Canada's Economic Outlook: Tariffs, Labour Market, and Interest Rates in Focus

The upcoming economic data releases in Canada will provide crucial insights into the early impact of new US tariffs, even before they take effect.

The trade data for July is expected to show signs of tariff front-loading, which could have given a temporary boost to Canada's exports. This phenomenon was observed ahead of IEEPA tariffs coming into effect in spring 2025.

According to the forecast, Canada's trade surplus will widen to $4.2 billion in July from $3.9 billion in June.

The labour market recovery in Canada may stall, with a smaller job gain of 5,000 expected in August, while the unemployment rate remains steady at 6.4%. The job postings from Indeed.com were little changed that month, and broader growth indicators have looked better since activities stalled over the winter.

The Bank of Canada is likely to stay on the sidelines for now, as heightened growth risks from new US tariffs and inflation risks from high oil prices are not enough to push them off. The central bank will acknowledge both the economic strength and forward-looking risks, leaving interest rates unchanged in their meeting on Wednesday.