In this edition of the Notebook, we break down the big development from the G7 summit—a potential Canada–U.S. trade deal in the works, and what it might include. We also look at new trade actions announced by the Carney government to support steel producers, fresh economic data showing signs of a slowdown, and some key headlines from the week in business and policy.
Canada–U.S. trade talks
The G7 leaders’ summit this week produced one tangible piece of news: Canada and the U.S. are moving toward some kind of trade agreement.
Prime Minister Mark Carney met with President Donald Trump on the sidelines of the summit on June 16. The two agreed to try to finalize a new economic and security pact within 30 days.
Trump even offered a glimpse of the discussions at a media availability ahead of the meeting:
“I think we have different concepts. I have a tariff concept. Mark has a different concept, which is something that some people like, but we’re going to see if we can get to the bottom of it. I’m a tariff person. I’ve always been simple. It’s easy, it’s precise, and it just goes very quickly. And I think Mark has a more complex idea, but also very good. So we’re going to look at both, and we’re going to see what we’re going to come out with.”
The quote says a lot about the likely shape of any eventual deal.
First, tariffs are not going away. Trump appears intent on maintaining them as a feature of U.S. trade policy. And despite his claim of simplicity, the agreements he’s pursuing are anything but: they’re complex, sector-specific, and designed to target particular trade imbalances or grievances. Look at the U.K. “deal” Trump has already signed. It preserves across-the-board tariffs, but includes exemptions for key sectors like aerospace. Auto duties are reduced, not eliminated, and a quota system to manage steel imports is being created. In return, the U.K. dropped its average tariff on U.S. goods and expanded quota-free access for American beef and ethanol.
Trump is taking a similar approach with Japan, where negotiations are reportedly stalled over duties on automobiles.
Canada, unlike those countries, isn’t facing across-the-board tariffs–at least not yet. But we are facing targeted duties on three major industries: autos, steel, and aluminum. That means the deal will likely come down to what Carney is willing to offer for the U.S. to ease duties in those sectors.
Concessions will obviously include Canada eliminating our own counter-tariffs, but it’s unlikely to be enough. Trump won’t be satisfied just to return to the previous status quo.
On the non-tariff front, it could range from easing foreign ownership rules and market access in sectors like telecom, airlines, or dairy; to guaranteeing the U.S. access to Canadian raw materials, especially critical minerals; to eliminating Canada’s digital services tax—though it’s worth noting the U.K. kept its digital sales tax in place.
(Canada’s digital sales tax is scheduled to come into effect at the end of this month, and Finance Minister Francois-Philippe Champagne said the plan is still to move ahead with it.)
Security will also be on the table. That could mean coordination with the U.S. on trade policy towards China, as well as agreements around defence procurement.
It’s very possible we end up with some type of hybrid quota system, where tariffs are removed up to a certain threshold for steel, aluminum, and cars. That means a big chunk of our trade may return to being duty-free, but with limited scope for these sectors to grow from current levels.
President Donald Trump arrives to speak at U.S. Steel Mon Valley Works-Irvin Plant, Friday, May 30, 2025, in West Mifflin, Pa. David Dermer/AP Photo.
Canada’s steel tariff play
The Canadian government is introducing its own version of managed trade. On Thursday, Carney announced a new 50 percent tariff on steel imports from countries without free trade agreements—but only on volumes above 2024 levels. That targets countries like China and Turkey, while creating a quota-style protection for domestic producers. The prime minister said the measures aim to keep countries from diverting steel, initially destined for the U.S., from flooding the Canadian market.
Carney also said additional tariff measures will follow in the coming weeks to counter “unfair” trade in steel and aluminum, even from countries Canada has trade deals with.
And if the U.S. doesn’t move on Canadian metals, Carney warned that Canada could raise its own counter-tariffs on U.S. steel.
Economic fallout
Data is beginning to come in showing signs of economic stress from the trade war. Preliminary figures from Statistics Canada show retail sales dropped 1.1 percent in May, which would be the biggest monthly decline in a year. April wasn’t much better for data. Over the last couple of weeks, Statistics Canada reported an 11 percent drop in exports that month, a 2.8 percent decline in manufacturing shipments, a 2.3 percent fall in wholesale sales, along with less spending on construction and fewer applications for building permits.
And it’s not just trade friction. The rapid deceleration in population growth is now a major economic headwind. In the first quarter of 2025, the country added just 20,000 people—one of the smallest quarterly gains on record—as curbs on temporary foreign workers and international students began to bite.
Economists now expect a slight contraction in GDP in the second quarter (April-June), with stabilization expected in Q3 and a modest rebound by year-end.
A recession is not being forecast, for now.
Assorted links
A few quick hits to round out the week:
Airline competition: Canada’s Competition Bureau released a report calling on the government to open the sector to more foreign investment. That includes a recommendation to allow 100 percent foreign ownership of airlines that operate solely within Canada.
G7 scorecard: John Kirton of the University of Toronto’s G7 Research Group says Carney had a strong showing at the G7 leaders’ summit, even with Trump leaving early. That’s in part due to Trump being in a “cooperative mood” during the meetings. Interestingly, Kirton notes, Carney’s chair summary notably avoided any mention of climate.
Global songbook: In the face of turmoil from Trump, global policy makers are all reading from similar songbooks. Here is the head of the European Central Bank, Christine Lagarde, giving her own version of Carney’s: “We can give ourselves far more than Donald Trump can ever take away.”
Housing flicker: Canada’s housing market saw a bit of a recovery in May, as lower prices begin to attract buyers, according to new data from the Canadian Real Estate Association. The market, however, remains weak, with activity still well below historical averages. The average price of a home sold in May was $690,900 (seasonally adjusted), down from its peak of $837,000 in 2021.
Holding the line: CRTC, Canada’s telecom regulator, said on Friday that it won’t reverse its decision allowing major providers to access each other’s fibre networks. Critics of the measure say it will discourage new broadband investment. Cabinet has until mid-August to respond.
New energy era: A report from Scotiabank on the increasing importance of Canadian energy to global security. “In this new era, energy policy must be grounded in realism, resilience, and diversification,” the authors conclude.
Theo Argitis is The Hub's Editor-at-Large for economics and business. Theo has been a journalist for the better part of three decades, spending much of his…
