Business Brief: Craving a TACO Tuesday

Good morning. Canada’s trade negotiating team was still hunkered down in Washington on Monday, while yet another tariff mediation took place. Let’s catch up on where things are at (and where they might go) before tomorrow’s deadline.

Up first

In the news

Auto: The Canadian auto industry is making grim calculations – what level of tariff can it absorb without being forced to idle more auto plants?

Energy: Quebec and Newfoundland and Labrador have salvaged a deal to jointly develop untapped hydroelectric resources on the Churchill River. But the revised deal comes with a major caveat, writes Konrad Yakabuski.

Economy: Gas prices drove inflation up to 3 per cent in July as food-cost pressures eased, just a tick above economists’ expectations.

In focus

The state of trade

Hi, I’m Jameson Berkow, capital markets reporter for The Globe.

No matter what happens today, I will be enjoying corn tortillas filled with some delightfully seasoned chicken, onions, pineapple and cilantro.

But I will be eating them with my fingers crossed (yes, it’ll be a mess) that today also marks the latest time that Trump Always Chickens Out.

Today is the last day before the mercurial U.S. President has promised to slap potentially devastating 50-per-cent tariffs on US$20-billion worth of Canadian exports to the United States. Canadian negotiators have given up their weekends in an effort to hammer out an agreement that would avoid such steep levies and Prime Minister Mark Carney is planning to make a personal appeal directly to Trump ahead of the deadline.

At the moment, however, both sides remain far apart on multiple issues. That means the best chance Canada has of avoiding the worst case scenario is to just wait for Trump to blink.

Anthony Scaramucci, a longtime Trump confidante and one-time Trump staffer known as “the Mooch,” predicted another TACO on the tariff threat against Canada based on the pressure Trump faces from hordes of American CEOs who have come to rely on an integrated North American economy.

Another sign that Trump would lose his nerve is because he has done it so many (many!) times already. More than a year ago, in July, 2025, Forbes Magazine had already catalogued 28 tariff flip-flops from the Trump White House.

Needless to say, there have been numerous TACO moments in the ensuing months. So many, in fact, that some investors have adopted a TACO-trade playbook where they buy stocks hit by a Trump tariff threat and sell them for a tidy profit after he inevitably backs down.

Trump even used the exact same threat now facing Canada – a 50 per cent tariff on a wide array of goods – against the European Union in mid-2025. The European TACO moment came just two days later when Trump offered a five-week delay to buy time for negotiations, but even that deadline eventually came and went without any sweeping tariffs taking effect.

And remember when he refused to rule out invading Greenland in order to annex the autonomous Danish territory? Me neither.

None of this is to say Canada shouldn’t be taking these threats seriously. There is always the non-zero chance that Trump keeps his word and expends significant political capital to punish America’s closest trading partner for perceived slights.

Yet if history is any guide, Canadians can expect to enjoy a tasty trade deal.

Charted

‘Canada is not immune’

Analysts say that a rise in Japanese government bond yields, and the related shifting makeup of foreign holders of U.S. government debt, could have a far-reaching impact with implications for Canadian investors.

Quoted

Accidentally a landlord: Some young Canadians who bought condos at the height of the market are trying to contain their financial losses by living with family and renting out the units, hoping their real-estate investments will eventually recover value. Meet Canada’s young accidental landlords.

Up next

More files we’re following

Rise: Iran vows to escalate tensions in the Strait of Hormuz and the wider region, while Trump threatens to bomb Oman.

Review: MPs agreed to launch a probe into Ottawa’s security screening and monitoring protocols after a Canadian NATO intern was arrested on suspicion of espionage.

Rebound: Canadian home sales are climbing again, albeit slowly, even as average prices remain lower compared to this time last year.

Before the bell: We’re watching for earning reports expected from Baidu Inc. and Home Depot Inc.

Morning update

Global markets were lower as a selloff in U.S. government bonds picked up pace, sending the 30-year Treasury yield to a near two-decade high as fears of an escalation in the Middle East war fuelled inflation worries and pressured stocks.

Wall Street futures were in the red, while TSX futures followed sentiment lower.

Overseas, the pan-European STOXX 600 was down 0.5 per cent in morning trading. Britain’s FTSE 100 was little changed, Germany’s DAX declined 0.32 per cent and France’s CAC 40 retreated 0.42 per cent.

In Asia, Japan’s Nikkei closed 2.54 per cent lower, while Hong Kong’s Hang Seng edged up 0.07 per cent.

The Canadian dollar traded at 72.10 U.S. cents.