Trump Intensifies Rhetoric on Eve of Tariff Deadline

As the August 1, 2025, deadline for President Trump's new tariffs on Canada looms, the rhetoric has intensified. This week, Commerce Secretary Howard Lutnick stated that the deadline would not be extended, with no more "grace periods," confirming that the tariffs are set to go into effect.

President Trump further escalated the situation today, taking to social media to state that it would be "very hard to make a Trade Deal with them" after the Canadian government indicated support for Palestinian statehood. This links the trade dispute to an unrelated geopolitical issue, further complicating negotiations and underscoring the unpredictable nature of U.S. trade policy. The tariffs set to go into effect on Friday include a 35% tariff on a broad range of non-USMCA compliant Canadian imports and a 50% tariff on certain copper imports, though some experts believe Canada may be spared this due to U.S. targeting of Chinese producers.

The Canadian government has maintained a firm stance, with Prime Minister Carney condemning the tariffs as punitive toward a longstanding ally, and Trade Minister LeBlanc stressing that Canada will not accept a weak deal just to avoid duties.

Bank of Canada Holds Rates Steady

On Wednesday, July 30, 2025, the Bank of Canada held its key interest rate at 2.75%, marking the third consecutive hold after a series of cuts earlier this year. This decision was widely anticipated by economists, but the accompanying Monetary Policy Report provided crucial new details on the central bank's current thinking.

Governor Tiff Macklem stated that the decision was based on "a fragile balance between weakening domestic demand and lingering inflationary pressures tied to trade disruptions," and that the Governing Council had reached a "clear consensus" to hold the rate.

Key insights from the BoC's statement and MPR:

• Tariff Scenarios, No Central Forecast: For the first time in years, the BoC did not provide a single, central economic forecast. Instead, it presented three scenarios—a "status quo" with ongoing tariffs, an "escalation" scenario, and a "de-escalation" scenario. This highlights the high degree of uncertainty surrounding U.S. trade policy.

• GDP Outlook: The Bank now estimates that Canada's real GDP contracted by 1.5% in the second quarter on an annualized basis. Macklem attributed this to a "pull-forward" of exports in Q1, as firms rushed to get ahead of tariffs, and a subsequent sharp decline in Q2 as U.S. demand for Canadian goods softened.

• Inflationary Pressures: The BoC noted that while headline inflation remains close to its 2% target, having risen to 1.9% in June, underlying inflation remains elevated at around 2.5%. This is being driven by higher prices for non-energy goods, including those impacted by tariffs. The Bank is closely monitoring the extent to which these higher costs are passed on to consumers.

• Labour Market: While job growth has remained resilient in some sectors, the unemployment rate has gradually risen to 6.9% in June, with job losses concentrated in tariff-exposed industries.

The BoC's decision signals a cautious, "wait-and-see" approach. Macklem left the door open to future rate cuts, but only if "a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained."

In a move that links directly to the ongoing trade tensions, the Ontario government officially cancelled its $100-million contract with Elon Musk's Starlink on Wednesday. The deal, which was intended to bring high-speed internet to 15,000 residents in rural and northern Ontario, was initially threatened by Premier Doug Ford in February as a retaliatory measure against U.S. tariffs. While a fee was paid to terminate the contract, the province has not disclosed the exact amount, stating only that it was "significantly less" than the total value. The cancellation leaves the future of high-speed internet for these communities in limbo, and opposition parties have criticized the government for the cost to taxpayers and for not having a ready alternative.

Conservative Leader Pierre Poilievre is pursuing a new seat via the August 18 by‑election in Battle River–Crowfoot, Alberta, following his loss in Carleton during the April federal election and the resignation of sitting MP Damien Kurek to clear the path. The riding remains one of the safest Conservative strongholds, with Kurek having secured over 80% of the vote in April. The nomination deadline closed on July 28. The race has become a unique spectacle, with over 200 candidates having registered to run, more than doubling the previous record. This is largely due to an electoral reform advocacy group, the "Longest Ballot Committee," which is organizing the protest. Elections Canada has adapted by announcing that the vote will use a write-in ballot to accommodate the record-long list of names.

At a recent candidates’ forum hosted by the Camrose and District Chamber of Commerce, Poilievre was warmly received by constituents, with many supporters expressing confidence in his victory. Debate participants noted that Poilievre is “widely expected to win” and characterized the seat as “Pierre’s riding to lose.” Nonetheless, analysts caution that a defeat could severely undercut his leadership credibility—one political commentator from CTV described a loss as potentially “the death of his Conservative leadership role.”

The outcome in Alberta will not only determine Poilievre’s return to Parliament but also signal whether the Conservative Party’s national narrative can weather recent electoral setbacks and evolving trade-related tensions.

Data To Watch

What’s Next for Canada’s Economy? Key Data Releases to Keep an Eye On.

These upcoming dates could shift market sentiment, alter fiscal strategies, and impact regulatory decisions in real time. Stay ahead with these critical dates:

1. Tariff Deadline — August 1, 2025

Trump's self-imposed deadline for tariffs or a Canada deal. Markets will hinge on clarity by midnight.

2. Labour Force Survey — August 8, 2025

The monthly jobs report will give the first real look at how the Canadian labour market performed in July, a period of heightened trade uncertainty. Economists will be watching to see if job losses in tariff-exposed sectors continued or worsened.

Final Thoughts

This week, the Bank of Canada has hit the pause button, the economy has contracted, and President Trump's tariffs are now in effect, creating a perfect storm of uncertainty. As we navigate a path forward, the focus will shift from what might happen to what is actually happening on the ground—how businesses are adapting, how inflation is responding, and how the government will steer the economy through these turbulent waters. Tune in next week as we begin to navigate the high-stakes month ahead.