When Giants Talk Trade, Canada Feels the Impact
Last week, I discussed the build-up to the China – US trade war and what each side is hoping to get from a deal. After tensions flared this spring, complete with sweeping tariffs and tech restrictions that rattled global markets, the two countries agreed to a temporary truce and resumed negotiations. There’s now a draft framework deal on the table, but it’s more of a ceasefire than a peace treaty. Still, even a partial deal could shift the global economic outlook – and that matters a lot to Canada.
A US – China trade deal would be good news for Canada – not because we’re directly involved, but because we’re deeply connected to both countries through trade, supply chains, and the broader global economy. When the world’s two largest economies stop fighting, everyone breathes a little easier.
First off, de-escalation means less global uncertainty. When tariffs fly, they disrupt everything from commodity prices to shipping routes. A more stable backdrop could boost demand for Canadian exports like oil, lumber, and minerals – all of which depend on global growth.
Second, Canadian companies that supply US manufacturers stand to benefit. If US firms can once again source materials from China more reliably, it smooths out the entire North American supply chain. That’s a win for Canadian producers of auto parts, tech components, and energy equipment.
Third, China is a major buyer of raw materials. When trade tensions slow its economy, demand for Canadian oil, potash, grain, and natural gas tends to drop. A deal that helps China’s economy rebound could send more of those Canadian exports out the door, providing a much-needed boost to the Canadian economy.
And finally, like I’ve said many times before, markets don’t like surprises. They love clarity. A trade agreement would ease market jitters, support investor confidence, and reduce volatility. That’s good news for Canadian investors, pension funds, and anyone with savings in RRSPs or TFSAs.
In short, Canada may not have a seat at the table, but we’re very much in the splash zone. A smoother relationship between the US and China could strengthen demand for Canadian exports, reduce supply chain friction, and give both global and domestic markets a lift. And when the global economy is growing, Canada usually rides the wave too. 😊
With all that in mind, it’s no surprise that investors have been keeping an eye on these negotiations. For us investors, understanding the ripple effects of major geopolitical developments, like a potential US –China trade deal or a Middle East ceasefire, is just part of staying in the loop. So, with geopolitics once again shaking things up, let’s take a look at how the markets reacted to the headlines and economic data this past week—and how my portfolios handled the ride.
Items that may only interest or educate me ….
Canadian economic news, US economic news
Canadian Economic News
This past week’s key economic data that the Bank of Canada (BoC) considers when deciding whether to raise or lower the interest rate.
BoC Meeting Minutes
The Bank of Canada’s minutes from its June 4 meeting revealed that members once again chose to hold the benchmark interest rate steady at 2.75%, pausing for a second consecutive time as they try to balance easing inflation with growing concerns about the broader economy. While headline inflation dipped to 1.7% in April, much of that drop was due to temporary factors like the suspension of the carbon tax. Under the surface, core inflation, which excludes more volatile items like energy, was still running at 2.3%, a sign that underlying price pressures remain.
One of the key concerns raised in the meeting was rising global trade tension, especially the new US tariffs of 50% on Canadian steel and aluminum. While the US imposed these tariffs, the impact is felt on both sides of the border. Higher import costs in the US tend to reduce demand for Canadian goods, which can weigh on Canadian exports and slow growth here at home. On top of that, trade disruptions like these often lead to supply chain uncertainty and rising input costs for Canadian businesses. That combination can feed into higher prices for consumers and add to inflation pressures even as the economy softens.
Canada’s economy expanded by 2.2% in the first quarter, but the Bank suspects much of that strength came from businesses rushing to stockpile inventory ahead of the tariffs. Beneath that headline figure, domestic demand was soft, and unemployment ticked up to 6.9%. Looking ahead, the Bank expects economic growth to cool significantly in the second quarter.
For now, the Bank is still in wait-and-see mode. A rate cut at the next meeting on July 30 is still on the table, but policymakers are in no rush. If inflation proves stubborn or global trade issues keep driving up costs, they may hold off. At this stage, they’re focused on keeping everything in balance, carefully watching how both inflation and growth unfold.
Retail Sales
Statistics Canada reported that retail sales rose 0.3% in April, falling short of the expected 0.5% gain and slowing from March’s 0.8% increase. On a year-over-year basis, total sales were up 5.0%, also down from March’s 5.6% pace. The biggest boost came from ‘New car dealers,’ with a 2.9% jump in April, while ‘Automotive parts, accessories, and tire retailers’ saw sales drop by 4.7%. Looking at year-over-year trends, ‘Used car dealers’ stood out with a 16.6% gain, while ‘other motor vehicle dealers’ posted the steepest drop, down 4.1%.
Core retail sales, which strip out vehicles, gas, and fuel, edged up just 0.1% in April, a slight dip from the 0.2% gain in March. Compared to a year ago, core sales were still up 3.7%, though that too was softer than March’s 5.5% increase. With both headline and core numbers losing steam from the month before, it’s a signal that consumer momentum may be cooling.
Looking ahead, the early estimate for May is more concerning: a sharp 1.1% drop. That likely reflects a pause after a spring spending spree, as consumers rushed to make purchases before possible tariff-related price hikes. Combined with signs of a softening labour market, this raises red flags about Canada’s economic momentum heading into the summer.
For us investors, the retail data adds weight to expectations that the BoC will need to cut rates again. Inflation continues to cool, and now retail spending is starting to show fatigue. That could open the door to lower borrowing costs in the months ahead. For the markets, this kind of backdrop puts more focus on interest-rate-sensitive sectors like housing and financials, while consumer discretionary stocks might feel the squeeze if spending keeps slowing.
Canadian Market Volatility
Canada’s market mood ring, the S&P/TSX 60 Volatility Index (VIXC), opened at 9.61 and stayed between 8.5 and 10 for most of the week, finishing at 9.86 – almost right where it started. Brief spikes above 10 were triggered by renewed concerns over Middle East tensions and the Fed’s decision to hold its benchmark rate steady.
If you’re new to the VIXC, it’s basically Canada’s version of a “fear gauge.” When it dips below 10, it usually means investors are feeling confident. A range between 10 and 20 signals a business-as-usual environment, while anything above 20 suggests market anxiety is starting to build.
US Economic News
This past week’s key data points that the Federal Reserve (Fed) considers when deciding whether to raise or lower the interest rate.
Fed Rate Decision
This past week, the Fed’s Federal Open Market Committee (FOMC) decided to hold interest rates steady at 4.75%, marking the fourth straight meeting without a change. That part was widely expected. What stood out was the Fed’s updated forecast – it now expects just two rate cuts later this year, down from the three cuts many analysts and markets had been hoping for heading into the meeting.
Although inflation has eased since last year, it’s still running above the Fed’s 2% target. Meanwhile, the job market is still strong, and newly announced US tariffs are adding more uncertainty to the economic outlook. Because of that, the Fed is taking a cautious approach and says it will wait for more data before deciding when, or even if, to start cutting rates.
For consumers, that likely means borrowing costs on mortgages, credit cards, and other loans will stay higher for a while longer. For us investors, the fact that rate cuts are still on the table is a sign the Fed is watching closely for any signs that the economy is losing steam. In short, the Fed is trying to walk a fine line – cool inflation without tripping up growth.
So while the pause wasn’t a surprise, the slightly more conservative rate cut outlook was a reminder that the path to lower rates won’t be quick, or guaranteed, even if political pressure, including from President Trump, continues to mount. In the meantime, markets will likely stay choppy as investors digest each new piece of economic data.
Retail Sales
According to the Commerce Department, retail sales fell by 0.9% in May. It was the second straight month sales dropped and the biggest monthly drop since January. That decline was larger than the expected 0.7% drop and suggests American consumers are finally easing up after a burst of spring spending. Some of that earlier strength came from people making big purchases, like cars, before potential tariffs took effect. Now that the rush is over, it’s no surprise that spending has cooled a bit.
A closer look at core retail sales, which exclude autos, auto parts, and gas stations, and are often seen as a better gauge of everyday consumer spending, shows a small dip of 0.1% in May, after a modest 0.1% gain in April. It’s not a dramatic pullback, but it does hint that shoppers are becoming a bit more cautious. Still, compared to this time last year, core sales are up 4.6%, which shows that underlying demand is holding up better than the monthly numbers might suggest.
Overall, the May retail sales report points to a slowdown, not a slump. Consumers are still opening their wallets, just not with the same enthusiasm as earlier in the year. For the Fed, it’s another mixed signal, growth may be softening even as inflation continues to cool, so any decisions around interest rate cuts could be delayed. For investors, that means markets may stay choppy as everyone tries to figure out what comes next.
American Market Volatility
Wall Street’s “fear gauge,” the CBOE Volatility Index (VIX), began the week at 19.78, a bit below last week’s close of 20.82. But it didn’t stay there for long. As hostilities in the Middle East escalated, investor nerves kicked in, pushing the VIX back above the 20 mark. It stayed mostly between 19.0 and 22.5 throughout the week, reflecting heightened uncertainty. By week’s end, it had settled at 20.62, a clear sign that anxiety was rising across the markets.
For those new to the VIX, it’s basically Wall Street’s stress meter. When investors grow uneasy about global events like the current hostilities in the Middle East, or economic concerns such as inflation, they tend to move away from riskier assets like tech stocks. That pullback can lead to sharper price swings, which is when the VIX tends to spike. Readings between 12 and 20 usually suggest markets are operating normally, but once it climbs above 20, it’s a signal that investors are bracing for rougher conditions. The higher it goes, the more turbulence the market is pricing in.
Weekly Market and Portfolio Review
For the week, the TSX (SPTSX) was essentially flat, although technically down 0.03% the S&P 500 (SPX) fell 0.2%, the DJIA (INDU) was also basically flat but technically gained 0.02% and the Nasdaq (CCMP) rose 0.2%.
| Index | Weekly Streak |
| TSX: | 1 – week losing streak |
| S&P: | 2 – week losing streak |
| DJIA: | 1 – week winning streak |
| Nasdaq: | 1 – week winning streak |
The markets started the week on a strong footing, with all four major indexes – the Toronto Stock Exchange Composite Index (TSX), the S&P 500 Index (S&P), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq) – climbing early on. But that rally quickly ran out of steam, as you can see in the weekly progress chart above. Renewed trade tensions, rising geopolitical risks, and fresh signals from the Fed weighed on investor sentiment, causing the momentum to fade. By week’s end, the DJIA and Nasdaq squeaked out modest gains, while the S&P and TSX slipped, snapping the TSX’s three-week winning streak.
Trade once again took centre stage. At the Group of 7 (Canada, the US, France, Japan, Germany, the United Kingdom (UK), and Italy) summit, the US signed a new deal with the UK and made some headway with Canada, with President Trump and Prime Minister Carney pledging to reach a broader trade and security agreement within 30 days. But progress with the European Union and Japan stalled, fuelling fears that the US might pivot to one-sided trade terms rather than negotiated deals – something that kept markets on edge.
Geopolitical tension added to the mix. Early in the week, hopes of a de-escalation between Israel and Iran helped lift markets. But those hopes faded fast. By midweek, investors were watching for any signs the US might get pulled into the conflict, a scenario that could send oil prices soaring and trigger broader market volatility. Fortunately, President Trump said he would wait another two weeks before making a decision. Crude oil has been climbing since the fighting began, and another jump in prices could further rattle markets.
On the economic front, American retail sales came in softer than expected, hinting that American consumers may be slowing down after a spring spending spree to beat tariff-related price hikes. Then came the Fed. As expected, rates were held steady at 4.75%, but Chair Jerome Powell made headlines by warning that inflation could tick higher this summer as tariffs begin to hit consumers. He even noted that if it weren’t for those added pressures, rate cuts might already be underway.
That comment likely didn’t sit well with Trump. Still, there was a silver lining: the Fed’s latest projections included two potential rate cuts before the end of the year, and Fed Governor Christopher Waller added that a cut could come as soon as their July 29 – 30 meeting. That gave rate-sensitive sectors and borrowers a sliver of hope.
Here in Canada, all eyes were on the G7 summit, where investors hoped Canada and the US might finally land a trade deal. While no agreement was reached, Carney’s warning that Canada could impose counter-tariffs if progress stalls within 30 days underscored just how high the stakes are. Meanwhile, rising oil prices, spurred by Middle East unrest, helped support energy stocks and gave the TSX a bit of a lift, even as broader uncertainty loomed.
All in all, early optimism gave way to familiar headwinds – trade, inflation, and geopolitics – reminding us that while markets may find pockets of strength, the road ahead is still anything but smooth. 😊
| Portfolio | Weekly Streak |
| Portfolio 1: | 1 – week winning streak |
| Portfolio 2: | 1 – week winning streak |
| Portfolio 3: | 1 – week winning streak |
Given how markets mostly moved sideways this week, it was a pleasant surprise to see all three of my portfolios finish in the green. To make it even better, Portfolio 2, the laggard this past week, matched the weekly gain of the Nasdaq, this week’s top-performing index, as shown in the performance chart below.
Portfolio 1 got back in the win column, rising 1.8% thanks to 52% of its holdings posting gains. With just over half the companies moving up, it was especially helpful that one of those winners was Nvidia (NASD: NVDA), the portfolio’s largest holding at nearly 40% of its value. While there weren’t any major gains, both Cameco (TSE: CCO) and Formula One Group (NASD: FWONK) hit new all-time highs, helping the portfolio into positive territory.
Portfolio 2 posted the smallest gain of the three, inching up by 0.2%. Not exactly a blowout, but a gain is better than a loss. 😊 It was the only portfolio where fewer than half the holdings rose last week, with just 48% recording gains.
Portfolio 3 was the bright light, jumping 2.2% for the week, with 62% of its holdings in the green. The biggest driver was Alvopetro Energy (TSXV: ALV), which surged 11% and helped power the portfolio into top spot for the week.
Overall, a solid week across the board, even in a choppy market that mostly moved sideways. When the indexes tread water but the portfolios still push ahead, I’ll take that as a quiet win. With more economic data on the way and the conflict in the Middle East still unfolding, uncertainty isn’t going anywhere. For now, though, it’s nice to end the week in the green. 😊
Companies on the Radar
After a busy stretch the previous week, this one was much quieter on the investing front. No new companies made it onto my radar, so I’m still watching the same three names. All are Canadian, which avoids any foreign exchange impact, and they sit in that mid-cap space, offering growth potential without the early-stage volatility. 😊.
- Aritzia (TSE: ATZ): a fashion retailer and design house known for its upscale in-house brands of women’s clothing and accessories. It controls everything from design to distribution and sells through more than 130 boutiques across North America, along with a fast-growing online platform. Its main markets are Canada and the US, where it continues to expand.
- TerraVest Industries (TSE: TVK): an industrial manufacturer serving the energy, agriculture, and transportation sectors across North America. Its products include propane tanks, ammonia storage vessels used in farming, natural gas transport vehicles, and various energy processing systems. It’s a solid operator in essential industries.
- Secure Energy Services (TSE: SES): an industrial company that focuses on environmental and waste management services for energy and industrial clients. It offers recycling, disposal, and infrastructure support across North America. For anyone interested in sustainability and infrastructure, this one’s worth keeping an eye on.
As always, these are not buy recommendations. Make sure to do your own research and choose investments that fit your personal financial goals.
The Radar Check was last updated June 20, 2025.
That’s a wrap for this week, thanks for reading – may your portfolio stay green and your dividends steady. See you next time!