{"id":816693,"date":"2026-07-21T16:32:10","date_gmt":"2026-07-21T16:32:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/816693\/"},"modified":"2026-07-21T16:32:10","modified_gmt":"2026-07-21T16:32:10","slug":"the-market-knows-how-this-game-is-played-now-what-economists-and-strategists-are-saying-about-trumps-latest-tariffs","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/816693\/","title":{"rendered":"\u2018The market knows how this game is played now\u2019: What economists and strategists are saying about Trump\u2019s latest tariffs"},"content":{"rendered":"

Markets are taking news of U.S. President Donald Trump\u2019s 50-per-cent new tariffs<\/a> on a range of Canadian goods in stride this morning. <\/p>\n

The Canadian dollar is hovering around 71 cents US, down only about a quarter of a cent from prior to the late Monday announcement. Short-term Canadian bond yields are only slightly lower, albeit the spread with U.S. Treasuries is growing – the U.S. two-year yield, for instance, is up 3 basis points this morning while the Canadian equivalent is down 1 point. While that suggests the market is pricing in some additional economic softness in Canada in the months ahead, the latest interest rate probabilities suggest a Bank of Canada rate hike is still more likely by the end of this year than a rate cut. Meanwhile, the TSX is higher this morning and trading right along with Wall Street. <\/p>\n

Some forestry stocks have seen selling off. West Fraser Timber (WFG-T<\/a>) has been one of the hardest hit, down 2.5 per cent. <\/p>\n

The new tariffs, threatened to take effect on Aug. 19, would cover a wide range of goods across sectors. <\/p>\n

According to the Bank of Montreal, chemicals, plastics, electronics and industrial equipment would take the biggest hit under the new tariffs. Consumer goods and forestry products would be next on the list. Also impacted would be some manufacturing, machinery and industrial equipment and agriculture\/food products.<\/p>\n

Here is what economists and market strategists are saying: <\/p>\n

Royce Mendes, managing director and head of macro strategy at Desjardins<\/p>\n

\u201cThe new tariffs are exactly the type of escalation we expected to see during this phase of the trade negotiations \u2013 if anything, they\u2019re somewhat less aggressive than feared. They fit President Trump\u2019s signature style of leveraging the American market to force partners into making concessions. As a result, our forecasts already embed a period of uncertainty hanging over the Canadian economy and financial markets in the third quarter. While we don\u2019t expect the Bank of Canada will need to cut rates, we see bond yields, stock prices and the Canadian dollar all falling further in the near term on elevated trade tensions over the next few months.”<\/p>\n

\u201cThat said, we expect the administration will want to announce a series of wins ahead of the midterm elections, including at least a partial resolution to North American trade disputes. That leaves us still optimistic about the prospects for the economy and financial markets in 2027.”<\/p>\n

Robert Kavcic, senior economist with BMO Capital Markets<\/p>\n

\u201cAll in, the USTR [Office of the United States Trade Representative] estimates this move will cover $20 billion of goods (roughly $C28 billion), or about 5% of goods exports to the U.S., and roughly 0.8% of Canadian GDP. If that number is accurate, we judge that the weighted average effective tariff increase rom pre-trade war levels, which is currently about 5 ppts, would jump to around 7.5 ppts. While that still sounds digestible in the aggregate, some specific businesses\/industries would be hit extremely hard. And, if the shelter of USMCA is in fact broken, that would do serious further damage to business confidence. As we\u2019ve seen before though, 30 days provides room to de-escalate, and legal challenges would almost certainly follow.\u201d<\/p>\n

\u201cPerhaps the market knows how this game is played now. For the Bank of Canada, following a well-behaved CPI report on Monday, this is just a reminder that uncertainty on the trade front has not gone away, and any rate hikes at this stage would need to be considered very, very, carefully\u2014we believe the Bank is firmly on hold this year and, in their words, worsening trade relations with the U.S. could even open the door to easing again.”<\/p>\n

Andrew Hencic, director and senior economist with TD Economics<\/p>\n

\u201cImportantly, unlike the Liberation Day tariffs that were gradually walked back, the new tariffs are highly targeted. The new batch looks to affect the Canadian economy with minimal impact on U.S. industry and consumers. The 30-day implementation period does, in theory, leave time and room for negotiation. Given the backdrop of the USMCA negotiations, it\u2019s reasonable to wonder just how long these tariffs will be in effect.\u201d<\/p>\n

\u201cGiven the targeted nature of these tariffs, it suggests that products were selected where demand is going to be highly responsive to the new duties. For Canada\u2019s economic outlook, it\u2019s also important to note that businesses have been operating under a cloud of uncertainty for over a year, and although the new announcements are likely to dent confidence further, a repeat of the scale of the confidence shock from 2025 remains a tail risk. Given the circumstances, should the tariffs be maintained it would likely take between 0.3 to 0.6 percentage points off GDP growth over the next year, absent any major changes to business behaviour or government response. We believe that the ultimate impact would likely track closer to the lower range of these estimates.\u201d <\/p>\n

\u201cBusinesses are likely to front-run the tariffs ahead of the August 19th deadline. This will increase the volatility in the trade data. The data are unlikely to reflect the full effect of the tariffs (if they come into force) until September, so the full macroeconomic impacts will start to show through in late-26.\u201d<\/p>\n

\u201cWhat is important is that the downside economic risks from trade the BoC has continually cited remain ever-present.\u201d<\/p>\n

Taylor Schleich and Ethan Currie, economists with National Bank of Canada<\/p>\n

\u201cIt\u2019s not a foregone conclusion that these tariffs will enter into force and USTR Greer has already indicated they\u2019re a negotiating tactic. But even if the levies are imposed, they\u2019re unlikely to materially alter the BoC\u2019s rate path. The Bank had previously said that \u2018significant new trade restrictions on Canada\u2019 could warrant rate cuts to support growth. Without minimizing the impact on affected firms, the scope of the levies does not appear sufficient to meet that easing threshold.\u201d<\/p>\n

\u201cStill, these tariffs are not without some economic or policy consequence. At a minimum, they give the Bank [of Canada] more reason to remain patient and refrain from near-term rate hikes despite above-target inflation. The renewed uncertainty could also dent business confidence, which had recently been recovering (in part because of easing trade uncertainty). And while this should not jeopardize Canada\u2019s recent return to growth, it could slow that momentum and make the ongoing recovery more uneven.\u201d<\/p>\n

Benjamin Tal, deputy chief economist of CIBC World Markets<\/p>\n

\u201cWe see this as a sector-specific development rather than a broad macroeconomic story, though it is clearly significant for the industries directly affected. Notably, Section 338 has not been used since the 1930s and has never previously been used to impose tariffs, which suggests the measure could face legal challenges. The timing is also notable, and it is likely these tariffs will serve as additional leverage in upcoming CUSMA negotiations. At this stage, we do not believe the move is large enough to alter our current view on either the Fed or the Bank [of Canada].\u201d<\/p>\n

David Rosenberg, founder of Rosenberg Research<\/p>\n

\u201cThese new measures affect $20 billion of targeted Canadian exports, or barely more than a 5% share of what the country ships stateside, but it is the message this sends \u2014 leverage during the USMCA negotiations, which promise to be tough and cast a renewed cloud over the local economy.\u201d<\/p>\n

Eric Lascelles, chief economist and head of investment strategy research at RBC<\/p>\n

\u201cIt is not clear whether this latest tariff threat will actually be implemented and whether the tariffs would hold up to legal scrutiny, but it is still bad news for Canada, creating elevated uncertainty and potentially slowing the economy. The U.S. is also adversely affected, though at a smaller share of GDP.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Markets are taking news of U.S. President Donald Trump\u2019s 50-per-cent new tariffs on a range of Canadian goods…\n","protected":false},"author":2,"featured_media":816694,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[901,888,902,879,877,903,45,49,48,876,895,896,891,878,875,46,549,295,894,887,914,880,881,893,889,890,884,904,885,909,910,912,907,911,905,908,882,898,899,714,897,906,865,61,900,892,886,883,913],"class_list":["post-816693","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-alberta","tag-arts-news","tag-bc","tag-breaking-news","tag-breaking-news-video","tag-british-columbia","tag-business","tag-ca","tag-canada","tag-canada-news","tag-canada-sports","tag-canada-sports-news","tag-canada-trafficcanada-weather","tag-canadian-breaking-news","tag-canadian-news","tag-economy","tag-education","tag-environment","tag-federal-government","tag-foreign-news","tag-globe-and-mail","tag-globe-and-mail-breaking-news","tag-globe-and-mail-canada-news","tag-government","tag-life-news","tag-lifestyle","tag-local-news","tag-manitoba","tag-national-news","tag-new-brunswick","tag-newfoundland-and-labrador","tag-northwest-territories","tag-nova-scotia","tag-nunavut","tag-ontario","tag-pei","tag-photos","tag-political-news","tag-political-opinion","tag-politics","tag-politics-news","tag-quebec","tag-sports-news","tag-technology","tag-travel","tag-trudeau","tag-us-news","tag-world-news","tag-yukon"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/816693","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=816693"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/816693\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/816694"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=816693"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=816693"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=816693"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}