Canada-U.S. trade: navigating 50% tariffs
Posted :
How quickly things can change. Through mid-August, it looked as though significant progress had been made in Canada-U.S. trade negotiations. Following the breakdown of talks over the August 22 weekend, however, the outlook now appears decidedly less rosy. As a result, the 50% U.S. tariffs on US$20 billion of Canadian exports have come into effect. On its side, Canada is preparing a package of fiscal measures aimed at supporting its affected workers and businesses, while also considering retaliatory actions of its own.
We have a few high-level thoughts on what remains a highly fluid situation:
1 We would not assume that these latest developments are irreversible, nor that the announced measures and any forthcoming Canadian retaliation will become permanent features of the bilateral trade relationship. One important difference this time is that Canada, rather than the United States, walked away from the negotiations. That said, over the past 18 months, we have repeatedly seen trade tensions ultimately ease after periods of heightened rhetoric that unsettled businesses and investors.
2 As things stand, the direct impact on Canada would likely be painful for the affected sectors, but relatively limited from a broader macroeconomic perspective. Our initial assessment suggests only a modest downward revision to our Canadian growth forecasts for 2026 and 2027. While certain industries may face significant challenges, we believe the overall impact on Canadian GDP is likely to remain contained.
3 While the direct effects of the tariffs appear manageable, the greater risk, in our view, comes from the uncertainty factor. A persistently volatile operating environment could have a more lasting and meaningful impact on business investment than the tariffs themselves, potentially delaying spending decisions and weighing on economic activity.
Following the breakdown of talks, Canadian bond yields declined significantly across the yield curve, while the Canadian dollar weakened modestly.1 These reactions appear warranted given that the Bank of Canada had previously signaled that a renewed escalation in U.S. tariffs could lead to additional monetary policy easing. However, any further pressure on Canadian markets would need to be assessed more holistically. Several possible offsets remain in place, including fiscal policy support, elevated energy prices, and the early stages of an AI-driven capital expenditure cycle.
1 Bloomberg, as of 8/24/26.
Investing involves risks, including the potential loss of principal. Financial markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments.
The information provided does not take into account the suitability, investment objectives, financial situation, or particular needs of any specific person.
All overviews and commentary are intended to be general in nature and for current interest. While helpful, these overviews are no substitute for professional tax, investment or legal advice. Clients and prospects should seek professional advice for their particular situation. Neither Manulife Investments, nor any of its affiliates or representatives (collectively Manulife Investments” is providing tax, investment or legal advice.
This material is intended for the exclusive use of recipients in jurisdictions who are allowed to receive the material under their applicable law. The opinions expressed are those of the author(s) and are subject to change without notice. Our investment teams may hold different views and make different investment decisions. These opinions may not necessarily reflect the views of Manulife Investments. The information and/or analysis contained in this material has been compiled or arrived at from sources believed to be reliable, but Manulife Investments does not make any representation as to their accuracy, correctness, usefulness, or completeness and does not accept liability for any loss arising from the use of the information and/or analysis contained. The information in this material may contain projections or other forward-looking statements regarding future events, targets, management discipline, or other expectations, and is only current as of the date indicated. The information in this document, including statements concerning financial market trends, are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Manulife Investments disclaims any responsibility to update such information.
Manulife WAM shall not assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained here. This material was prepared solely for informational purposes, does not constitute a recommendation, professional advice, an offer or an invitation by or on behalf of Manulife WAM to any person to buy or sell any security or adopt any investment approach, and is no indication of trading intent in any fund or account managed by Manulife WAM. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Diversification or asset allocation doesn’t guarantee a profit or protect against the risk of loss in any market. Unless otherwise specified, all data is sourced from Manulife WAM. Past performance does not guarantee future results.
This material has not been reviewed by, and is not registered with, any securities or other regulatory authority, and may, where appropriate, be distributed by Manulife WAM and its subsidiaries and affiliates. Manulife WAM is the global investment, financial advice, and retirement plan services segment of Manulife Financial Corporation.
© 2026 by Manulife Wealth and Asset Management. All rights reserved. The statements and opinions expressed in this article are those of the author. Manulife WAM cannot guarantee the accuracy or completeness of any statements or data.
5868116