In the span of about 15 hours, Canada’s central bank chief warned governments against using national security concerns as a “pretext for inefficient protectionism,” the federal government announced potential new tariffs on Chinese imports, and a U.S. presidential nominee doubled down on an economic plan that would see about 75 per cent of Canada’s global exports face severe new penalties. More on the day that underscored the urgency of Canada’s trade challenges below, but first:
In the news
Let’s build: Canada must strengthen its relationship with the United States and deliver more for its largest trading partner, Royal Bank of Canada’s chief executive says.
Let’s move: Brookfield Asset Management Ltd. is considering moving its head office to New York to set it up to join a wider roster of stock indexes, as it seeks to expand the pool of potential investors in its stock.
Let’s look closer: Real estate investment trusts are soaring, but do they really have much more room to run?
Happening today
- The U.S. releases its consumer prices index report for August at 8:30 a.m. ET.
- Britain reports GDP for July.
- Earnings include Dollarama, Transcontinental and Manchester United.
In focus
Canada’s world of trade wars
Macklem sets the stage
In a speech to the Canada-UK Chamber of Commerce in London, Bank of Canada Governor Tiff Macklem warned that changing patterns of global trade could add upward pressure to inflation, Mark Rendell reports. Geopolitical tensions, trade wars and strained supply chains threaten to derail global economic growth, Macklem said.
- The speech came hours before Ottawa announced it is considering a surtax on Chinese critical mineral products, batteries and parts, solar products and semiconductors.
- And in last night’s U.S. Presidential debate, Republican nominee Donald Trump defended his proposal to impose tariffs of up to 20 per cent on all imports.
Even if entirely by coincidence (the Bank of Canada works independently from the political process, it should be noted), the events show how carefully Canada must step as it aims to appease its biggest economic ally while avoiding potentially disastrous retaliations from China. And that risk is growing:
Ottawa vs. Beijing
- The federal government’s announcement yesterday follows a decision to raise tariffs on Chinese-made EV imports to 100 per cent and 25 per cent on aluminum.
- China responded to the EV tariff by launching an “anti-dumping” investigation into imports of canola from Canada. A suspension on the import of Canada’s rapeseed, as it’s also called, would be devastating to the industry.
Canada’s relations with Beijing could make for a compelling backdrop to Frozen 3. But it isn’t just from China that Ottawa is feeling the chill.
Ottawa vs. Washington
The U.S. government is escalating its fight with Canada over a new tax Ottawa implemented in June on foreign tech giants such as Apple and Amazon.
U.S. Trade Representative Katherine Tai announced last month that her office has requested dispute-settlement consultations with Ottawa under the Canada-United States-Mexico Agreement (CUSMA).
- The tax imposes a 3-per-cent levy on Canadian revenue from digital services exceeding $20-million that is earned by companies with at least $1.1-billion in global revenue.
- That would include revenue from search engines, social-media platforms and online marketplaces.
- Goldy Hyder, president of the Business Council of Canada, warned in a letter this week to Finance Minister Chrystia Freeland that the tax could be destructive to Canada’s relationship with the U.S.
As that fight escalates, a potentially larger one is brewing in the background over CUSMA. Both Democratic nominee Kamala Harris and Trump could prove challenging when it comes time to renegotiate the trilateral agreement in 2026.
- In July, a group of former diplomats, policy advisers and business leaders warned that “time is running out” for Canada to improve trade relations with the U.S. ahead of those talks.
- The country’s relations with Trump are “chilly at best,” and Harris voted against the agreement when she was a U.S. senator. She argued at the time the trilateral deal didn’t do enough to protect American workers.
Canada goes it alone
In both the tariffs on China and the digital services tax, the federal government has drawn criticism for working outside of established global frameworks for resolving trade disagreements.
- The digital services tax was rolled out even as 138 of Canada’s allies in the Organization for Economic Co-operation and Development agreed to hold off applying the levy for at least another year under a deal backed by the United States.
- The tariff on Chinese EVs was put in place under a provision of Canadian customs law that allows the government to levy tariffs in response to foreign practices that adversely affect trade.
- Critics have argued invoking that provision makes the Canadian government “judge, jury and executioner” when it comes to the trade policies of its trading partners: “Section 53 is the nuclear option.”
And neither case seems in keeping with the spirit of another priority Macklem outlined in his speech earlier in the day.
Describing a “fragmented” world in which geopolitical tensions are splintering supply chains and pushing countries to fight for themselves, he called for investment in “effective multilateral institutions.”
“They are more important than ever in this fragmented world,” he said. “And they will be only as effective as members want them to be.”
Quote of the day
Today we’re so much more than soup.
— Campbell CEO Mark Clouse explains why Campbell Soup is dropping “Soup” from its name. Clouse said yesterday the move symbolizes the company’s shift to other packaged food such as jarred sauces like Rao’s and Goldfish snacks.
Charted
What’s in store for Couche-Tard?
That dive at the end represents the moment reports surfaced yesterday that U.S. antitrust regulators have told Seven & i that it may probe a potential deal in an early sign that a takeover by Quebec-based Alimentation Couche-Tard could face regulatory scrutiny.
Morning markets
Global markets were mixed ahead of key U.S. inflation data for August that could signal the size of the Federal Reserve’s expected interest rate cut next week.
Wall Street futures were in negative territory as investors weighed the impact of the heated presidential candidates debate last night between Kamala Harris and Donald Trump. TSX futures were flat.
Overseas, the pan-European STOXX 600 was up 0.38 per cent in morning trading. Britain’s FTSE 100 inched up 0.05 per cent, Germany’s DAX gained 0.41 per cent and France’s CAC 40 rose 0.3 per cent.
In Asia, Japan’s Nikkei closed 1.49 per cent lower, while Hong Kong’s Hang Seng slipped 0.73 per cent.
The Canadian dollar traded at 73.63 U.S. cents.