Skip to main content
business briefing

Briefing highlights

  • Trade wars wound economy
  • China retaliates, hitting U.S. goods
  • Onex strikes deal to buy WestJet
  • Stocks, loonie, oil at a glance
  • What to expect in housing report
  • What else to watch for this week
  • Required Reading

The potential toll

Trade wars are wounding Canada's economy.

Already hit on some fronts, Canada will also be collateral damage in the escalating U.S.-China trade battle.

Put it all together, as Bank of Montreal senior economist Sal Guatieri did, and you can peg the toll on Canada.

Mr. Guatieri calculated existing and potential harm by looking at previous trade actions, such as duties on steel and aluminum, the indirect impact on Canada from the effects of the China spat on the U.S. economy and further threatened measures, such as those on autos.

This comes after U.S. President Donald Trump raised the tariff level on certain Chinese goods on Friday and threatened to hit other products, prompting Beijing to vow retaliation.

China responded today, saying it would slap tariffs on US$60-billion of American imports.

“China announced it will raise tariffs on some U.S. imports on June 1 and that it may stop buying U.S. agricultural goods and reduce Boeing orders,” said Derek Holt, Bank of Nova Scotia’s head of capital markets economics.

“This came after Trump tweeted a warning this morning that ‘China should not retaliate - will only get worse,” Mr. Holt added.

“Therefore, watch for the potential for further escalation of tit-for-tat tariffs. In essence, China’s stance invalidates the argument that because China imports less from the U.S. than vice versa, its potential to retaliate is coming from a weaker position. China is invoking the threat of a total blockade of key U.S. goods straight to the heartland of Trump’s agricultural base.”

Without going into all of his math, Mr. Guatieri said the cost to the U.S. economy of various trade actions could be about 1 per cent in lost output.

He then took the impact of that and the earlier hit from the steel and aluminum levies to calculate the cost to Canada.

“The estimated 1-per-cent slowing in U.S. GDP due to current duties and possible further protectionist moves could translate into 0.5-per-cent-less Canadian output, based on the estimated impact of a change in U.S. growth on Canada,” Mr. Guatieri said.

"Lower commodity prices won’t help," he added in his report.

"Including earlier tariffs on steel, aluminum and retaliatory actions could cost the economy another 0.3 per cent, putting the potential hit from a global trade war at around 0.8 per cent (or 150,000 jobs) for Canada."

Remember, too, that Canada has been caught in the crossfire over Huawei, the Chinese telecom giant the U.S. wants banned from work on new networks for security reasons.

At the request of the U.S., Canada arrested Huawei's chief financial officer, Meng Wenzhou, in Vancouver as it tries to have her extradited.

Meng WanzhouJeff Vinnick/Getty Images

Among other things, China has blocked certain Canadian canola imports.

"The still-subdued global backdrop, renewed global trade tensions and signs that China is broadening its boycott of Canada’s agricultural products do not bode well for export growth," warned Stephen Brown, senior Canada economist at Capital Economics.

"Canadian agricultural firms initially benefitted from the U.S.-China trade war, and while their market share in China in March remained higher than for most of 2018 ... that might not be the case for much longer."

Read more

Onex strikes deal for WestJet

Onex Corp. is shaking up Canada’s airline industry with an all-cash deal to acquire WestJet Airlines Ltd.

Onex and affiliated companies are offering $31 a share in a deal they value at about $5-billion, including debt.

WestJet will be run as a privately held company, Onex and the airline said.

Onex approached WestJet in March, they said, and a special committee of independent directors recommended the deal.

Read more

Markets at a glance

Read more


Oil tankers hit

From Reuters: Saudi Arabia said two Saudi oil tankers were attacked off the coast of the United Arab Emirates, condemning it as an attempt to undermine the security of crude supplies amid heightened U.S.-Iranian tensions.

Japan in slump

From Reuters: Japan may be in recession, a government assessment of its own economic indicators showed, as the U.S.-China trade war and weak external demand hurt activity and pose fresh challenges for Prime Minister Shinzo Abe’s policies.

What to watch for this week


There are still some corporate earnings to come this week, including, today, Aimia Inc., Guardian Capital Group Ltd. and TransAlta Corp.

Power Corp. also reports its first quarter and holds its annual meeting.


We'll see how much more we're paying as consumers when Statistics Canada reports April inflation numbers.

Economists expect the report to show consumer prices rose 0.4 or 0.5 per cent in April from March, putting annual inflation at 2 per cent, up a touch from March's 1.9 per cent.

"Higher gasoline prices again added a boost, but a weak print falling out of the annual calculation will also have helped nudge the inflation rate higher," said CIBC World Markets senior economist Royce Mendes.

"It’s possible that the global increase in pork prices and airlines contending with the grounding of aircraft lent some additional support to prices during the month," he added.

"That said, the Bank of Canada won’t feel the need to change tack, with its common component measure of core inflation likely remaining at 1.8 per cent."

We'll also see the national reading of how Canada's housing market fared last month, having already seen several local reports.

BMO expects the Canadian Real Estate Association to report a better showing, with sales up 3 per cent in April from a year earlier and 2 per cent from a month earlier, seasonally adjusted.

“Broadly, the 50-basis-point drop in mortgage rates since the start of the year is providing some support to the market; though given debt levels, don’t expect housing to rebound strongly,” said Benjamin Reitzes, BMO’s Canadian rates and macro strategist. Prices should also fare better.

"Average prices look to be flat from a year ago (the first non-negative print in seven months), while the quality-adjusted MLS [home price index] is also expected to be flat, an improvement from back- to-back negative prints," Mr. Reitzes said.

Markets will also be watching for the U.S. retail sales report, which economists generally expect will show a gain of 0.2 per cent in April from March.


Economists expect Statistics Canada's monthly report on manufacturing to show show sales up 1.6 or 1.7 per cent in March from February.

Later in the morning, the Bank of Canada releases its review of the financial system.

And on the earnings front, Walmart reports its first quarter.

"One of the few U.S. retailers that has been able to take the fight to Amazon, recent sales figures have shown that the company has continued to outperform its peers, while it also has taken steps to expand into new markets," said CMC Markets chief analyst Michael Hewson.


Relax and get ready for the weekend. CAE Inc. reports results, but there’s not much else on tap.

Required Reading

Into the limelight

European bureau chief Eric Reguly looks at Peter Thiel’s Canadian partner, who’s stepping into the limelight.

On SNC’s breakup plan

Cash-hungry engineering assets would threaten SNC-Lavalin Group Inc.’s plans for a breakup, an analysis finds, institutional investment reporter David Milstead writes.

Risks of frontier markets

Investment reporter David Berman looks at one of the takeaways from the recent travails of Bombardier Inc. and SNC-Lavalin: Investors cannot ignore the risks run by companies that do business in faraway lands where the rule of law takes a back seat.