The week that was

• U.S. President Trump, who celebrated a trade deal with Japan earlier in the week, ended the week saying that he wasn’t sure a deal with Canada would be reached–and that the U.S. may unilaterally impose more tariffs on its neighbour.

• One‑third of Canadian firms expect tariff‑related cost spikes, down from two‑thirds last quarter, due largely to USMCA exemptions. And half of firms already face higher costs, yet many can’t pass them on, squeezing margins.

• In a joint statement, Canada’s premiers call on the Carney government to “improve the overall trade relationship” with China.

• Algoma Steel, which sells about 60% of its output to the U.S., is seeking between $400 and $600 million in tariff relief from Ottawa.

• U.S. President Trump indicates that 15% is as low as the U.S. is willing to go on tariffs.

When 15% is the new 35%

Tucked away in Japan’s trade deal with the U.S. was a US$550-billion pledge to create a sovereign wealth fund overseen by the U.S. President himself. Could that prove to be the blueprint for Canada and the EU, both of whom are angling to seal trade deals before Aug.1?

Details of the Japan fund are vague with both parties characterizing it very differently: The U.S. sees it as a 90:10 partnership in the U.S. taxpayer’s favour, with Washington dictating Japanese companies where to invest; Tokyo sees it as an investment pledge from Japan Inc. The U.S. is increasingly blurring the lines between creating an ecosystem that facilitates investments to what some are calling state intervention over business investments and activities. The most recent example: A US$400-million direct, China-style investment in rare-earth minerals company MP Materials by the Pentagon—a deal that has been criticized by industry competitors for its overreach.

The U.S. state creep poses a challenge for North American markets that are fair and free, but could start seeing U.S. federal-based entities coming to the fore—a new generation of government-backed entities that Western governments have criticized autocratic states for over the past several decades.

Canada has much to offer to the U.S. as an investor, but in the right circumstances. Canadian stock of U.S. foreign direct investment stands at US$812 billion, second only to Japan’s US$819 billion. In theory, more Canadian investments could be channeled into the U.S., structured to enrich Canadian domestic supply chains as well. The continued integration of Canada and the U.S., in public and corporate sectors, should result in positive spill-over effects for Canada in terms of investments, business activity and trade. There are also may be plenty of room for a slew of joint Canada-U.S. projects—in critical minerals, automotives, nuclear, fossil fuels and electricity, among others.

But if a joint fund of some description is on the table, it can’t be a blank cheque to Washington.
It’s crunch time for Canada, which is also facing 35% tariffs for all non-USMCA compliant goods if a deal is not struck (Both Carney and Trump have downplayed chances of a trade deal by Aug.1.) We may have to contend with 15%, which seems to be the going rate, as Europe appears to be resigning itself to that figure with Washington.

That could prove to be positive for Canada. 

Assuming the USMCA preferred treatment remains intact, Canada seems poised to garner a ‘best-in-class’ access to the U.S. market. A possible weighted-average effective tariff rate of 2-3% is attractive both in absolute and comparative terms, assuming a 15% universal tariff rate on only 10%-20% of non-compliant USMCA trade. Essentially that’s similar to most-favoured nation tariff rates (traditionally 2.5%).

3 questions with…

In a week when Prime Minister Carney met with the Premiers, our Head of Thought Leadership Jordan Brennan reached out to Trevor Tombe, at the University of Calgary’s School of Public Policy, to discuss interprovincial trade barriers—and Trump.

Q: How much are interprovincial trade barriers costing Canada?
A: My research with collaborators suggests that Canada’s economy could increase by between 4.4% and 7.9% over the long-term—a gain of between $110 and $200 billion per year—if internal trade barriers are eliminated through mutual recognition policies. In specific sectors like trucking, these barriers add approximately 8.3% to freight rates, inflating business costs and reducing overall productivity. The smaller and generally lower income provinces, especially in Atlantic Canada, stand to gain far more than other provinces.

Q: What do you think the likely economic outcome of Bill C-5 will be?
A: Bill C-5 represents a significant federal effort to address internal trade barriers. However, we should be cautious about immediate GDP impacts. The $200-billion growth figure cited by some represents the upper end of estimates and assumes a massive levelling of trade barriers far beyond anything currently proposed. The real gains will come if provinces reciprocate with their own mutual recognition legislation, but we’re seeing considerable momentum in that regard.

Q: Prime Minister Carney seems to believe that removing internal trade barriers will offset the economic harm associated with Trump’s tariffs. How realistic is this belief?
A: The magnitude of interprovincial trade costs is larger than the costs of U.S. tariff disruptions but would take far longer to manifest. Over time, we could potentially more than compensate, but internal trade liberalization is not a sufficient short-term offset for immediate economic disruption.

Import quotas – a pain point for the U.S.

Canada’s supply management has caught the eye of the Trump administration, again. Critics from south of the border are zeroing in on import quotas specifically for dairy products.

• Canada’s supply management system is governed through import quotas, producer set prices, and production quotas for dairy, eggs, and poultry–a policy to guarantee farmers’ domestic market share and fair prices for products relative to farm inputs.

• Import quotas are intended to limit imports within Canada’s supply management industries. In recent trade negotiations, however, Canada has made greater concessions. For example, in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) negotiations, Canada agreed to provide participating countries with an estimated 3.25% of Canada’s domestic dairy market.

• As Canada-U.S.-Mexico-Agreement (CUSMA), the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and CPTPP are phased in over the next 10 years, Canadian foreign market access is expected to climb to roughly 10% of Canada’s dairy production.

• But as Canadian processors hold most tariff import quotas, foreign importers have argued that they have limited access to Canada’s markets to fulfill their non-tariffed trade volumes negotiated in the agreement.

RBC Thought Leadership’s latest report, Supply Management Explained, explores the benefits and drawbacks of the system and its role in trade wars.

Resourceful ‘Northern America’

Canada and the U.S. ramped up their commodity exports over the past decade, as both countries leverage their resource riches. The latest report from UN Trade and Development (UNCTAD) shows the two countries—comprising ‘Northern America’—raised their combined commodity exports to 13.1% of the global total by 2023, from 10.8% a decade ago. Other regions barely grew or lost market share during the period.

Commodity concentration: Canadian commodity exports—energy, mining and agriculture, as defined by UNCTAD—accounted for 55.8% of its total commodity exports in 2021-23, compared to 53.3% between 2012-14. The U.S. has become even more reliant: the three commodities made up 35.5% of all American commodity exports during the period, up from 29.5%. As both have earmarked energy, ag and mining as export priorities, they could become more dependent on the three commodities—and their price volatility.

Agriculture rising: For Canada, agriculture was able to grow its export market share from 14.7% to 16.7%, with energy, at 17.4%, up only marginally. For the U.S., it was all about the shale evolution and LNG revolution.

Commodity contraction: Globally, commodity exports now account for 32.7% of all international trade in value terms, down from 35.5% a decade earlier.

Strive to diversify. Countries mainly exporting raw materials could miss out on the broader benefits of global trade, driven by diversification, innovation and value-added production. While that UNCTAD warning was directed at developing countries, it should not be lost on Canadian businesses looking to expand mining, energy and agriculture sectors.

Final word

“It’s not our objective to have an agreement at any cost.”

—Prime Minister Mark Carney on negotiations with the U.S.

Contributors: Jordan Brennan, Shaz Merwat, Lisa Ashton, Reid Mckay, Yadullah Hussain, Caprice Biasoni

Trade war fallout

By Jordan Brennan, Head of Thought Leadership

What if the U.S. is no longer at the centre of the global trading system? That was one of the ideas explored at a Fields Institute-hosted roundtable I attended this week in Toronto.

The U.S. has wielded tremendous soft power through its custody of the global trading system for the better part of 80 years. That came to an end on April 2^nd with President Trump’s ‘Liberation Day’ tariffs, according to one speaker. The speaker went on to claim that the end of American leadership would beget four possible scenarios:

• World War Trade. This is a 1930s-style scenario where other countries follow the U.S. in ignoring WTO policies. Unless resolved in the coming weeks, Trump’s tariffs will likely provoke retaliatory tariffs from other countries in a tit-for-tat escalation. In one scenario, the trigger is Chinese retaliation against the anti-China provisions the U.S. is seeking from trading partners (e.g., the U.S.-U.K. deal attempts to lock China out of critical supply chains). This nightmarish scenario, thankfully, is the least likely.

• Managed multi-lateral drift. This is the current base case. The world sees more protectionism from the U.S. and more liberalization everywhere else. The U.S. stands alone in violating the WTO rules, but everyone else plays nice. 

• Fighting trade blocs. Further geo-political fragmentation leads to the creation of adversarial trade blocs. Within the blocs, there is some measure of cooperation and openness. Between the blocs, we see WTO non-compliance. Three main blocs will form: a U.S.-centric bloc with Canada and Mexico, a pan-European bloc, and a China-led bloc. Japan is a wildcard.

• Re-globalization without America. This is the most likely scenario. The U.S. will become a more closed economy, trading less with the world. Given that the U.S. only accounts for 15% of global trade, this is not fatal to the international trading system.

It’s not clear what these scenarios would mean for Canada. With more than 75% of our merchandise exports headed to our American neighbours, it is difficult to imagine a future in which the U.S. does not remain Canada’s largest and most important trading partner.

It is possible, strangely, that Canada’s position with the United States is strengthened on a relative basis, given that U.S. tariffs on Canada may end up being considerably lower than those on America’s EU and Asian trading partners. Canada could end up trading more with the United States, not less, despite the tariffs.

It’s also possible, again unexpectedly, that foreign direct investment in Canada is strengthened—think auto—as countries that were happy to pay the ~3% most favoured nation tariff rate now face a 25% tariff wall and will therefore look to pick up spare capacity within North America to work around that wall.

What’s clear is that Canada needs a strong ‘Plan B’ and ‘Plan C’ in the current negotiations with President Trump. Free trade with the U.S. is the preferred outcome, but Canada needs a menu of options if we cannot secure a satisfactory deal.

The week that was

• Prime Minister Mark Carney acknowledged that a deal with the U.S. isn’t likely to result in the elimination of all tariffs.

• Trump’s tariffs have raked in nearly US$50 billion for the U.S.—so far.

• Mexican President Claudia Sheinbaum said she and Carney have spoken about Mexico and Canada increasing collaboration around trade.

• A dozen EU nations are considering so-called anti-coercion instrument, that could include new taxes on big U.S. tech firms or investment restrictions, if a deal with the U.S. isn’t struck by Aug. 1.

Protein pop

Canada’s agri-food exports rebounded in May after plunging in April, with meat and seafood exports leading the way. New Statistics Canada merchandise trade data shows meat exports were up 13% in May—largely spurred by pork exports to Japan—while packaged seafood splashed up to 52.9% after a year-long decline.

Why that matters?

• Commodities travel the path of least resistance, but adjustments can take time. Thanks to the CPTPP, Japan’s duty on Canadian fresh, chilled or frozen pork of 4.3% is gradually phasing out by April 2027, specifically for products that are “over-gate,” which is Japan’s minimum pricing system for all pork imports. Processed products like sausages that faced tariffs of up to 10% pre-CPTPP, are now fully phased out. Canadian prepared and preserved swine meat, including lunch meat, to the U.S. dropped from $4 million in January to $2.4 million in May, while the same category of exports to Japan rose from $3.2 million in January to $8 million in May.

• Canada’s agri-food trade diversification efforts may not be that diversified, yet. The U.S. remains an important partner, especially for highly perishable products like greenhouse tomatoes. Yet, Canada’s agri-food exporters for many categories are on the move and looking to grow in markets where access is already strong, and logistics are in place, including Japan, Mexico, and South Korea. Further unlocks could be markets on the edges with high growth potential for Canada driven by expanded market access. For example, Columbia and Taiwan, both outside of Canada’s top 5 markets for beef and veal export, have grown in export value by 236% and 57%, respectively, between May 2024 and 2025.

Bottom line: With a tariff-free North America looking more unlikely, Canada continues to diversify its agri-food trading partners and appears to be focused on growing in existing tariff-free or low-tariff markets.

The big number

84

Percentage of Canadians who don’t expect the Trump administration to negotiate in good faith.

Copper in the crosshairs

Copper is now a target of the Trump Administration’s AI-centered energy and resource security agenda, where the commodity’s utility as an electrical conductor makes it a priority for the transformers, transmission lines, and battery technologies that will underpin the buildout of AI infrastructure. By the end of the month copper imports into the U.S. could face 50% tariffs, the latest metal to become front and centre in a realignment of resource supply chains.

• The U.S. imported 42% of its refined copper on average in the past four years. But with 5% of global reserves, there is scope to expand domestic production.

• Canada occupies a relatively small share of global copper refining, responsible for 1.2% of refinery production in 2024, and approximately 0.8% of reserves.

• Canada is a major supplier of copper to the U.S. in the form of ore and concentrate, refined copper, copper scrap, and copper matte and precipitate, and exports to Asia and Europe. Canadian exports to the U.S. were worth $4.8 billion in 2023.

• The effect of the copper tariffs will be felt less in some provinces. B.C., for instance, hosts Canada’s largest copper mines but doesn’t export significantly to the U.S. But others could be more susceptible. Quebec hosts a copper smelter and a refinery and accounted for 80% of copper exports to the U.S. in 2024, according to data from Innovation, Science, and Economic Development Canada.

• Canadian mines produced 508,000 tonnes of copper in 2023, and the country counted 14 copper deposits among its top 100 mineral exploration projects in 2024. Expanding Canada’s reserve base and bringing more Canadian copper to market, whether at home or abroad, will be important for achieving our energy and AI ambitions.    

Eye on Africa

Africa has long been a battleground for the China and the U.S. as they vie for economic and trade influence in the continent. The competition has only intensified as the two countries seek access to minerals, from gold to graphite. The U.S. is trying to break Chinese sway in the continent by brokering a peace between Rwanda and the Democratic Republic of Congo (DRC). Washington also recently wrapped up a U.S.-Africa Business Summit with US$2.5-billion investment commitment, that included US$1.5 billion towards a 1,150-kilometre transmission line from Angola to deliver 1.2 gigawatt electricity to power DRC mining sites. In return, the U.S. gets access to DRC’s natural resources that include two-thirds of global cobalt that power EV batteries. It’s also the largest supplier of tantalum–a critical metal used in capacitors–and the world’s second largest supplier of copper.

Africa could prove to be a new, thriving trading destination as Ottawa casts its export net wider. There are opportunities abound:

• Canada-Africa trade has tripled over the past 25 years, but still accounts for a mere 1% of Canada’s total trade volume.

• Canada could sell cleantech to a continent that remains heavily dependent on coal, especially in growing economies like South Africa. May be LNG, too.

• Canada can also export mining equipment and clean extraction methods in resource-rich African nations.

• Health-tech and pharma services could also boost digital health services, especially in the continent’s underserved regions. Edu-tech exports to a continent with the world’s youngest population could prove to be another winner.

• Africa’s critical minerals supplies offer diverse range of inputs to EV battery supply chains, offering analternative to Chinese-controlled resources. 

Final word

“We’ve been clear from the get-go that supply management is off the table.”

—François-Philippe Champagne, Canada’s Finance Minister, on the protections in place on dairy and agriculture not being part of the U.S/Canada negotiations. 

High Noon in Canada

We seem to be in the Wild Wild West as Donald Trump’s latest 35% tariff threat against Canada disregards the July 21 deadline and disrupts the behind-closed-door negotiations underway.

The new deadline is August 1, by which date Canada has been asked to address several U.S. trade irritants, including supply management and the flow of fentanyl across the border. CUSMA-compliant goods crossing the border will “most likely” be exempt, said one U.S. official, in a volley of trade attacks on friends and foes alike that’s designed to confound and confuse—and lead to capitulation.

The latest threats from Washington have spurred the federal and provincial governments to look for new avenues of growth, seek new partners—east and west—, and rev up the dormant interprovincial trade engine.

Some Canadian policymakers were looking to do just that at the Calgary Stampede this week. The Greatest Outdoor Show on Earth, as it’s called, has become a blend of rodeo, carnival, and business fair, pulling in a million people a year.

Mark Carney and Pierre Poilievre were there, along with a gaggle of premiers and senior ministers. Ontario’s Doug Ford brought six cabinet members as he pushes ahead with his domestic trade agenda.

Here’s some of what’s at play as Canada looks for new trade streams:

• A $100B energy package: Alberta and Ottawa are making progress on a big energy package that could include an oil pipeline to the West Coast, the Pathways project to capture carbon emissions, and room for expanded oil production. The Pipeline + Pathways package has a lot of political punch, but headline costs could be sobering. Add in the costs of expanding production, and the sticker could reach $100 billion. Now, that’s an investment over many years designed to deliver a multiple of that in economic growth and government revenue. But anything of that magnitude will require an explainer-in-chief.

• New corridors: Pancake-flipping Ford and Alberta’s Danielle Smith also agreed to a feasibility study of new pipelines and rail lines between the two provinces, pledged to increase interprovincial trade of alcohol and vehicles, and push for nuclear energy development.

• Pacific partners: International investors are very interested in Canada, as a relatively safe alternative to much of the world, including the U.S. But Japan and India wants to see action on regulatory reform, and more investment in export infrastructure. The biggest question is how quickly Canada can move on Indigenous consent for major projects.

• Megaproject port side. ThePort of Vancouver is looking to boost its total capacity by 70% through the proposed Roberts Bank Terminal 2 Project. Canada’s main gateway has begun looking for a contractor to build the $3-billion project to boost trade with Asia.

A lot is at stake, and the country doesn’t have much time.

The week that was

• A federal red-tap review is under way to weed out rules that impede internal trade and business investments. Cabinet ministers are also being asked to find ambitious spending cuts amid Ottawa-wide belt-tightening.

• Canadian firms, such as Purdys Chocolatiers, are reporting brisk domestic business as the U.S. brand boycott persists in the country.

• Global trade surged in the first half of 2025, but slowing global economic growth pose risks for trade in the latter half, the UN warns.

• President Donald Trump’s trade threats and actions now extend to copper, pharmaceuticals and Brazil. Around 14 countries also received tariff missives with the President’s classic sign-off: “Thank you for your attention to this matter!”

• A cavalcade of small U.S. businesses and interest groups are filing cases against Trump’s litany of tariffs imposed under the International Emergency Economic Powers Act.

From West to Rest: Can BRICS+ Redraw the Trade Map?

Multilateral cooperation is a delicate balancing act at the best of times. For half a century, the G7 skillfully juggled competing interests and represented the values of liberal openness, democratic governance, and pluralistic tolerance on the world stage. But with President Trump firing tariff missiles in all directions, including G7 partners, the BRICS+ bloc, seen as an emerging market counterweight to the G7, is quietly emerging as an attractive alternative for some nations.

The 11-nation group met in Rio de Janeiro last weekend. And while some have argued that the bloc lacks any basis for unity or cohesion apart from antipathy to the G7, the geo-economic coalition’s rising influence cannot be denied.

• Formed in 2009, the bloc initially included Brazil, Russia, India and China, but now encompasses South Africa, Egypt, Ethiopia, Indonesia, Iran, and the UAE, with Saudi Arabia mulling over its membership. Together these countries account for more than a third of global GDP and nearly half of the world’s population. As a trading bloc, the BRICS+ eclipsed the G7 in merchandise exports in 2021, accounting for 30% of the global total.

  

• Will Trump’s tariff war accelerate the G7’s relative decline? And will the BRICS+ be able to re-orient trade flows, proving to be a more influential voice for non-Western countries in multilateral governance? It’s too early to tell.

• But the U.S. is already worried, with Trump threatening tariffs on countries aligning themselves with what he calls the bloc’s “Anti-American policies.”

• Will Canada get swept up in the U.S.-BRICS cross-currents? Ottawa is already looking to reset ties with China and India—two founding members of BRICS. Foreign Affairs Minister Anita Anand, who is currently in Asia, says Canada is looking to wrap up free trade agreements with Southeast Asian nations—as soon as possible—, several of which are likely BRICS membership candidates.

• As the Canadian government seeks relief from Trump’s tariff blitz, a longer-term trade strategy confronts the diminished status of G7 nations. How members of the BRICS+ fits into Canada’s trade future remains unknown, especially as Ottawa wants to avoid giving Washington any ammunition to blow up their fragile trade negotiations.

After decades of a unipolar world, the return of a multi-polar world is complicating Canada’s efforts to seek new trading partners.

The big number

11,000

The increase in the number of Canada’s trade-dependent manufacturing sector in June. Overall, the ecomony created 83,000 jobs, a figure that surprised analysts given the uncertainty around trade and investments.

The race North America can’t afford to lose

As the North American auto industry reels under the weight of U.S. tariffs, the real story on autos may not be in Washington, but in Shenzhen, where Chinese electric vehicle (EV) behemoth BYD’s headquarters are located.

Ford CEO Jim Farley has been the most vocal about the need to “humbly accept” Chinese leadership in EV technology. The executive even imported Chinese EVs recently to test their build quality. Canada and the U.S. remain the only two major nations with no consumer access to Chinese vehicles—the U.S. imposes an almost 150% duty on new Chinese EV imports and Canada has a 100% tax—but Chinese cars are widely expected to come to North American shores at some point.

The almost-overnight success of BYD, which has ramped up production to four million units in just four years, is notable. The automaker surpassed Tesla last year as the world’s largest EV seller. BYD’s patented Blade battery is considered to be among the world’s safest and most affordable, while its autonomous driving system is deemed to be as good as, if not better than, Tesla’s. Most stunning? BYD’s EVs come at bargain prices—on average US$20,000 (C$27,400), less than half the cost of a new North American vehicle.

Whatdoes China’s enhanced automotive industrial capacity portend for Canada’s auto industry, which has been under strain for the better part of two decades? Provincial and federal governments invested heavily in the EV value chain, but with stalling EV sales (9% of total sales in Q1, 2025, compared to 18% in Q4, 2024) and paused or postponed production facilities (Honda, BASF, Northvolt to name a few), the soundness of Canada’s EV bet is being questioned. Pressure on Ottawa from some automakers to scrap the EV mandate could be another body blow to the nascent industry.

One thing seems certain: Americans, Canadians and Mexicans fighting with each other over auto production will not catalyze innovation—it would only accelerate China’s global EV lead.

The Trade-Offs of Supply Management

Trade irritant, stable, costly, secure — these are just a few of the words currently being used to describe Canada’s supply management system, underscoring the renewed debate it’s attracting.

Supply management has faced scrutiny during nearly every major trade negotiation and economic downturn — and it’s poised to be a key discussion point in next year’s Canada-U.S.-Mexico Agreement (CUSMA) review.

The debate is no longer confined within agriculture’s siloed walls. Supply management touches many corners of Canada’s economy: from food prices and consumer choice to supply-chain jobs, trade diversification, and economic growth.

In RBC Thought Leadership’s latest report, Supply Management Explained, we take a closer look at the system’s benefits and drawbacks.

Read the full report here.

Final Word

“We’ll fight against it. Period.”— Canada’s Trade Minister Melanie Joly, responding to Donald Trump’s threat to impose 50% tariffs on imported copper.

After Independence Day comes Liberation Day 2.0

Happy 249^th Birthday, America! Enjoy the fireworks over the long weekend, but markets are bracing for the more consequential American spectacle on July 9 when the 90-day pause on Liberation Day tariffs comes to an end. Will there be more pyrotechnics or a fizzle out?

The White House’s “90 deals in 90 days” ambition has turned into two American humble-pie, kinda partial deals with the U.K. and China, and another with Vietnam this week.
Will President Donald Trump extend the ceasefire, or will he launch a fresh volley of tariffs against allies like Japan, the EU and Canada?

“About 10 to 12 countries are very close to a deal,” said Joseph Lavorgna, an advisor to U.S. Treasury Secretary Scott Bessent, with another 20 negotiating in good faith. “And Secretary Bassett highlighted that many deals could be done by Labor Day.” Is that a tell that the administration is looking to push past July 9? Who knows.

While Canada has an eye on that date, Prime Minister Carney has marked his own red circle in the calendar: the July 21 deadline to conclude a security and economic deal with the U.S. To facilitate talks, Ottawa scrapped its digital services tax on Big Tech, which was an irritant to President Trump. Canada is now back in the “front of the line” in trade negotiations, assured Pete Hoekstra, U.S. Ambassador to Canada.

Strategically, it’s an open question if Canada is better off rushing to negotiate a bilateral deal with the U.S. or defer until the autumn. In such serial negotiations, first movers often set the pattern, so there may be an advantage to rush a deal with Trump. On the other hand, the president desperately wants the Federal Reserve to cut interest rates, which would lower interest payments on America’s ballooning public debt, lower debt-servicing costs and galvanize economic activity. Jerome Powell, Chairman of the Federal Reserve, is holding firm on rate cuts until the trade turmoil settles down. Come autumn, we will be in a countdown to midterm elections, which will put pressure on Trump to rev up America’s economic engine. Canada may be better off waiting until public pressure on Trump mounts. That is, if its own trade and economic data holds up.

While Trump recently said his administration has “all the cards” in its negotiations with Ottawa, Carney has a few aces up his sleeve, too.

• Energy. Oil, natural gas, and electricity, etc.—Canada has it in abundance. The U.S. needs them all to help power its data centres and, presumably, an industrial revival.

• Uranium. Canada, the world’s second largest producerof uranium,would need to figure prominently to power Trump’s plan to start construction of 10 large nuclear reactors by 2030, and expand U.S. nuclear energy from 100 gigawatt currently to 400GW by 2050.

• Big Tech. Ottawa has just pulled its 3% digital services tax (that’s $3 billion in forgone revenue), gaining goodwill while keeping the option to re‑table it if talks stall.

• Critical minerals. Canada produces or refines 21 of the 50 U.S.‑listed critical minerals—developing capacity at Saskatchewan’s new rare‑earth plant and Ontario’s Ring of Fire are poised to cement Canadian leadership in responsible critical minerals.

• Counter‑firepower. A choice of last resort given potential costs for Canadian businesses, Finance Canada can mirror U.S. moves with tariffs on up to $155 billion of U.S. goods—a list was already drafted in February.

• Friend‑shoring pitch. A bilateral supply‑chain roadmap under previous administrations argue deeper North‑American integration—EV batteries, semiconductors, green steel—as the surest hedge against both Chinese dominance and tariff chaos.

• Supply management. Some agriculture and dairy concessions may be on the table as a compromise, as Ottawa finds a balance between appeasing Washington without upsetting the domestic audience.

The week that was

• The Great Canadian booze boycott sent imports of U.S. alcohol plummeting 94% year-on-year to just $3 million in April. Some U.S. officials see removal of the boycott as part of the trade deal.

• Ottawa scrapped all 53 federal exemptions in the Canadian Free Trade Agreement that were impeding interprovincial trade, just in time for Canada Day. Good, now dismantle the patchwork of provincial barriers, the Canadian Federation of Independent Businesses recommends.

• Republicans killed the “revenge tax” from the so-called Big, Beautiful bill that passed yesterday. It was scrapped after G7 countries agreed to exempt the U.S. from an OECD-proposed global minimum tax—raising questions about the pact’s global-ness.

• Speaking of free passes, the EU is proposing to exempt its steel and other heavy industries from its carbon border tax exports in the face of competition from foreign rivals.

• Global LNG vessel deliveries shot up 60% to 67 units last year, taking the global fleet to 831, as LNG trade booms. Another 103 vessels are set to be delivered this year.

The big number

10.8%

Windsor’s unemployment rate in May, as Ontario’s key auto-assembly hub reels from U.S. tariffs. The province’s overall unemployment rate stands at 7.9%.

Current trade sentiment: Diversify—and dread

Canada is recalibrating its international trade flows in response to U.S. tariffs, new Statistics Canada data shows. Following heavy drops in exports in April, there are some signs of a shift, but the outlook remains uncertain for Canadian industries. Most of the strategic sectors—iron, aluminum, lumber and pharmaceuticals—, that Trump has marked as strategic to the U.S. economy, saw declines.

• On the bright side, exports edged up: Canada’s record $7.6 billion merchandise trade deficit in April narrowed to $5.9 billion in May, with overall exports up 1.1%, led by gold. Imports fell 1.6%.

• But U.S.-bound trade continued to shrink. Tariff-induced declines in Canadian exports continued a four-month decline, dropping 0.9% in May.

• The diversification drive is on. Canada is beginning to increase its exports to non-U.S. markets, which rose 5.7% in May—a record.

• Tariff-hit sectors bore the brunt. May saw little relief among key sectors, following major export reductions in April. Exports of unwrought iron, steel, and aluminum alloys and products dropped 4.9% since April. Exports of lumber and sawmill products also declined 2.2%, while pharmaceutical fell 0.5%. However, motor vehicles and part exports rose 0.9%.

• Lumber is staring down the barrel of steeper duties. Canadian softwood lumber exports to the U.S. could see duties jumping from 14.5% to 34.45% in July, unless a deal can be hashed out.

  CEOs of auto manufacturers met with Carney this week to discuss ways to protect the auto  supply chains from the trade war, and diversify trade relationships. And while Canada’s imposition of temporary tariff-rate quotas on steel mill products could provide short-term relief to domestic producers, several industries await more trade clarity.
  
  Also read: $125B Exposed: What’s at risk for Canada as Trump eyes 5 strategic sectors

Final Word

Canada is a “very difficult country to TRADE with, including the fact that they have charged our Farmers as much as 400% Tariffs, for years, on Dairy Products,”—U.S. President Donald Trump, as he takes aim at Canada’s supply management system.

The week that was

• In addition to having her term as Canada’s Ambassador to the U.S. extended, Kirsten Hillman was named Canada’s chief negotiator in trade talks with the U.S.

• Complaints from U.S. manufacturers that China was limiting the release of rare-earth elements despite its trade truce with Washington prompted Beijing to promise on Friday that it would approve U.S applications. This comes a day after Trump announced that the U.S. and China had “just signed” a deal.

• The U.K. unveiled a broader trade strategy focused on its £500 billion a year service exports sector and the desire to land deals with a range of partners, including the six-member Gulf Cooperation Council.

• Trump threatened Spain with increased tariffs, after Spanish Prime Minister Pedro Sánchez rejected NATO’s new target of spending 5% of GDP on defence.

• Donald Trump, at the urging of oil executives, is pushing to rollback climate laws as part of U.S.-EU trade negotiations.

The big number

US$179.2 billion

Total value of U.S. exports in May, down 5.2% versus April – that’s the sharpest month-over-month decline since 2000

Global oil and gas trade just got risky—again

As Iran and Israel traded missiles and the U.S. bombed three of Tehran’s nuclear facilities, oil tanker rate premiums spiked 83%. And with major LNG exporter Qatar briefly getting ensnared in the crisis, another element of risk was added to the global oil and gas trade.

While oil tanker rates cooled off a couple days after the ceasefire, this volatility could remain a perennial issue hovering over global commodity production—and prices. Meanwhile, LNG tanker rates, due to re-routing and summer demand, remain elevated. By 2030, almost 25% of global LNG flows are expected to pass through the Strait of Hormuz, a critical oil and gas channel in the Middle East, based on Rystad data.

Canada has an opportunity to help de-risk global supply from both a geopolitical and a concentration of supply standpoint—a proposition valued by European and Asian buyers, as we highlighted in our recent report A G7+ Strategy for Natural Gas: Four Scenarios for Energy Security in the 2040s.

And Canada would soon become a bona fide member of the LNG exporters club.This weekend, LNG Canada awaits the arrival of likely two LNG carriers, including Puteri Sejinjang, a new 174,000-cubic-metre carrier, to pick up the first-ever shipment of gas from the West Coast facility.

Final Word

“Our strategic response to this new world can’t be based on nostalgia or post-imperial delusion, let alone any ideological or dogmatic attachment to one trading bloc or another.”
–Douglas Alexander, U.K.’s Trade Minister