President Donald Trump and Canadian Prime Minister Mark Carney spoke twice in two days as Washington's 50% tariffs on a range of Canadian goods near their Wednesday deadline. The talks have not produced a delay, and business groups warn the threat alone is already hurting sales. A hotter Canadian inflation print is adding a second layer of uncertainty this week.
Trump and Carney spoke late Monday and were set to speak again Tuesday, with just hours left before the U.S. imposes 50% tariffs on hockey sticks, wine and other Canadian imports. The Monday-night call did not convince Trump to hold off on the tariffs, according to a Fox Business report cited by CNBC.
Section 338 tariffs target $20 billion in trade
The new duties are set to take effect Wednesday unless a deal emerges. They cover roughly $20 billion worth of Canadian imports, according to the Office of the U.S. Trade Representative. That is a fraction of the $382 billion the U.S. imported from Canada last year, but the targeted rate could still hit Canadian sellers hard.
They are being imposed under Section 338 of the Tariff Act of 1930, a Great Depression-era law the Trump administration unveiled last month in response to what it called Canadian trade discrimination in the motor vehicle, alcohol and dairy industries. According to CNBC: "A 50% tariff essentially makes a product uneconomic to sell into a particular market", said Dan Kelly, president of the Canadian Federation of Independent Business.
Kelly said many of the group's 103,000 members warned the tariffs could grind their U.S. sales to a halt if implemented, and some businesses reported U.S. buyers already holding off on orders in anticipation of the duties.
Inflation clouds Bank of Canada's next move
The tariff standoff lands alongside a hotter domestic inflation print. Statistics Canada reported the Consumer Price Index rose 3% year over year in July, accelerating from 2.8% in June, a reading that appeared to temper expectations for near-term monetary easing.
Economists said the data was mild enough for the Bank of Canada to keep its focus on trade risks rather than spreading price pressure, though some analysts noted it could open discussion of higher rates, keeping cut hopes off the table for now. Canada's main stock index, the S&P/TSX composite, closed down 0.8% at 36,367.93, its third straight decline and its lowest close since August 6, as tariffs and inflation weighed on sentiment.
Trump has already imposed several rounds of tariffs on Canada, including on metals, lumber and auto parts, and previously imposed duties over alleged drug-trafficking concerns that the Supreme Court struck down in February. Kelly said the Section 338 measures strike at the heart of small business trade between the two countries because so many targeted products are consumer-oriented.
Sources: CNBC, Investing.com
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