Canada-US Trade – The Empire Tariffs Back

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.