Earlier this week, U.S. Trade Representative Jamieson Greer clarified what had been building for months: the U.S. will seek to keep the core of CUSMA intact but negotiate new and bifurcated terms with Canada and Mexico.  

Under the CUSMA status quo, different terms do currently exist for Canada and Mexico with the U.S. But Greer’s comments represent a material shift, one that widens the scope of issues under examination in the Canada-U.S. economic relationship and will fundamentally change how it is governed.

A deal with many strings attached

• By negotiating bilateral grievances under parallel agreements with Canada and Mexico, Washington is predicating market access for the two countries on outcomes across multiple files, rather than a single, fixed set of rules.

• For instance, rather than locking in a 16-year extension, Greer indicated that the U.S. is likely to trigger a process of annual reviews that can run for up to a decade–keeping the agreement in force, but under continuous pressure of renegotiation.

• Practically, that means trade policy becomes more iterative. Outcomes on tariffs, procurement, digital rules, dispute resolution, or enforcement will not be settled once but revisited as negotiations evolve.

• Politically, Greer is foreshadowing that it’s impossible to neatly resolve this all by the July 1^st deadline, where instead he can now announce that the core protocols of CUSMA remain in place while thornier issues continue to be hashed out in expanded side agreements.

• Additionally, with the current unpredictability in energy markets, Greer may have been looking to assure investors that the integrated North American energy market will continue with some semblance of a process in place.

• Steve Verheul, Canada’s former chief trade negotiator, noted that the war on Iran has strained America’s supply chains across energy, aluminium, fertilizers—commodities that Canada could help supply, giving Ottawa some leverage.

The central question is about a baseline market access tariff

• The most important issue is whether the U.S. introduces a broad market access tariff and, if so, what’s the number.

• Many on the Canadian side argue anything above 5% would be unacceptable. But the U.S. may look to push for as high as 10%, albeit this would likely come with significant carveouts and exemptions.

• A baseline market access tariff would have broader implications for the Canadian economy than the more concentrated effects the sector-specific Section 232 tariffs have had, as demonstrated in RBC Economics latest report: One year of tariff shocks in Canada.

Beyond trade: a more strategic negotiation

• Prior to Greer’s comments, the USTR also released its annual National Trade Estimate Report on March 31^st, listing what it deems as “significant foreign trade barriers” for partners, including Canada. 

• Most of the irritants listed aren’t surprising, they are becoming increasingly central to negotiations.

• Because of Trump’s trade war, some of these gripes have evolved and expanded, including provincial liquor stores no longer stocking U.S. alcohol.

• Others cut into how Canada structures parts of its economy: increased “Buy Canadian” procurement provisions, dairy supply management, digital and streaming regulations, and newfound sovereign data ambitions.

• Adding to that is the U.S.’s strategic ambition with respect to critical minerals. Canada’s level of participation in those ambitions will be a key issue, as we discussed in February.

The timeline ahead and how it impacts strategy

• June 1^st: Greer must report to Congress on the administration’s intent–whether to extend CUSMA as is or pursue changes.

• July 1^st: Canada, Mexico, and the U.S. will meet formally for the six-year review built into the agreement, at which point the U.S. likely pushes to shift towards a 10-year framework of annual reviews.

• The U.S. is positioning for a sustained model of negotiation under the rolling review, where it can continue to exert leverage on unresolved issues.

• One of Ottawa’s objectives, in addition to ultimately maintaining favourable, broad access to the U.S. market, is to push decisions on priority files as close to the mid-term elections as possible, without jeopardizing the entire agreement.

–Thomas Ashcroft, Global Policy Issues Lead

Tariff Toll

It’s been a year since Donald Trump stood in the Rose Garden at the White House and announced his government’s “Liberation Day” tariffs. This week, our colleagues at RBC Economics took a close look at the impact of those tariffs. Here are a couple of the key takeaways (click on the links for plenty more analysis):

Canada: One year of tariff shocks in Canada: What we learned

• Despite heightened trade tension, Canada was still the largest source of imports for 22 American states last year, unchanged from 2024.

• Canada’s limited retaliatory measures minimized the trade war’s impact on consumer prices in Canada.

• Since the U.S. tariffs on Canadian goods are targeted, the impact has been uneven across the country.

The U.S.: One year later: How U.S. tariffs and trade policy have reshaped the landscape

• Tariffs have not reduced trade imbalances, particularly with China.

• Tariffs revenue has little impact on reducing the deficit—for one thing, they don’t come close to making up for the Big Beautiful Bill tax cuts.

• There is no evidence that tariff policy has led to a reshoring of manufacturing jobs.

An emerging crisis

As the Middle East crisis drags on, many oil-importing emerging economies face a “triple squeeze”: rising energy import costs, currency depreciation, and higher rates to reprice debt.

Iran’s virtual blockade of the Strait of Hormuz has sent oil, diesel and gas prices soaring, raising costs for food, fertilizer and transport globally. But it’s developing economies that are bearing the brunt. For several African economies, energy and transport make up 15-25% of the CPI basket, a stronger U.S. dollar (up 0.85% against a basket of currencies since the Iran war began) has raised local currency debt service costs. Countries from Argentina to Vietnam have embarked on energy conserving measures and/or initiated emergency consumer support measures to offer some relief. Energy-driven inflation is pressuring central banks to maintain high interest rates even as domestic economies slow and foreign exchange reserves are drained. Investor confidence has already taken a hit with the MSCI Emerging Market Index wiping out its 13% year-to-date gains, while emerging market bond sales hit their lowest level for March since 2009.

Emerging markets’ debt vulnerabilities were already at historic highs. Developing countries paid US$741 billion more in debt service than received in financing (2022–2024). Borrowing costs have risen materially, with post-2020 issuance coming at rates around 10%, roughly double pre-pandemic levels. With 29% of Low-Income Countries (LIC) bonds maturing by 2026, default risk is rising for some sovereigns. The World Bank says it’s “ready to respond at scale” to assist emerging markets that have reached out.

Here are some of the countries that are under strain:

• Egypt: Net energy importer with large fuel subsidies (28% of government spending), high USD debt, and near-term Eurobond rollovers US$4 billion); FX pressure (currency −8%) and current account deficit (−3% GDP) compounded by reliance on GCC remittances (73% originate from Gulf economies) and declining Suez/tourism revenues.

• Pakistan: Petroleum prices are up 25%, as upcoming rollover (US$1 billion) is due 2026; recent debt crisis history, and heavy reliance on GCC remittances (62% of remittances originate from Gulf economies) strain reserves and heighten balance-of-payments risk.

• Bangladesh: Structurally dependent on LNG (50% of electricity) with no short-term substitutes; supply disruptions and rising transport costs are pushing inflation (~9%+) and increasing FX reserve pressure.

• Zambia: Extremely high debt service burden (10% of GDP) and fertilizer import dependence (2.5% of GDP); FX depreciation (−5%) compounds external financing stress.

• Sri Lanka: Post-2022 default economy remains fragile; fuel rationing and continued import dependence constrain recovery despite partial stabilization of LNG supply via the U.S.

• Côte d’Ivoire, Mongolia, Dominican Republic: Combination of FX-denominated debt exposure, current account deficits, and 2026 maturities; several also carry subsidy burdens (e.g., Mongolia) that amplify fiscal pressure as energy prices rise

• South Africa: High share of local debt held by non-residents (16% of GDP); FX pressure (currency –5.2%); vulnerable to capital outflows, bond market volatility, and tightening financial conditions.

• Turkey: Extremely high domestic yields (>35%), persistent currency depreciation, and significant reserve depletion (US$23 billion) from FX intervention; limited policy flexibility.

• India: crude import dependence is at 89%, roughly half via the Strait; rupee at record lows, fertilizer plants capped at 70% capacity; exposure amplified by reliance on remittances.

• Philippines: Imports 90% of its oil from the Middle East; current account deficit (−3.4% GDP). Maritime shipping disruptions are compressing margins in its most critical export sector (as semiconductors and electronics account for roughly 60% of total exports), while energy price pass-through is driving inflation above target.

How it impacts Canada

Several of the markets critical to Canada’s diversification strategy are exposed to the war in Iran: Bangladesh and Pakistan are key destinations for Canadian pulses. In Zambia, where copper accounts for roughly 70% of export earnings, Canadian firms are leading major production expansions. Reports of hours-long queues at fuel stations in India signal the shock is already hitting at the household level—and it comes as the Canada-India Comprehensive Economic Partnership Agreement (CEPA) negotiations target $70 billion in two-way trade by 2030. Meanwhile, Canadian entities’ exposure to emerging market assets across South America, Africa and Asia, could also present another challenge.

— Sydney Wisener

The week that was

World Trade Organization (WTO) reform talks derailed

• The WTO’s 14^th Ministerial Conference, held in Cameroon last week, failed to usher in a new era of global trade reform after the U.S. and Brazil sharply diverged over how long to extend the E-Commerce Moratorium, an agreement that prohibits levies being placed on electronic transmissions and digital services.

• The disagreement was the primary reason why a draft plan for reform of the WTO was not adopted, a major setback for the organization as it looked for ways to fight back against its marginalization and remain relevant in this new era of trade disruption.

• U.S. Trade Representative Jamieson Greer slammed the WTO upon his return to the U.S., saying it would only play a “limited role” in future global trade policy discussions.

Helium emerges as another Hormuz headache

• As well as disrupting global energy, aluminum, shipping, and fertilizer markets, the quasi-closure of the strait threatens the global supply of helium, a key component in the production of semiconductors.

• Since helium is primarily a by-product of LNG production, LNG supply chokes threaten to also disrupt the flow of the gas, of which a third of global supply passes through Hormuz. Helium prices have roughly doubled since the war began according to Fitch Ratings, which could have knock-on effects for technology-heavy economies, such as South Korea, Japan, and even the United States tech sector.

• Tungsten and sulfur are also key components of the global semiconductor supply chain and have experienced sharp price increases. Prior to the war beginning on February 28^th, China had restricted its tungsten exports and called for tighter limits on sulfuric acid exports.  

The U.S. announces new tariffs on pharmaceuticals

• Donald Trump announced new levies on branded drugs from pharmaceutical companies, including 100% tariffs on patented medications and their active ingredients.

• This follows through on the threats Trump made last fall as part of his administrations drive to pressure pharmaceutical manufacturers to build or onshore production facilities to the U.S.

• Reduced rates of 15% will be offered to jurisdictions that have secured trade deals with Washington, including Switzerland, Japan, the EU and South Korea. A U.S. official said the UK will essentially have zero tariffs on its imports as major British companies have struck deals with the administration.

— Thomas Ashcroft

Beyond the Barrel

The Strait of Hormuz has long been treated as an oil story. When it closes, energy markets move, tanker rates spike, and the headlines follow crude. But it remains a slow-moving shock to the cost of moving goods, which becomes more entrenched over time.

First-Order: Crude and Tankers

The most direct impact is exactly where markets expected it. Benchmark Very Large Crude Carrier (VLCC) spot rates have surged six-fold since early January and are currently priced at US$98/t (US$13-14/bbl). Tanker volumes through Hormuz (and Suez) have essentially collapsed, with more than 500 vessels stranded in the Persian Gulf.

Second-Order: Products and Fuel

Refinery outages and export constraints tied to Hormuz have fractured global bunker supply chains, forcing vessels to seek fuel at alternative ports at elevated war-zone premiums. Charted below is the Singapore marine fuel indexed price, up 66% since the crisis began. Not charted but equally telling is the spread between Freight on Board (FOB) and delivered prices, typically <5% but well over 50% in mid-March, reflecting genuine physical dislocation in how marine fuel reaches vessels.

Maersk, a Danish shipping company, formalized this disruption on March 25 with a global Emergency Bunker Surcharge, entrenching a products shock into shipping economics worldwide.

Third-Order: Container and Dry Bulk

The Shanghai Containerized Freight Index (SCFI) fell gradually ahead of the conflict and has since rebounded (see chart), but the moves are likely seasonal. Chinese New Year brought port throughput to 40-50% of normal capacity in mid-February. How much of the SCFI March recovery is supply related in contrast to stronger demand is likely unclear until official port data is reported at month end.

Still, dry bulk was structurally underexposed to Hormuz to begin with–only around 55 dry-bulk vessels were transiting the strait weekly before the conflict and the Baltic Dry index is largely flat, if not marginally down. Nonetheless, large container vessel average speeds have edged marginally lower (see chart) since late February, a modest signal consistent with routine rerouting at the edges of the conflict zone.

–Shaz Merwat, Energy Policy Lead

Untangling North America’s biofuel supply chain

North America’s once integrated biofuel supply chain is splintering along national lines.

U.S. federal incentives, state-level programs, and Canada’s Clean Fuel Regulations (CFR) are increasingly pulling in different directions, leading to a fragmented market with implications for Canadian biofuel producers and farmers growing oilseeds and grain including canola, soybeans, and corn.

Policy shifts triggered a continental divide

Changes to U.S. policy under the Renewable Fuel Standard (RFS) and new production tax credits have led the shift. Proposed 2026–27 RFS rules significantly increase domestic biomass-based diesel blending targets, reinforcing demand for oil-based feedstocks like soybean oil.

• At the same time, newer incentive structures—particularly the transition from blender credits to production-based credits—are explicitly favouring domestic fuel production in the U.S.

• The change eliminates the US$1 per gallon incentive Canadian biodiesels and renewable diesel received in the U.S. market as biofuels must be produced in the U.S. to earn the production-based credits. The result: an approximate 13% decline in value of Canadian imports into the U.S. between 2024 and 2025, according to Canada’s trade portal. It’s a meaningful departure from the bump Canadian biofuels received from U.S. subsidies.

What’s the impact on Canadian oilseed and grain markets?

Biofuel is a policy driven market and regulatory certainty is not a guarantee. Incentives for biofuel feedstocks under U.S. policy are still evolving as the U.S. Environmental Protection Agency (EPA) establishes its Renewable Volume Obligations (RVOs) for 2026 and 2027.

The pending U.S. policy uncertainty for Canadian farmers is that the EPA has proposed reducing the number of Renewable Identification Numbers (RINs) generated for imported renewable fuel and renewable fuel produced from foreign feedstocks, which would financially discourage U.S. biofuel refineries to use Canadian feedstocks. However, rising domestic Canadian demand could partially offset the export risk.

Canola: It’s the most exposed. Canola oil exported to the U.S. is primarily used for renewable diesel production. Exports of canola oil volume to the U.S. fell by 26% between 2024 and 2025, after climbing in each of the previous five years. The drop occurred while the Canadian canola industry spent more than a year in regulatory limbo, waiting for the U.S. Department of the Treasury and the Internal Revenue Service to clarify how production credits would work, confirming the inclusion of North American feedstocks in January this year.

Soybeans: Canadian soybean farmers may benefit from supportive U.S. policy. According to the U.S. Department of Agriculture’s 2026 outlook, biofuel mandates and tax incentives are expected to drive a 17% increase in U.S. soybean oil use for biofuels. Rising demand for soybeans is supporting prices, yet the commodity still faces potential downsides on trade with the U.S. if the EPA’s proposed RVOs are confirmed.

Corn: It remains anchored in U.S. ethanol production under the RFS. Yet, Canadian ethanol producers are now disadvantaged under the Clean Fuel Production Credit (45Z) that’s designed to encourage U.S. production of finished biofuel via incentives.

Bottom line

The Canadian outlook is mixed with domestic market demand hinging on the federal government’s forthcoming CFR amendments, where policy levers to shore up domestic demand are being considered, including minimum domestic content and credit multipliers for local producers.

–Lisa Ashton, Agriculture Policy Lead

The week that was

Canadian beef producers raise concerns over potential Mercosur free trade deal

• As Ottawa looks to secure a free trade agreement with the South American bloc this year, the Canadian Cattle Association (CCA) expressed concerns.

• Brazil is the world’s largest beef producer, and the CCA worries that a Mercosur free trade deal would flood the Canadian market with cheap beef, harm the industry’s efforts to recover amid the tightest cattle supply in 40 years, and risk accusations from the U.S. of Canada enabling a “back door” into North American markets.

Fertilizer costs are leaping just as planting season gets underway

• Disruption to shipments of fertilizers and commodities essential to fertilizer production through the Strait of Hormuz has increased prices, while North American farmers prepare to embark on their spring planting season. Urea, for example, has seen a ~40% price increase since the conflict began. The surge is quickly becoming a political issue for Trump who met this week with American farming groups, an influential political lobby.

• Meanwhile, Russia, whose shipments remain unaffected by the Hormuz blockade, has deep reserves of fertilizers and commodities. Earlier this week, Russia halted its exports of ammonium nitrate, to shore up its domestic supply. But the conflict potentially raises the specter of Russia looking to increase its leverage on having restrictions on Russian fertilizer exports to Europe eased.

European parliament approves trade deal with U.S.

• EU lawmakers had previously delayed approving the Turnberry agreement over U.S. President Donald Trump’s threats to annex Greenland, but on Tuesday the European parliament cleared the way for its implementation—with additional conditions attached. Prior to the vote, the U.S. threatened that the EU would lose favourable access to LNG shipments from the U.S. if the deal was further delayed, as Europe feels the bite of disrupted LNG shipments from Qatar.

• The deal would eliminate EU tariffs on American industrial goods and some agricultural products and reduce U.S. tariffs on most EU goods to 15%. However, MEPs attached safeguards, such as delaying the EU’s tariff eliminations until the U.S. reduces its levies. These safeguards must be approved by EU member states, with negotiations commencing April 13^th.

–Thomas Ashcroft, Geo-Politics Lead

Troubled waters

It does not take sustained disruption to ships sailing through the Strait of Hormuz for it to stop operating as a reliable artery of global trade. The costs are starting to add up: container shipping rates have risen 12% in the two weeks ended last Thursday, according to the Drewry World Container Index.

• When maritime war risks emerge, a relatively concentrated group of insurers designate high-risk areas, standard coverage falls away and shipowners must secure additional war risk insurance on a voyage basis, priced as a percentage of the vessel’s value.

• In recent weeks, those premiums have surged from fractions of a percentage point to now 5% of a ship’s value. For a large tanker, that translates into millions of dollars for a single passage. That could soon lead to shortages and likely higher prices for everyday items from toys to clothes to chips.

• When Iranian drones, mines, or small-boat attacks present a persistent and credible threat to the strait, this also becomes a human judgment call for the captains and crew. Not to mention the shipowners who don’t want to see one of their expensive tankers go down or be rendered useless.

• There are rising international efforts, including from Canada, to safely reactivate a key maritime channel in the Gulf, where an estimated 1,000 ships—largely energy tankers—are currently stalled.

• According to Lloyd’s List Intelligence, the conflict has already seen 23 vessels targeted, with some incidents leading to crew casualties.

• While Covid hit volumes sharply and dramatically increased freight rates, Hormuz is testing the precision of the global shipping system: flows are being rerouted, voyages are lengthening, and tonnage is being repositioned across basins. Cargo that would typically transit Hormuz is increasingly moving west via alternative corridors, with Red Sea ports emerging as key nodes in what is now a rapidly shifting map for cargo transiting through the Middle East.

What’s the impact?

• Longer voyages absorb capacity, tighten vessel availability in some regions, and create imbalances elsewhere. For containerized trade, the impact is consequential. E-commerce delivery delays have already hit Middle East retail, as air cargo is also taking a hit.

• Global supply chains depend on timing. Goods move in sequence and within defined windows. That predictability is now eroding. An increase in freight rates can be absorbed. A shipment that arrives weeks late, and without certainty, cannot.

–Thomas Ashcroft

LNG in Dire Straits

Oil and gas trade has virtually halted in the countries surrounding the Strait of Hormuz in the Persian Gulf. And as Qatar’s natural export facilities suffered a hit, it has sent energy forecasters back to the drawing board.

The global LNG market was on track to move into meaningful surplus in 2026, with two million tonnes on supply of 475 million tonnes (MT) in 2026 and 30 MT on supply of 585 MT in 2029.

How badly are Qatar’s LNG exports hit?

• A disruption to Qatari supply — the world’s second largest LNG exporter — would wipe that surplus out entirely for roughly three years to a 30 MT shortage in 2026, and only 8 MT excess in 2029. Of course, this assumes no demand destruction, which remains to be seen.

• Based on conversations, Qatar’s adjusted supply scenario of LNG this year is likely 50-55 MT, a ~30 mtpa disruption from last year’s ~83 mtpa of production. That’s not a rounding error—it is a decline just under two times greater than Canada’s current entire LNG export capacity.

• Qatar’s North Field expansion, which underpins the global supply growth story through 2030, could get pushed back with a slower ramp. The market was pricing in those volumes but is now repricing a near to mid-term shortage.

  

This is a two-stage shock

• The Strait of Hormuz dimensions compound the picture. With tanker traffic effectively frozen, the disruption isn’t just a production story – even unaffected volumes are shut-out of the Strait.  

• LNG Canada is revving up. Eight vessels departing B.C. in the first 17 days of March versus four in all of December signals that Pacific Basin buyers are already rerouting toward non-Gulf supply.

• Reports suggest U.S. LNG cargoes are also headed to Asia via the Panama Canal.

• Bottom line: The anticipated LNG glut — widely expected to lower prices and improve affordability — is likely off the table through at least 2028.

For more, read: Energy Shock: 8 charts that explain the global oil and gas fallout – RBC

–Shaz Merwat

Moving tariff targets

Negotiating trade with President Donald Trump is like playing whack-a-mole. Irritants pop up relentlessly and belligerently. Except if you swing late, the mole pops up and whacks you back harder. The U.S. Trade Representative’s launch of a Section 301 investigation into Canada is just the latest belligerent act.

The investigations, targeted a total of about 60 trading partners, fall under two probes:

• First, to determine if countries have failed to effectively ban or enforce prohibitions on goods produced with forced labour entering America (which is the focus of the Canadian investigation).

• Second, whether foreign government subsidies result in overcapacity that floods markets and hurts U.S. manufacturing in key sectors.

The U.S.’s motive is to force allies to share the load in hardening against forced labour goods from regions like Xinjiang region—where minorities are forced to produce goods—, apart from overcapacity, and broader Chinese supply risks. It’s not just bilateral finger-pointing but, for Canada, it does initiate a deliberately targeted process:

• Washington charges that Ottawa’s forced-labour enforcement regime unfairly burdens U.S. commerce by letting tainted goods flow into North America.

• That triggers mandatory consultations, public hearings, and evidence-gathering before tariffs can then be applied.

What’s the realistic threat?

If Canada falls foul of these investigations, duties could target manufacturing inputs (steel, aluminum, minerals), high-tech goods (semiconductors, solar, electric vehicles), seafood, toys, electrical equipment, and consumer essentials like textiles and leather. 

Canadian Border Services Agency (CBSA) data reveals modest gains after 2024 Forced Labour and Child Labour in Supply Chains Act took effect in Canada. Seizures of suspected forced-labour shipments—apparel, toys, and electronics often traced indirectly to the Xinjiang autonomous region in China—edged up, with around 50 detentions in 2024 versus almost none in the prior three years. However, only one shipment was confirmed as violating the prohibition in Canada, a fraction of U.S. Customs and Border Protection’s US$1 billion in seizures over suspected ties to forced labour. The Canadian government committed $25.1 million over two years starting 2025 to Global Affairs Canada and CBSA for investigations and enforcement, to accelerate this, but Washington questions the bite, arguing the enforcement lacks the teeth would help achieve its strategic goals with China.

What happens now?

• Section 301 is a process, not a trigger. Unlike Section 232, it requires consultations, evidence-building, and public hearings before any tariffs can be imposed.

• Canada has a narrow window to shape the record: April 15 submissions and hearings beginning April 28 will be critical to demonstrate enforcement progress and anchor arguments in CUSMA labour commitments (Chapter 23).

How it impacts CUSMA negotiations

• The timing is deliberate. Section 301 process is running in parallel with the CUSMA review, giving the U.S. Trade Representative office USTR an early signal of whether consultations are producing results.

• United States Trade Representative’s Jamieson Greer said this week that Canada lags Mexico in the CUSMA review process. The Canadian pacing is strategic, reflecting a conscious allocation of risk and leverage in Ottawa. Mark Carney assembled his team and split roles accordingly: Ambassador Mark Wiseman courts Congress against wild cards like CUSMA withdrawal (which can be done through executive order, although Congress does maintain ultimate control over repealing the legislation).

• Meanwhile, chief negotiator Janice Charette coordinates the relevant government departments and red lines for the PM.

• Pre-U.S. midterms, Canada must collaborate on forced labour without offering high-value concessions like critical minerals access. Demonstrating enforcement progress and willingness, while holding strategic cards close and letting the midterms test Trump’s leverage to preserve Ottawa’s negotiating room.

–Thomas Ashcroft

A nuclear reboot for Taiwan

China’s recent opportunistic “offer” to Taiwan to unite with the mainland in exchange for energy security illustrates how energy security, trade, and geopolitics are converging, as the Middle East conflict violently shakes up global energy systems.

Why does Taiwan need energy security?

• The East Asian Island is the world’s leading producer of semiconductors, with natural gas and oil—mostly imported—accounting for 61% of energy supply, according to data from the Statistical Review of World Energy. Coal (33%), nuclear (3%), and renewables (3%) make up the rest.

• In 2016, Taiwan initiated policies to phase out nuclear power and completed the shutdown of its final reactor in May 2025, bringing nearly 5GW of power—or 42% of Canada’s nuclear capacity—offline, and growing its liquefied natural gas imports.

• Around 42% of Taiwan’s imported LNG came from Qatar, which suffered a severe missile attack from Iran this week.

• Taiwan is revisiting its nuclear strategy, with feasibility studies to examine restarting two nuclear power plants. State-owned utility Taipower is also expected to submit reactor restart plans this month.

Lessons in a new energy era

• Our report Atomic Advantage: Canada’s generational opportunity in a new Nuclear Age, underscored how energy security is driving a resurgence in nuclear power worldwide.

• Many European and Asian nations are diversifying their energy suppliers but also power sources to navigate the geopolitical instability disrupting global energy markets.

• As nations seek to diversify both energy supplies and power sources, Canada is well positioned to help. Canada’s Candu reactor technology, which includes sub-gigawatt scale reactors suited to smaller grids, and growing SMR expertise make it a natural partner for countries looking to reduce fossil fuel dependence without relying on Chinese or Russian technology.

–Vivan Sorab

(Round)table talk

This week, RBC and Eurasia Group convened a roundtable in Washington, D.C., bringing together policymakers, business leaders, and trade experts as part of the lead-up to the Canada–U.S. Summit that we’ll co-host in Toronto in June.

The tone was cautiously optimistic, which is markedly different from the doomsday headlines and political noise that has become commonplace. Key players on both sides of the border remain focused on preserving and strengthening one of the most deeply integrated economic relationships in the world.

The discussion coalesced around several critical themes:

• The upcoming CUSMA review, built into the agreement six years ago, was designed as a forum to air grievances, not dismantle the framework. That process alone won’t upend a trade relationship that sees Canada as the top trading partner for more than 30 U.S. states—a fact the Office of the United States Trade Representative is acutely aware.

• Section 232 tariffs on aluminum, lumber, steel, and autos—imposed on national security grounds—lie outside the formal review process, and there will inevitably be high-stakes negotiations around changing the status quo.

• Trump is also less likely, and less able, to unilaterally reimpose sweeping tariffs in 2026. Yet initiatives like Project Vault signal his intent to align allies with U.S. interests on critical minerals and advanced technologies. Trump will want to ensure Canada doesn’t stray too far from the U.S. orbit on those, particularly as the EU advances its own agenda on tech sovereignty and regulation.

• For its part, Canada has distinct advantages to draw on: its supply of heavy rare-earth elements with irreplaceable magnetic and high-temperature properties, as well as its leading capabilities in quantum computing.

• Meanwhile, China’s role in both markets remains a concern and will feature prominently in negotiations. For Washington, the priorities are to reduce the ability for Canada to serve as a backdoor for Chinese goods into the U.S. market and to decouple its critical minerals supply chain. Ottawa needs to manage that shift while maintaining a measure of economic flexibility.

• Energy interdependence is key. The integrated Canada–U.S. energy system, bolted together by pipelines and grids, powers a landmass larger than Russia. Canada supplies more than 60% of U.S. crude oil imports, and industry leaders cautioned against viewing that relationship merely as leverage. With both countries ranking among the world’s top energy producers, the logic is compelling to expand joint infrastructure and strengthen North America’s competitive position globally.

Political leaders may argue and tinker with the details, but the machinery of integration continues, driven by habit, necessity, and sheer economic gravity.

-Thomas Ashcroft

The Trump Paradox

RBC’s John Stackhouse on how trade tensions may strengthen Canada’s position in an integrated market:

Trump’s extraordinary use of tariffs has braced Canadians for a more fundamental remaking of continental free trade, on less favourable terms for Canada and Mexico.

This has put Canada on a more ambivalent, but strategic and resolute course. It is not unusual for Canadian governments of both major political parties over the decades to oscillate between closer alignment with Washington and periodic assertions of autonomy. But this time, it is different in at least one big way: Canada is now investing heavily in industrial strategy and other sovereign economic policies.

As a result, there are at least three major restructurings underway:

• Expanding ports and export infrastructure to reach markets beyond the United States.

• Building domestic defence, digital, and data capacity with a “Buy Canadian” approach to procurement and a willingness to increase collaboration with other European and Asian partners.

• Rebuilding domestic industrial capacity while reorienting manufacturing toward higher-value, globally competitive activity.

Taken together, and if executed, this strategy would not imply a retreat from the U.S. market so much as a change in how Canada relates to it. Trade with the United States would remain large and central, but less one-sided: Canada would export more from a broader base of domestic capacity, rely less on U.S. inputs, and approach the relationship from a position of greater bargaining strength. The result would likely be steadier, more diversified cross-border trade.

Read the full commentary here.

Imports, inputs and irritants

Our Agriculture Lead Lisa Ashton sat down with Ambassador Darci Vetter, Former Chief Agriculture Negotiator for the Office of the United States Trade Representation, to unpack recent changes in the U.S. tariff approach and what the agriculture sector should be thinking of ahead of the CUSMA review. (This interview has been edited and condensed for brevity.)

Q: How might the Trump administration’s current focus on reciprocity and trade deficits impact agriculture and food trade, where supply chains are often multi-country and complex?
A: Farmers and food processors now have to factor multiple and changing tariff rates into their sourcing decisions. These calculations are further complicated by tariffs on steel, aluminum, auto parts, lumber and other products that are critical inputs. 

It’s also not clear to me that the U.S. agricultural trade deficit is a good indicator of the health of the U.S. agricultural sector. If you look at the products that the U.S. exports versus those it imports, you are quite literally comparing apples and oranges. While there is merit in examining how U.S. farmers can better serve local and national markets—and no country wants to be overly dependent on food imports—imported agricultural and food products ensure consumers have access to a varied, affordable and healthy diet.

The USDA’s latest agricultural trade forecast is predicting a US$20 billion decrease in the agricultural trade deficit.¹ While the forecast predicts a small increase in exports, a closer examination shows the majority of the changes are due to a decrease in prices for high-value imports like coffee, cocoa and spirits, rather than changes in policy.

Q: What should agriculture and food sectors be watching for in the CUSMA review? 
A: The trilateral food and agricultural trade relationship among Canada, the U.S. and Mexico is one of the world’s most integrated agricultural trading relationships. In 2024, U.S. agricultural and seafood exports to Mexico and Canada totalled more than US$60 billion². In the U.S., a broad group of agricultural associations have formed the Agricultural Coalition for USMCA to advocate for continuation of the agreement, recognizing its critical value for the sector.

Longstanding relationships are bound to have a few irritants. In his December testimony to Congress, U.S. Trade Representative Jamieson Greer listed a few issues in agriculture— including market access for U.S. dairy products that Canada committed to provide under CUSMA; addressing Canada’s exports of certain dairy products; and the impact of importing Mexican seasonal produce on U.S. growers. 

Q: What other elements of the CUSMA review could impact the sector?
A: The U.S. is likely to prioritize tighter rules of origin and/or North American content requirements for autos, auto parts, steel and aluminum—affecting supply chains for these important inputs for agricultural production and food processing.

One of the most important elements of CUSMA was the Sanitary and Phytosanitary Measures Chapter. CUSMA added important obligations to help ensure food safety and animal and plant health. The SPS Chapter calls for coordination to ensure regulations are transparent, based on sound science and risk, and allow for key agricultural technologies. The USMCA SPS Committee provides a venue to coordinate positions and inform international standards. While unlikely to be changed in the review, they provide a clear example of the benefits of long-term regional approach to trade relationships.

Also in this edition: A conversation with Canada’s Foreign Affairs Minister Anita Anand, key takeaways from PDAC, and the Iran conflict’s impact on global oil supply and prices

Canada’s new capital-first strategy

If trade and investment are two sides of the same coin, Canada for a good while has been calling on trade when the coin was flipped. The Carney Doctrine—whenever it’s written—shows a new preference for investment. No capital, no bananas.

The prime minister signalled a capital-first inclination in his lightning tour of Asia this week, as he covered 30,000 kilometres, three countries and $5.5 billion in deals faster than the Toronto Maple Leafs can win a game. The messages in Mumbai, Sydney and Tokyo—three of the world’s key capital markets centres—is that Canada needs and wants capital. Not a lot of symbolic trade MOUs on this junket.

Carney’s Indo-Pacific initiatives focussed on capital flows, industrial partnerships, and supply chain integration across sectors such as critical minerals, semiconductors, AI, defence manufacturing, and energy security. From a distance, it looked more like a PE road show than a trade mission. Example: IFM, an infrastructure investment behemoth owned by Australian pension funds, declared its intention to invest up to $10 billion in Canada. That matters because more infrastructure in the two countries will enable more trade.

Back home, some subtler changes added to the trend toward global capital as the precursor to trade. A shakeup at Global Affairs was the latest sign that foreign policy is now rooted in the PMO. The Prime Minister and his top bureaucrat, Michael Sabia, also hired Glenn Purves as deputy minister of international trade. Purves is a long-time bureaucrat who had worked under Sabia before heading to the private sector early last year as head of macro research at BlackRock’s Investment Institute. 

Putting a capital markets guy atop the trade service is a signal: capital first. Purves now has his own global infrastructure, too, through trade commissions, to ensure Carney’s capital calls are met. Somewhere on that PMO in the Sky, the Prime Minister keeps a tally of commitments made, and commitments delivered. Call it the new balance of trade. 

– John Stackhouse

Turning off the tap

The Strait of Hormuz, through which 20% of the world’s oil passes, is a key transit point for many energy-import dependent Asian countries. China, by a wide margin, tops that list.

Since the Iran conflict started, commercial shipments of crude and natural gas have slowed to a “near-total” pause. And the price is climbing—fast. Brent Crude futures crossed US$90 a barrel, the highest in almost two years, leading to fears of higher prices at the pumps and spiking inflation. 

–Farhad Panahov

Critical conversations: 7 takeaways from PDAC

This year’s Prospectors & Developers Association of Canada (PDAC) event in Toronto was abuzz with talk of Canda’s critical mineral riches and the speed at which they can be brought to global markets—at commercial scale. The industry is enthusiastic, the government supportive, but there is a long way to go to realize Canada’s mining potential.

Here are seven themes that we observed at the event:

• Diverging views of supply chains exposures

• Resolving refining bottlenecks will be key

• Project Vault is not a partnership of equals

• Copper is the clearest demand signal

• Don’t ignore civilian demand

• Prioritize across the minerals list

• Regulatory coordination as competitive advantage

Read more on these key takeaways from Shaz Merwat, RBC Thought Leadership’s Energy Lead, here.

Three Questions with…Foreign Affairs Minister Anita Anand

Hours after returning home from India, where Prime Minister Mark Carney kicked off talks of a Comprehensive Economic Partnership Agreement aimed at doubling two-way trade to $70 billion by 2030, Foreign Affairs Minister Anita Anand joined RBC’s John Stackhouse on stage at the Toronto Region Board of Trade.

Some key takeaways from the conversation (edited for brevity):

JS: What signals are you bringing home, especially to business decision makers?
AA: We are the only G7 country that has a free trade agreement with every other G7 country. We had the infrastructure in place from a trade perspective. We need it to be operationalized and utilized. Such is the case with India. We need all of us to be utilizing the agreements that we are executing, or we will keep having to rely on one trading partner and all the difficulty that has caused.

JS: I’ve heard this for decades. We need to diversify. We’re making progress but it’s slow progress. What are we, in business, missing?
AA: It’s really important to unpack what we are doing internationally. That’s what I’m trying to do, make foreign policy and these types of agreements accessible and understandable for businesses to utilize—that will yield actual trade diversification over and above the agreements that we’re signing.

JS: I wonder if you could wrap up with a positive reflection from your trip and if there was any one point that really gave you confidence, especially for businesses?
AA: There is a positive story here despite the very difficult economic environment we find ourselves in, despite a global conflict that is extremely disconcerting and stressful. Canada is on a positive path to growth. Canada has everything the world wants. There is not a room that I go into where people are uninterested in Canada.

Watch the entire conversation here.

Trade Posts

States challenge Trump’s latest trade measures

• As many as 24 U.S. states have sued the Trump administration over its new 10% tariffs imposed under Section 122 of the 1974 Trade Act, arguing the president again exceeded his authority after the Supreme Court struck down the earlier emergency-powers tariffs.

• The case reopens yet another legal front in Washington’s tariff strategy and prolongs uncertainty for businesses, as courts weigh the limits of executive trade authority.

AI chip exports potentially being tied to U.S. investment

• The U.S. Commerce Department is proposing new export rules that would require countries buying large volumes of Nvidia and AMD AI chips to commit investment into U.S. data-centre infrastructure.

• The move signals a shift toward “investment-for-access” technology policy, as the U.S. tries to leverage its semiconductor advantage to support the huge buildout of data centres.

–Thomas Ashcroft