The Trade Brief: Canada’s trade wake-up call

In a world of stalled deals and rising tariffs, we’re here to make sense of it all and make sure you’re informed. Welcome to the first edition of The Trade Brief, our new monthly guide tracking trade, trends and tensions with a focus on what it all means for Canada.  

Now that we’ve set the table, let’s see what June’s been cooking:  

The numbers are in and they don’t look great for Team Canada. Yikes. 😬

📉 Exports are tanking 

• In April, Canadian exports fell 10.8%. 
• May brought a small recovery (+1.1%), but it barely dents the damage. 
• Since the trade war began in early 2025, exports to the U.S. have dropped 26.5% – a major blow for an economy that is closely tied to its southern neighbour. 

👉 Only 68% of Canada’s total exports now go to the U.S. – one of the lowest levels ever recorded. 

🚚 Border traffic is slowing 

• The number of commercial trucks entering the U.S. from Canada fell 11.4% in April and 10% in May. 
• For comparison, trucks from Mexico dipped just 2.8% in April, a sign that Canadian exporters are being squeezed harder. 

Why it matters: Cross-border truck volume is often a real-time indicator of trade activity.
Fewer trucks = fewer sales. 

🌍 Looking beyond the U.S. 

Canadian companies are clearly hunting for new markets and are seeing some success: 

• Exports to non-U.S. countries rose 5.7% in May, hitting a record high. 
• We’re shipping more goods to the U.K., Singapore, and Italy in particular. 

The catch: While promising, those gains still don’t offset the losses from our main trade partner. 

🇺🇸 Meanwhile, in the U.S. … 

• The American economy is humming along. 
• 147,000 jobs were added in June. 
• The unemployment rate dropped to 4.1%. 
• Oh, and the U.S. has collected US$81.5B in tariffs since the trade war started, most of it from countries other than Canada. 

A (small) silver lining 

Thanks to the Canada-U.S.-Mexico Agreement (CUSMA), about 91% of Canadian exports to the U.S. are still tariff-free. 

That’s kept some sectors afloat and puts Canada in a better position than many countries dealing with U.S. trade restrictions. 

But back home, it’s not pretty 

• From January to May, Canada’s manufacturing sector lost 54,000 jobs. 
• National unemployment hit 7%, the highest since 2016 (pandemic years not included). 

🥫 Trade war = higher grocery bills 

RBC says the trade war could worsen food insecurity in Canada. Why? 

• Farmers are losing money because tariffs from both the U.S. and China are hitting them hard. 
• Food producers are buried in red tape to meet CUSMA rules. 

What does that mean? 
The price of food is going up, and for many Canadians it’s already unaffordable. 
It’s a clear signal that the trade war is hitting Canadian workers and businesses in the pocketbook. 

⏳ More tariffs coming? 

Prime Minister Carney says new counter-tariffs are on the table if Canada and the U.S. can’t strike a deal by mid-to-late July. 

The catch? These tariffs might hit Canadians harder than Americans, raising costs even higher on everything from groceries to goods that keep small businesses running. 

The bottom line? 
Canada’s trade relationship with the U.S. is under serious strain. While businesses are branching out and CUSMA offers some protection, the impact is starting to show and it’s not pretty. 

✨If you’ve made it this far, let’s get into the nitty gritty of it all ✨  

What’s going on with steel and aluminum? 

Short version: it’s under fire 🔥  

The Trump administration slapped a 50% tariff on imported steel earlier this year, then added more products to the list. Washing machines included. 

• In 2018, similar tariffs pushed up U.S. prices by: 
  +2.4% for steel 
  +2.6% for aluminum 
• U.S. manufacturing jobs took a hit: ~75,000 lost in sectors that rely on those materials. 

The impacts will be felt strongly as the U.S. accounts for over 90% of Canadian steel and aluminum exports. 

But we are fighting back. The Canadian government plans to cap steel imports from countries without a free trade deal to 2024 levels. 

The goal: stop cheap steel dumping and keep the domestic industry standing. 

💻 Tech & Taxes 

Canada dropped its Digital Services Tax (DST) after a (long) standoff with the U.S. PM Carney made the announcement just hours before the first DST bills were due, and just a few days after President Trump cut off trade talks with Canada over … you guessed it … the DST. 

Meanwhile in the U.S. … 

Section 899 (aka the “Revenge Tax”) was scrapped from Trump’s “One, Big, Beautiful Bill.” This section would’ve imposed a tax on investment income from American companies paid to investors living outside the U.S. 

Why now? 
G7 countries agreed to exempt the U.S. from the new global 15% minimum corporate tax, changing the game for everyone involved. 

🌎Time to go global, buckle up 🌎 

U.S. trade deadlines loom 

The Trump administration is pushing for countries to finalize trade deals or face new tariffs. Still, big hurdles remain. 

What’s slowing things down? 

• Mixed messages from U.S. negotiators 
• New tariffs popping up 
• Countries hesitant to give in to tough U.S. demands 

🤝 Who’s done deals so far? 

• 🇻🇳 Vietnam: Agreed to a 20% tariff on imports to the U.S., 40% on transshipped goods (a Trump priority), plus U.S. aircraft and farm product purchases. Final deal coming soon. 
• 🇬🇧 U.K.: Also sealed a deal at the G7 in Kananaskis last month. The U.K. got lower tariffs on cars (under a certain quota), exceptions for aerospace and a commitment to negotiate pharma/steel/aluminum later on. 

Both deals aim to strengthen “supply chain security” aka avoid rerouting of goods from China into the US. 

Japan & South Korea still stuck 

• 🇯🇵 Japan’s 25% auto tariff is a dealbreaker. Trump’s not happy and threatens more tariffs. 
• 🇰🇷South Korea’s debating dropping antitrust laws and increasing defence spending to 5% of GDP (from 2.3%). Japan faces the same 5% defence ask (currently 1.6%) but TBD.  

🇮🇳 India’s tough spot 

U.S. demands on agriculture, especially genetically modified crops and dairy, are sensitive. India needs a win to sell any deal at home. 

🇪🇺 EU talks moving cautiously 

The Wall Street Journal reported a possible deal could tackle non-tariff barriers like digital rules. If talks fail, the EU might retaliate with tariffs or even start a new trade club without the U.S., involving itself and CPTPP countries. 

🇩🇪 Germany and 🇮🇹 Italy want a quick deal, but German Chancellor Merz calls negotiations “too complicated.”…. He’s so real for that.  

Deadline extension please? 

The U.S. pushed the deadline to August 1^st for 14 countries and announced new tariffs through letters. More letters to come, so grab your popcorn 🍿, it could get interesting. 

U.S. Treasury Secretary Scott Bessent has mentioned September 1^st as a potential deadline for some countries.  

Now what? There is still more time to negotiate and sort out new and tricky tariff investigations under Section 232 (National Security). 

But we’ll see.  

🇨🇳 China’s got stuff to sell, and not much to buy 

China’s exports are booming (up 33%) while imports have stalled since 2022. Their trade surplus is nearly US$500 billion. 

The government is pushing policies to replace foreign businesses with domestic ones.  

In summary: China is exporting more, importing less. 

👀 On our radar 

• Global growth slowdown 
• The IMF expects growth to dip from 3.2% in 2024 to 2.8% in 2025, before a slight rebound to 3% in 2026. 
• EU-Mercosur trade hits a snag 
  • Agriculture remains the main hurdle. Both sides still hope to ratify the deal by the end of 2025.  
• Big gas milestone 
  • LNG Canada just loaded its first liquefied natural gas for export, a major win for Canada’s energy sector.🙌 
• Min. Anand goes to Asia 
  • 🇨🇦 Foreign Affairs Minister Anita Anand is headed to Japan and Malaysia and will meet with the Association of Southeast Asian Nations (ASEAN).  

👋That’s a wrap 

Hope you enjoyed the first edition of our Trade Brief. If you want to stay in the loop, sign up to get this straight to your inbox every month, no jargon, just the good stuff. 

See you next month!