Trade talks between Ottawa and Washington collapsed Friday night, and by Saturday tariffs were again flying in both directions. Same trade war, another sequel, and this morning Trump added a new twist, floating an even bigger tariff for down the road.
The tariff two-step.
- New US tariffs hit roughly C$28 billion of Canadian exports.
- Canada has said it will impose “dollar for dollar” retaliatory tariffs that, importantly, will not take effect until September 8th and support the sectors affected by US tariffs; we’re awaiting further details.
- Trump raised the stakes this morning, threatening to lift some tariffs on Canada to 50%, though not until January 1, 2027.
- Expect a one-off price bump on both sides of the border, not a lasting inflation problem.
The implications.
- The real risk is these spiral beyond sector-specific tariffs. That’s not in either side’s interest, but the September 8th and additional January 2027 runway leaves room for both sides to re-engage before it comes to that.
- BoC stays parked; the market agrees as yields rallied and the loonie sold off on the news.
- Credit is shrugging it off for now: spreads are unchanged, with just a touch of pressure on auto-sector names.
