Canada Prepares for Tariff Fallout as August Deadline Looms

The US and Canada are racing against an August 19 deadline for Washington to impose 50% tariffs on some Canadian exports. Tense negotiations will likely ensue as the deadline approaches, but a deal is far from certain.

Market observers may be anticipating Trump to back down after announcing the threatened tariffs would be carried out. Should the tariffs persist, they are unlikely to push Canada into recession or prompt the Bank of Canada to ease monetary policy, but could delay tightening.

The tariffs will cover around 5% of Canada's exports to the US, but those exports would be severely impacted by a 50% tariff. Exports make up about 30% of Canadian GDP, and those to the US account for approximately 70%, meaning that the affected exports would make up marginally above 1.0% of Canadian GDP.