of protection. Ottawa is changing the $10-billion Large Enterprise Tariff Loan facility so qualifying businesses can receive support covering as much as 36 months of liquidity requirements, up from 24 months. Maximum loan terms will rise from 10 years to 15 years. The facility is administered by the Canada Enterprise Emergency Funding Corporation and is designed for otherwise viable Canadian businesses struggling to obtain enough conventional financing during major trade disruptions.
The program is not theoretical. Ottawa announced a $100-million facility loan for Millar Western Forest Products in July and another $60 million for Quebec lumber producer Arbec Bois d’œuvre. Arbec operates eight plants and employs nearly 800 people, illustrating why governments view large-company liquidity differently from assistance for a small business. When a major industrial employer fails, the damage can spread through trucking firms, contractors, equipment suppliers and entire communities. Longer repayment periods do not eliminate the economic cost of tariffs, but they can prevent companies from making irreversible decisions—closing facilities, cancelling investment or permanently eliminating jobs—simply because they cannot finance a prolonged period of trade uncertainty.
Counter-Tariffs Will Raise the Stakes on September 8
Financial assistance is only one half of Ottawa’s response. Beginning at 12:01 a.m. on September 8, Canada plans to impose new tariffs on $27.6 billion worth of U.S. imports, matching the value of Canadian goods affected by Washington’s latest measures. Canadian duties will be set at 15%, 25% or 50% depending on the product and corresponding U.S. tariff. Targeted categories include steel and aluminum, dairy products, appliances, agricultural equipment, pulp and paper, plastics and electronics. Existing Canadian counter-tariffs on U.S. automobiles will remain in place.
For some steel and aluminum products already facing Canadian duties of 25%, the rate will rise to 50%. Appliances, dairy products including cheese, and certain fish and seafood products are among categories facing 25% tariffs. Ottawa says the purpose is to give Canadian producers a more competitive position against American imports, but retaliation also carries domestic costs. Carney acknowledged before the detailed package was released that counter-tariffs can raise prices and reduce consumer choice. That helps explain why the government is coupling retaliation with billions of dollars in support: Canada is deliberately increasing pressure on U.S. exporters while simultaneously preparing to absorb some of the resulting economic pain at home.
The Real Test Is Whether Ottawa Can Stop Temporary Damage From Becoming Permanent
Canada enters this escalation with a labour market that is not collapsing, but is hardly insulated from a major trade shock. Statistics Canada reported a 6.4% unemployment rate in July 2026. Economist Trevor Tombe of the University of Calgary estimates that if the new U.S. tariffs remain in place and affected sales fall substantially, a little more than 87,000 Canadian jobs could ultimately be at risk directly and through suppliers and service industries. His estimate includes roughly 52,000 directly exposed jobs and another 35,000 in connected businesses, with Ontario potentially facing the largest absolute losses.
Canada’s exposure remains structural. The United States received 71.7% of Canadian merchandise exports in 2025, although that was down from 75.9% a year earlier. Trade with non-U.S. markets has been expanding, but replacing American demand is a long-term undertaking, not something a loan program can accomplish in a few months. The $7.5-billion package therefore buys time rather than eliminating the underlying problem. Its success will depend on whether companies can use that time to retain workers, secure financing, modernize production and find additional customers before prolonged tariffs turn disrupted sales into permanently lost investment and employment.
