TARIFFS: Canada To Remove Retaliatory Tariffs On 'Long List' Of US Products- BBG
Aug-22 15:18
Canadian Prime Minister Mark Carney is expected to announce today that Ottawa will remove retaliatory tariffs on a ‘long list’ of US products that comply with the USMCA trade agreement, a major policy shift that lays the groundwork for the upcoming USMCA review, per Bloomberg.
- According to Bloomberg, the move means “a broad range of [USMCA compliant] US-made consumer products will no longer face a 25% tariff when imported into Canada." Bloomberg notes Canada is likely to retain 25% import taxes on US steel/aluminium/automobiles.
- Carney’s decision comes after Canadian FM Anita Anand met Secretary of State Marco Rubio this week, one of the most high-profile meetings since President Donald Trump raised the tariff rate on Canadian imports to 35% (keeping USMCA exemptions in place).
- Anand downplayed the need for a broad trade agreement with the US, in an interview with PBS yesterday, noting that 75% of trade is covered by the USMCA.
- Anand conceded: “I will say, though, that steel and aluminum in Canada, for example, are being hit very hard... The auto sector is another one. Lumber is another one. So, yes, we have concerns.”
- In preparation for the USMCA review, NYT reported this week that Mexico and Canada “are talking about ways to team up… This month, the two Canadian officials led a delegation there to meet with [Mexican President Claudia Sheinbaum] and prepare for a fall visit by [Carney]. The encounter was largely seen as a chance to reset the relationship and compare notes [on Trump]…”
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
FED: US TSY 17W AUCTION: NON-COMP BIDS $573 MLN FROM $65.000 BLN TOTAL
Jul-23 15:15
- US TSY 17W AUCTION: NON-COMP BIDS $573 MLN FROM $65.000 BLN TOTAL
FOREX: Deutsche Bank Continue to Favour EURCAD Topside
Jul-23 14:46
- Deutsche Bank have noted that while at first glance, there seems to be a lot going right for Canada, a closer look takes a lot of the gloss away. This leaves them with a bearish near-term bias and continuing to favour EUR/CAD topside, which is up ~1.5% since recommending the position in their FX blueprint. They focus on the following fundamentals:
- The recent employment print was certainly strong, but it follows a string of weakness that still leaves Canada’s unemployment 2%pts above the trough – the worst in G10. Separately, both the Ivey PMI and BoC business survey suggest GDP growth could slip to zero.
- The BoC survey finds the uncertainty around tariffs is delaying capex plans and affecting corporate margins since passing on the cost is tough. Tariff uncertainty is also visible in the goods trade balance, which slumped to the largest deficit in decades and in net terms, portfolio flows have worked against CAD.
- The Carney government is indeed planning to spend more on defence and other capex. But it's targeting substantial cuts to operational spending (7.5%+ per year) to fund some of that. The fall budget will contain important detail.
- Overall, DB believe this points in the direction of further BoC easing and it's notable how little is priced (less than 25bps to the trough).
GERMANY: FRANCE-Merz Hosts Macron w/Trade & Defence On Agenda
Jul-23 14:45
German Chancellor Friedrich Merz hosts French President Emmanuel Macron in Berlin this evening for a private dinner intended to further solidify the Franco-German relationship. The talks will almost inevitably focus on the two major geopolitical/geoeconomic issues facing both countries: the threat posed to trade by US President Donald Trump's 'reciprocal' tariffs, and the need to significantly increase defence spending and bolster ties on military procurement.
- Earlier today, Bloomberg reported that the EU was readying a plan for 30% levies on EUR100bln of US imports if no deal can be reached on tariffs with Washington. Nevertheless, Merz remains much cooler on the use of the 'anti-coercion instrument' than Macron. The German gov't is also much more keen on FTAs with third countries and other blocs, while France has been more reticent. This is most notable on the division over ratifying the Mercosur-EU trade deal, which faces visceral opposition from French farmers.
- On defence, divisions were evident over plans that would see European NATO members purchase US-made weaponry in exchange for sending their own supplies to Ukraine. Germany sided with the Nordics and UK in backing the plan, while Macron advocated for sending European (ideally EU)-made equipment. There is also a brewing row over the Future Combat Air System fighter jet project. Initially set to be developed by Franco-German Airbus and Spain's Indra Sistemas, France's Dassault Aviation has sought to become involved, leading to accusations of the solely French firm undermining the project.
- Today's meeting comes ahead of a full Franco-German joint cabinet meeting in late August.
