{"id":111973,"date":"2025-08-02T03:43:09","date_gmt":"2025-08-02T03:43:09","guid":{"rendered":"https:\/\/www.europesays.com\/us\/111973\/"},"modified":"2025-08-02T03:43:09","modified_gmt":"2025-08-02T03:43:09","slug":"with-never-ending-tariff-drama-the-canadian-economy-limps-along","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/111973\/","title":{"rendered":"With never-ending tariff drama, the Canadian economy limps along"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

Rolled coils of steel sit in the yard at Algoma Steel Inc. in Sault Ste. Marie, Ont., in late July. The Trump administration’s trade war is affecting some sectors much harder than others, notably steel and aluminum.Nick Iwanyshyn\/The Canadian Press<\/p>\n

Canadian businesses are left in limbo after Ottawa failed to clinch a deal with U.S. President Donald Trump by his Friday deadline, making Canada an outlier among its neighbour\u2019s big trading partners. <\/p>\n

Canadian negotiators have been in Washington this week trying to secure relief from Mr. Trump\u2019s array of tariffs. However, Aug. 1 came without any indication that Canada is close to a deal. Instead, Mr. Trump lambasted Canadian leadership and increased the blanket tariff <\/a>on Canadian goods to 35 per cent from 25 per cent, while leaving a crucial exemption in place.<\/p>\n

The increase in the \u201cfentanyl tariffs\u201d is not especially significant from an economic perspective, analysts say. That\u2019s because the tariff does not apply to products that meet content rules spelled out in the United States-Mexico-Canada free-trade agreement \u2013 a carve-out that has allowed most Canadian exports to continue to enter the U.S. tariff-free.<\/p>\n

But the lack of a deal extends the months-long stretch of extreme uncertainty, which is weighing on businesses and consumers. Many companies have paused investment and hiring plans, and consumers are holding off big purchases, until the trade landscape becomes clearer.<\/p>\n

John Rapley: Beneath the bluster, the U.S. is losing the trade war<\/a><\/p>\n

\u201cThe worst-case scenario for us would be a bad deal. The second worst case would be ongoing uncertainty over trade. And we certainly have that,\u201d said Dan Kelly, president of the Canadian Federation of Independent Business.<\/p>\n

Canada-U.S. Trade Minister Dominic LeBlanc said in an interview<\/a> with The Globe and Mail on Friday that the trade talks will continue next week, although he personally will return to Ottawa with plans to meet U.S. Commerce Secretary Howard Lutnick later in August. <\/p>\n

And he revealed just how tenuous the negotiations are. He was not sure whether the all-important USMCA exemption would remain in place until he saw Mr. Trump\u2019s executive order on Thursday evening, he said. <\/p>\n

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Ambassador to the U.S. Kirsten Hillman, left, and Canada-U.S. Trade Minister Dominic LeBlanc, pictured in May in Washington, have been seeking to hammer out a deal with the U.S. to lift tariffs imposed on some Canadian goods.Adrian Wyld\/The Canadian Press<\/p>\n

While discussions about near-term tariff relief continue, Mr. LeBlanc said that USMCA renewal talks, scheduled for 2026, could start as early as the fall. <\/p>\n

Canada\u2019s lack of a deal stands in contrast to other large U.S. trade partners who have swallowed a level of tariffs unthinkable only a few months ago, in order to create some semblance of certainty for their companies and avoid worse outcomes threatened by the mercurial U.S. President.<\/p>\n

Over the past two weeks, the European Union, Japan and South Korea have reached handshake deals with the White House that left in place a baseline U.S. tariff of 15 per cent alongside sectoral tariffs on autos, steel and aluminum \u2013 with some carve-outs. They also agreed to invest hundreds of billions of dollars in the United States and buy more U.S. goods.<\/p>\n

Tony Keller: Why the damage to Canada from Trump\u2019s tariffs has been small (so far)<\/a><\/p>\n

On Thursday, Mr. Trump signed an executive order placing tariffs on dozens of smaller economies that have not reached a deal with the U.S. by the deadline, ranging from around 10 per cent to 40 per cent. These levies \u2013 which are generally lower than those Mr. Trump threatened on \u201cLiberation Day\u201d in early April \u2013 come into force on Aug. 7.<\/p>\n

In contrast to Canada, Mr. Trump granted a 90-day extension to Mexico<\/a> on Thursday, allowing trade talks to continue without immediately raising U.S. tariffs. <\/p>\n

\u201cThe fact that U.S. trade policy changes week by week and seems to be, ultimately, a decision made by one man, it\u2019s almost impossible to forecast where that policy will go,\u201d said Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce. <\/p>\n

\u201cAnd even for countries that think they\u2019ve reached a deal, these are not treaties that have been ratified by Congress and they could be changed at the whim of the President down the road.\u201d<\/p>\n

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Bank of Canada Governor Tiff Macklem on Wednesday held interest rates at 2.75 per cent.Adrian Wyld\/The Canadian Press<\/p>\n

As Mr. Trump has taken a sledgehammer to the post-Second World War global trading system, and pushed tariffs up to a level not seen since the 1930s, Canada has remained in a relatively privileged position because of the USMCA exemption.<\/p>\n

The Bank of Canada <\/a>estimated this week that the average effective tariff rate on Canadian goods is around 5 per cent \u2013 up from nearly zero at the start of the year, but much lower than most other countries.<\/p>\n

Still, U.S. tariffs are leaving a clear mark on the economy: Canada\u2019s trade deficit has widened as exports to the U.S. plummet, levies have driven up some prices and growth has stalled in recent months. Statistics Canada\u2019s gross domestic product report this week suggests the economy remained essentially unchanged in the second quarter, though it was somewhat helped by an accumulation of inventory. <\/p>\n

Alongside its hold-steady rate decision this week, the Bank of Canada mapped out three scenarios for the economy moving forward, depending on the path of U.S. tariffs. <\/p>\n

In a de-escalation scenario, a deal would bring some tariff relief and aid growth despite supply-chain disruptions. <\/p>\n

Opinion: Cracks in the economy mean rate cuts are coming<\/a><\/p>\n

If tariffs remain near current levels, the central bank expects the economy will avoid a recession this year, with GDP growth bouncing back in the second half of the year to around 1 per cent. But if the trade situation deteriorates sharply, Canada could be in for a three-quarter recession, the bank said.<\/p>\n

None of the scenarios would be great for the economy, said Mr. Shenfeld of CIBC, who thinks the central bank will have to lower interest rates this fall to cushion the blow. <\/p>\n

Even though Canadian exports to the U.S. are mostly shielded from tariffs, the lack of a deal \u201cis a terrible outcome, because it continues the uncertainty,\u201d said Michael Dobner, national leader of the economics and policy practice at PWC, who noted that \u201ca lot of our clients are more or less frozen as far as investment decisions.\u201d<\/p>\n

\u201cIf you are an investor, whether you\u2019re Canadian or not, and contemplating an investment in North America, from a certainty standpoint you\u2019re better off investing in the U.S.,\u201d he said.<\/p>\n

The trade war is hitting some sectors much harder than others, notably steel and aluminum, which face 50-per-cent tariffs, and the auto industry, which faces a 25-per-cent tariff (with a carve-out for the value of U.S. auto parts in Canadian-made vehicles). <\/p>\n

Open this photo in gallery:<\/a><\/p>\n

Employees work on the production line at the Martinrea auto parts plant in Woodbridge, Ont., in February. The auto industry faces a 25-per-cent tariff, with a carve-out for the value of U.S. auto parts in Canadian-made vehicles.Chris Young\/The Canadian Press<\/p>\n

Brian Kingston, president of the Canadian Vehicles Manufacturers\u2019 Association, said while the urgency for a deal is high, the government needs \u201cto be very careful that we don\u2019t agree to something that makes Canada structurally uncompetitive with the United States.\u201d <\/p>\n

But Mr. Kingston said he\u2019s hopeful that a creative solution can be found for the auto sector, such as an adjustment to the quota of cars Canada sends over to the U.S. <\/p>\n

\u201cThis cannot continue for months and months. If it takes a matter of days or weeks, the industry can sustain that, but we can\u2019t find ourselves getting towards the end of the year and still having no agreement,\u201d he said. <\/p>\n

Prime Minister Mark Carney suggested earlier this week that even if Ottawa is able to reach some sort of deal, some sectoral tariffs would likely remain in place. But there are hints that these may be adjusted.<\/p>\n

On Thursday, U.S. Treasury Secretary Scott Bessent suggested<\/a> in a CNBC interview that the U.S. was working with Canada on some kind of arrangement for aluminum. U.S. industry is heavily reliant on imports of the metal from Canada. Mr. Bessent pointed to the Ford F-150 truck as one example. <\/p>\n

Candace Laing, chief executive of the Canadian Chamber of Commerce, said she wasn\u2019t surprised Mr. Carney and his team were unable to strike a deal with the White House this week. <\/p>\n

Open this photo in gallery:<\/a><\/p>\n

Stacked containers at the Port of Montreal on Friday. Prime Minister Mark Carney had suggested earlier this week that even if Ottawa is able to reach some sort of deal, some sectoral tariffs would likely remain in place.ANDREJ IVANOV\/AFP\/Getty Images<\/p>\n

Mr. Trump is pursuing a range of goals with his trade policy \u2013 including reshoring manufacturing \u2013 that simply don\u2019t make sense for the North American trading environment, she said, making it hard for Ottawa to accept the President\u2019s conditions.<\/p>\n

\u201cWe\u2019ve spent decades integrating our supply chains and building up businesses that are cross-border, and now you want to unwind that?\u201d Ms. Laing said.<\/p>\n

\u201cWell, that takes a ton of time and capital to do that. And that\u2019s why Canada is different, because you\u2019re literally destroying all that value to get that aim, which makes no sense.\u201d<\/p>\n

She said she\u2019s hoping the Trump administration softens its stand on Canada as the negative effect of tariffs on U.S. businesses and consumers becomes increasingly clear. <\/p>\n

Until Canada\u2019s trade negotiators can strike some sort of deal, whether as part of a handshake agreement like the EU and Japan secured or as part of a broader USMCA negotiation, Canadian businesses will be left trying to navigate a sea of risks. <\/p>\n

For now, that means trying to ensure their supply chains comply with North American content rules outlined in the USMCA, said Janine Harker, president of the Canadian Society of Customs Brokers. <\/p>\n

She\u2019s seen a rush of companies looking to become compliant and expects that to continue. But without a trade deal, uncertainty will continue to hang over business decision-making, she said. <\/p>\n

\u201cThey\u2019re trying to make reasonable guesses about what the business future looks like, but they really have no facts to base that on. They have no certainty about what next month or the next six months will look like,\u201d she said.<\/p>\n

With a report from Stephanie Levitz<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: Rolled coils of steel sit in the yard at Algoma Steel Inc. in…\n","protected":false},"author":3,"featured_media":111974,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[2148,2138,671,104,2132,692,64,2147,2131,2143,2144,2140,2133,2130,79,407,746,2142,2137,2159,2134,2135,454,2139,1165,728,2149,108,2154,2155,2157,2152,2156,2150,2153,2136,85,2146,80,2145,2151,1458,158,1164,2141,67,132,68,1154,107,2158],"class_list":{"0":"post-111973","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-alberta","9":"tag-arts-news","10":"tag-bc","11":"tag-breaking-news","12":"tag-breaking-news-video","13":"tag-british-columbia","14":"tag-business","15":"tag-canada","16":"tag-canada-news","17":"tag-canada-sports","18":"tag-canada-sports-news","19":"tag-canada-trafficcanada-weather","20":"tag-canadian-breaking-news","21":"tag-canadian-news","22":"tag-economy","23":"tag-education","24":"tag-environment","25":"tag-federal-government","26":"tag-foreign-news","27":"tag-globe-and-mail","28":"tag-globe-and-mail-breaking-news","29":"tag-globe-and-mail-canada-news","30":"tag-government","31":"tag-life-news","32":"tag-lifestyle","33":"tag-local-news","34":"tag-manitoba","35":"tag-national-news","36":"tag-new-brunswick","37":"tag-newfoundland-and-labrador","38":"tag-northwest-territories","39":"tag-nova-scotia","40":"tag-nunavut","41":"tag-ontario","42":"tag-pei","43":"tag-photos","44":"tag-political-news","45":"tag-political-opinion","46":"tag-politics","47":"tag-politics-news","48":"tag-quebec","49":"tag-sports-news","50":"tag-technology","51":"tag-travel","52":"tag-trudeau","53":"tag-united-states","54":"tag-unitedstates","55":"tag-us","56":"tag-us-news","57":"tag-world-news","58":"tag-yukon"},"share_on_mastodon":{"url":"","error":"Validation failed: Text character limit of 500 exceeded"},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/111973","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=111973"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/111973\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/111974"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=111973"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=111973"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=111973"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}