09/02/2026
Last week, we received an article from Alex Grassino (Global Chief Economist, Manulife Investments) and Dominique Lapointe (CFA, Senior Global Macro Strategist, Manulife Investments) about the recent 50% tariffs. Here are their 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.
At the time of writing, Canadian bond yields had declined significantly across the yield curve, while the Canadian dollar had 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 8/24/2026
(Disclaimers below)
