Thought Leadership

In this week’s edition: Trade signals at the G7, why it’s so hard for steel and aluminum manufacturers to diversify from the U.S., and how long it typically takes to get a major trade deal done.

The week that was

• Reports surfaced (here and here) that Canada and the U.S. have a working trade document, including details of a potential deal. No timeline yet.

• With Mexico’s Claudia Sheinbaum and India’s Narendra Modi in Kananaskis for the G7,  could more trade talk with Canada be on the agenda?

• According to the World Bank, we’re about to experience the slowest decade of growth since the ’60s–the result of uncertainty caused by tariffs.

• While Trump celebrates a “done deal” with China after two days of negotiations, word from China is more muted—Beijing’s official news agency called it an “agreement in principle.” China is said to only be lifting restrictions on rare earth minerals exports for six months leaving open the possibility of future escalation.

• In the next week or two, Trump plans to send letters outlining unilateral tariffs to many countries.

• Tariffs have yet to generate the inflation jump in the U.S. that many expected. Just wait, say economists.

• Dominican Republic has become a hot spot for U.S. companies seeking alternative manufacturing hubs. The country’s 92 free zones and proximity to the U.S. are two key factors.

Trade signals at the G7

While there may not be a major breakthrough with the U.S. on tariffs and trade at the G7, there are certainly a couple things to keep an eye on:

Critical Minerals: The U.S. trade war with China exposed major dependencies on critical and rare earth mineral supply chains, which Beijing dominates. To feed its lofty energy and tech ambitions, the Trump administration needs a reliable supply. Collectively, the G7 possesses massive untapped resource potential, and the capital needed to fund projects.

USMCA: Claudia Sheinbaum’s attendance will mark the first time since Trump’s inauguration that all three North American leaders are participating in the same multilateral meeting. This unlocks the potential for a sideline meeting to chart a course for the 2026 USMCA review and discuss ongoing efforts to combat the issue of fentanyl that remains the core justification for the U.S.’s IEEPA tariffs on Canada and Mexico.

Noteworthy

By Jordan Brennan

I was in Ottawa this week at Canada 2020, where the general sentiment among attendees was cautious optimism. The focus was on reigniting growth through nation-building projects. And while opportunities abound—in energy, mining, housing, infrastructure, AI—a rebooted operating model is needed. A few themes stood out:

• Internationally, Canada is seen as a high-risk jurisdiction thanks to regulatory delays (i.e. impact assessments that can stretch over a decade) and political instability (think rising separatist sentiment in Alberta). It was noted that international investors routinely add a 20% risk premium to capital allocation decisions involving Canada. Then there’s the broad political discretion cabinet holds over major projects. To unlock capital at home and abroad, we’ll need more regulatory and political certainty. Could a national trade corridor strategy help reduce Canada’s perceived risk profile?

• Building export infrastructure assumes we’ll develop the resources to fill it—but many projects remain stalled or cancelled. So how do we responsibly move resources from Canadian soil to global markets? Here, treaty rights and the duty to consult First Nations come into focus—not as a hurdle, but as a competitive advantage. Successful companies build full economic partnerships with First Nations early in the process—on everything from impact assessments, employment and procurement agreements and equity stakes. If we want more projects approved—and faster—this kind of partnership is essential.

• Same goes with Arctic security. With the retreat of sea ice, the Northwest Passage is being contested by foreign powers in part because it dramatically shortens the shipping time between North America, Europe and Asia. As one panelist put it, there’s no better way to assert Canadian sovereignty in the north than by developing the region. That means infrastructure—digital and physical—as well as the jobs and skills tied to mineral development.

• Another challenge is timing. While resource prices are set on volatile global spot markets, projects like LNG terminals or major mineral developments have multi-decade lifecycles. Development must be aligned with future demand patterns, yes, but we must also be hyper-focused on cost competitiveness. Forecasting global energy and mineral needs in 2050 is daunting, but essential if we’re to attract the patient capital needed for big projects.

Three questions…

With the U.S. doubling tariff rates on steel and aluminum, Jake Silverthorn on RBC’s Capital Markets Diversified Industrials team, helps us understand the current landscape.

Q: Why are Canadian steel and aluminum producers more impacted from U.S. tariffs than vice versa?
A: There is a structural difference between U.S. and Canadian markets. Canadian producers mostly operate in spot markets while U.S. producers use contract-based transactions, which makes it difficult for Canadian companies to effectively pass through tariff costs. Additionally, the tariffs have created a demand and pricing imbalance between the U.S. and Canadian markets.

Q: Why is it hard for Canadian producers to diversify away from the U.S. market?
A: Given high shipping costs, the U.S. represented the most profitable destination. Canadian producers have strategically placed their operations near U.S. ports to make shipping easier.

Q: What can Canadian producers do to maintain their U.S. market share?
A: To remain competitive with the domestic U.S. producers and maintain existing operations, Canadian producers are expected to absorb part of the tariff costs, impacting margins and cash flow.

Bottom line

917

The number of days a typical trade deal takes to complete from start to finish (The USMCA took 896 days). In April, Trump promised 90 deals in 90 days. With just a couple weeks remaining on that self-imposed deadline, the U.S. has signed 1 deal (U.K.) and has scored a tariff truce with China.