US March trade deficit surges as service export weakness adds to pre-tariff strength in goods imports

May 6, 2025 1:04 PM UTC

March’s record US trade deficit of $140.5bn is even higher than expected though consistent with the assumptions of the Q1 GDP report. Exports surged by 4.4% ahead of the April 2 tariff announcement while exports rose by a marginal 0.2%.

US Exit: Lessons From Brexit?

April 28, 2025 8:05 AM UTC

Overall, the U.S. attempt to reshape global trade is unlikely to significantly improve its trade position, but the size and influence of the U.S. may mean it does not get hit in net exports volumes like the UK.  Even so, U.S. business investment could be restrained by ongoing uncertainty from the T

Canada Election: Liberal Victory Likely, Stable Policy Expected

April 25, 2025 4:21 PM UTC

Canada’s election takes place on Monday. A victory for the ruling Liberals looks likely, but polls are close enough to mean that a hung parliament or even a majority for the opposition Conservatives, while unlikely, is not to be ruled out. Should the Conservatives spring a surprise, a more concili

Trump Under Pressure

April 23, 2025 7:15 AM UTC

A deteriorating economic; volatile financial markets and weakening approval ratings are all putting pressure on the Trump administration to do trade deals.  However, Trump instincts means he still likes tariffs, while negotiations will not be quick with China restraints and non-tariffs list desired

Foreign Official U.S. Treasury Holders: The Kindness of Strangers

April 22, 2025 7:30 AM UTC

Official holdings of U.S. Treasuries show a mixed picture with China, Brazil and Saudi Arabia well off peak holdings. Two drivers of some of these country flows are the peak in global central bank FX reserve holdings in 2021 and an increased holdings of other currencies in the last decade.  Neverth

Safe Havens Other Than the USD

April 17, 2025 8:30 AM UTC

The USD and U.S. Treasuries are currently not acting like safe havens, as the crisis is U.S. centric with the tariff debacle. 10yr Treasuries can regain safe haven status if a U.S. recession occurs, but U.S. equities are still clearly overvalued versus equity and equity-bond metrics.  We prefer Ind

Bank of Canada - Proceeding carefully, but risks still lean towards further easing

April 16, 2025 4:28 PM UTC

The Bank of Canada left rates unchanged at 2.75% as expected. The statement concluded that the BoC will proceed carefully, noting that monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war, but it can and must maintain price stability in Canada. While this shows cauti

Canada: BoC's Macklem - Less forward looking but prepared to act decisively

April 16, 2025 2:09 PM UTC

The BoC left rates unchanged as expected. They will proceed carefully but are prepared to act decisively, meaning their options are kept open.

Canada March CPI - Correction lower led by travel costs

April 15, 2025 12:54 PM UTC

March Canadian CPI in falling to 2.3% yr/yr from 2.6% is significantly weaker than expected. Lower prices for gasoline and travel tours were cited as negative influences, the latter surely impacted by the unwillingness of Canadians to travel to the USA.  The BoC core rates are on balance slightly s

Nervous U.S. Long Term Asset Holders

April 15, 2025 8:30 AM UTC

   Overall, foreign equity investors can no longer count on U.S. exceptionalism and could face lower long-term corporate earnings growth, which at a minimum will likely slow net inflows.  Bond investors also face ongoing policy volatility, which likely means a need for an extra risk premium – t

Trade Deals with the U.S.: Pressures and Obstacles

April 10, 2025 7:17 AM UTC

Pressures to do trade deals include the weaker U.S. economy and higher inflation when it arrives/foreigners becoming nervous of their USD30trn plus holdings of U.S. securities and more crucially risks to Trump and GOP approval ratings from Republican voters. Obstacles to quick trade deals include Tr

U.S China Trade War: Deal or No Deal Prospects?

April 9, 2025 9:00 AM UTC

The prospect of a trade deal between the U.S. and China are less and likely delayed into 2026, due to the hardline stance of Trump 2.0 due to the extra focus on tariff tax revenue and shifting production back to the U.S. It is still our baseline that a deal will be agreed though we would now see a d

Bank of Canada Preview for April 16: Easing to pause, but unlikely to be done

April 8, 2025 2:04 PM UTC

The Bank of Canada meets on April 16 and we expect that strength in some recent data and high uncertainty will see rates left unchanged at 2.75%. There will be little forward guidance and the accompanying Monetary Policy Report may avoid providing its usual economic forecasts. We do not expect that

Reciprocal Tariffs: The Hit To Other Countries

April 8, 2025 9:30 AM UTC

 Overall, we are still assessing the effects on non U.S. countries from the tariffs being imposed by the U.S. via direct trade/business investment/currency and financial & monetary conditions swings.  The impact will be adverse to GDP, but for some major countries could be less than the U.S.  How

Canada - BoC Q1 Business Outlook Survey shows caution, Consumer Survey more pessimistic

April 7, 2025 2:57 PM UTC

The Bank of Canada’s Q1 business outlook survey is weaker, though probably not by enough to shock the Bank of Canada. The survey was conducted in February, when tariffs were a worry but not yet a reality. 

Tariffs: Inflation may be the biggest worry for the U.S.

April 3, 2025 4:12 PM UTC

While surprising the market in their intensity, Trump’s “reciprocal” tariffs were in line with previous threats on most countries, and with Canada and Mexico being treated less harshly that feared, the net surprise is modest to us. However we do feel that inflationary risks have increased furt

U.S. Trade Surplus Countries: No Special Treatment?

March 31, 2025 9:04 AM UTC

Quick dilutions of tariffs or exemption will likely be slow in coming for countries that the U.S. has trade surpluses with, as the Trump administration are currently more focused on tariffs for tax revenue and trying to switch production back to the U.S. than trade deals.  Trade policy uncertainty

March Outlook: Navigating the Turbulence

March 27, 2025 10:30 AM UTC

All chapters of the March Outlook are now available and simply click the link below. 

Car Tariffs Then Lenient Reciprocal Tariffs?

March 27, 2025 8:59 AM UTC

   The 25% tariffs on cars underlines that tariffs are not just about getting better trade deals, but in Trump’s view raising (tax) revenue and trying to shift production back to the U.S. Combined with other tariffs being implemented, plus policy uncertainty, we see a moderate overall hit from t

Bank of Canada Minutes from March 12 - Debate over the 25bps easing, agreement to proceed carefully

March 26, 2025 6:19 PM UTC

The Bank of Canada has released minutes from its March 12 meeting, and these show some debate about the meeting’s decision to ease by 25bps to 2.75% and agreement to proceed carefully with further changes to policy. A lot can happen before the BoC next meets on April 16, but these minutes suggest

Outlook Overview: Navigating the Turbulence

March 26, 2025 9:30 AM UTC

·       More tariffs will arrive from the U.S. from April with product (car, pharma, semiconductors and lumber) and reciprocal tariffs. President Trump has a 3-part approach to tariffs to raise (tax) revenue; bring production back to the U.S. and get fairer trade deals.  This means some of t

Trump Product and Reciprocal Tariffs

March 21, 2025 9:00 AM UTC

It appears that we will get bad news from April 2 on extra tariffs before any good news.  Firstly, the announcement effect of tariffs for many countries and extra products will hurt U.S. business and consumer sentiment.  Secondly, part of the reason for tariffs is extra tax revenue and to try to s

Canada: BoC's Macklem - Policy to be less forward looking

March 20, 2025 5:12 PM UTC

BoC Governor Macklem sees the Canadian economy as facing new uncertainty just after a soft landing had been achieved.

Canada February CPI - Acceleration clearer as sales tax holiday ends

March 18, 2025 12:51 PM UTC

February Canadian CPI at 2.6% yr/yr from 1.9% in January is significantly stronger than expected, with the rise inflated by the mid-February expiry of a sales tax holiday that started in mid-December. This will lift March data further. The Bank of Canada’s core rates are also stronger, suggesting

Bank of Canada - With risks on both sides, timing matters

March 12, 2025 3:47 PM UTC

The Bank of Canada eased as expected by 25bps to 2.75%, a level it sees as neutral. Given massive uncertainty clear forward guidance is impossible but they made no attempt to hide the gravity of the problem, Governor Tiff Macklem stating Canada is facing a new crisis from which the economic impact c

Canada: BoC's Macklem - Facing new crisis, impact could be severe

March 12, 2025 2:06 PM UTC

BoC Governor Macklem will weigh the impact of a weaker economy and higher prices, though today's easing shows the immediate focus is on the economy.

Trump and Dollar Policies

March 10, 2025 6:04 AM UTC

   The Trump administration could decide to more broadly talk the USD down or less likely try to reach a cooperative Mar A Lago accord with big DM and EM countries. A more cohesive alternative is a forced currency deal for countries to appreciate their currencies to avoid more tariffs and withdraw

U.S.-Canada trade, Lutnick and Trump

March 6, 2025 4:12 PM UTC

Commerce Secretary Lutnick states Trump is likely to defer tariffs on all USMCA goods which he believes is more than half of the total with Canada and Mexico. Canada however says retaliation will stay until all US tariffs are removed. We are looking at reducing rather than removing the damage.

Bank of Canada Preview for March 12: Tariff risks justify a further 25bps easing

March 5, 2025 5:51 PM UTC

The Bank of Canada meets on March 12, and while the tariff picture is still anything but clear, we expect a 25bps easing to 2.75%. The economic damage done by the ongoing tension is already likely to be significant, and may become seriously so. Inflationary risks have increased, and the Canadian eco

Trump Latest Thinking

March 5, 2025 11:07 AM UTC

Bottom line: President Donald Trump signaled that he is committed to tariffs to raise revenue; bring production back to the U.S. and get fairer trade relations.  This three part approach will likely shape implementation of further product and reciprocal tariffs from April.  However, reports sugges

Trump Tariffs: Bad for The U.S. Worse For Canada

March 4, 2025 3:48 PM UTC

When Trump announced 25% tariffs on Canada and Mexico in February, we put up a piece outlining the likely economic consequences, which became dated by the end of the day as Mexico and Canada won a one month delay in return for some concessions at the border. We are now recycling that story, with som

Trump Tariffs and U.S. Business and Consumer Sentiment

March 3, 2025 9:02 AM UTC

 •    Mexico and Canada are trying to frantically find solutions to delay across the board tariffs again, though the U.S. is hinting that the rate could be less than 25%.  China extra 10% tariff remains likely, as the U.S. increases trade pressure on China.  More tariffs also remain highly

Preview: Due February 28 - Canada Q4/December GDP - A solid quarter outside weaker inventories

February 27, 2025 4:10 PM UTC

We expect Q4 Canadian GDP to rise by 1.7% annualized, marginally below a 1.8% estimate made with the Bank of Canada’s January Monetary Policy Report but with positive details outside inventories. We expect a 0.1% increase in December GDP, slightly below a 0.2% estimate made with November’s data.

Canada: BoC's Macklem - Outlines grim scenario for Canada if tariffs are imposed

February 21, 2025 7:43 PM UTC

BoC Governor Macklem sees limited scope for the BoC to undo the economic damage from tariffs, but would seek to keep price gains as one-time.

Reciprocal Tariffs and Reducing Bilateral Trade Imbalances

February 17, 2025 10:28 AM UTC

·       President Trump’s executive order on reciprocal tariffs has not produced much market reaction, both as the proposals will not be delivered to the president until April 1 and the process of Commerce/U.S. Treasury and Homeland Security input is seen reducing the odds of penal tariffs.

Bank of Canada Minutes Back 25bps Easing, Less Clear on Potential Tariff Implications

February 12, 2025 7:09 PM UTC

The Bank of Canada has released minutes from its January 29 meeting, which show no signs that the decision to ease by 25bps saw much debate. Uncertainty due to tariff risks was seen as supporting the decision. However, should a trade war with the US be seen, the minutes show a more balanced view, co

Trump’s Tariffs: Steel Then Reciprocal and Then Cars

February 11, 2025 1:23 PM UTC

 The 25% Steel and Aluminum tariff could have small to modest adverse inflation and GDP growth impacts on the U.S., but the prospect of reciprocal and more product and country tariffs create trade policy uncertainty/supply chain disruption and paperwork problems.  This could amplify the impact of

Fixing The U.S. Trade Deficit

February 6, 2025 2:30 PM UTC

  New U.S. trade deals will likely make slow progress in reducing bilateral trade deficits as the underlying drivers behind the U.S. trade deficit are macro forces.  While the U.S. economy outperforms other major trading partners; the value of the USD remains overvalued and as long as tariffs are

December sees large U.S. trade deficit while Canada's balance moves into surplus

February 5, 2025 2:01 PM UTC

December’s US trade deficit of $98.4bn from $78.9bn in November is even wider than expected and the widest since March 2022. Exports fell by 2.6% after a 2.7% November increase while imports rose by 3.5% for a second straight month.

Trump Tariffs, or Not: Trying to Make Sense of a Policy Farce

February 3, 2025 11:46 PM UTC

So, after a weekend and a day of drama we are back to where we were on Friday morning. Forecast updates made on the imposition of tariffs will not be thrown in the trash can, but now will be held as an alternative should Trump decide to go ahead on March 1 after postponing them from February 1 (whic

Trump Tariffs: Bad for The U.S., to Canada and to Mexico

February 3, 2025 6:34 PM UTC

In announcing 25% tariffs on Canada and Mexico, as well as additional 10% tariffs on China, Trump exceeded the expectations of many, including ourselves. The situation is fluid with Mexico (but not yet Canada) receiving a one-month delay, but the risks of a lasting trade war need to be seriously con

Canada November GDP - A weak month with tariffs threatening

January 31, 2025 2:18 PM UTC

November Canadian GDP with a 0.2% decline was weaker than the -0.1% estimate made with October’s release, where the increase was unrevised at 0.3%, The preliminary estimate for December is for a rise of 0.2%, which if accurate would leave Q4 GDP near a 1.8% annualized estimate made by the Bank of

Bank of Canada eases by 25bps as expected, sees balanced risks if a trade war can be avoided

January 29, 2025 4:21 PM UTC

The Bank of Canada eased by 25bps to 3.0% as expected, and confirmed the ending of Quantitative Tightening, as had been outlined by Deputy Governor Toni Gravelle on January 16. The BoC has delivered some fairly optimistic forecasts, but these are made assuming an absence of tariffs, given that the B

Canada: BoC's Macklem - Optimistic provided trade war can be avoided

January 29, 2025 3:12 PM UTC

BoC Governor Macklem sees the economy as well positioned provided a trade war can be avoided.

Canada: BoC's Gravelle - Sees QT ending in first half of 2025

January 16, 2025 5:49 PM UTC

These comments from BoC Deputy Governor Gravelle outlining an end to QT by mid 2025 allow the January 29 meeting to focus on rates. We expect a 25bps easing.

Bank of Canada Preview for January 29: Easing to continue but more cautiously

January 13, 2025 5:23 PM UTC

The Bank of Canada meets on January 29, and will make its decision a few hours before one is made by the FOMC. The BoC decision will be following two straight easings of 50bps, though minutes from the last meeting, on December 11, showed a debate between 25bps and 50bps, and that they expected a mor

US November trade balance corrects lower but trend still widening

January 7, 2025 1:54 PM UTC

November’s US trade deficit of $78.3bn is in line with expectations generated by advance goods data though up from a $73.6bn deficit seen in October. The data shows exports and imports both rebounding from weakness in October that was probably influenced by a strike at East Coast ports early in th