The Trade Hub

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.