Canada Fires Back at US Trade War Escalation

Canada has imposed tariffs on hundreds of US products in response to Donald Trump's 50% tariffs on $20 billion of Canadian exports. This move is part of a growing trade war between the two countries. The Peterson Institute for International Economics warns that if the US scraps the USMCA and imposes 15% tariffs on goods from Canada and Mexico, it could add around 0.27 percentage points to the PCE price index.

The S&P 500, Nasdaq, and Dow Jones are currently holding up well, but this calm may be tested if inflation comes in above expectations. The US payrolls surprised with 162,000 new jobs in August, which could raise the odds of a Fed rate hike at next week's meeting.

The European Central Bank meets on September 10 and is expected to hike rates to 2.5%. In Japan, the BOJ is also expected to hike rates this month followed by another increase in December or January. Global bond yields are heading higher as central banks try to guard against rising inflation risks.