Good morning. Donald Trump threatened on the weekend to impose 100-per-cent tariffs on Canadian imports, issuing a warning that underscored the U.S. President’s disruptive approach to trade and the erosion of economic and security frameworks that have bound U.S. allies together since the Second World War. The fraught path forward is in focus this week. Thank you for your attention to this matter!
Up first
In the news
Deals: Canadian companies are growing wary amid increased interest in takeovers, Bank of America executive says.
Aerospace: There is “no debate” within Airbus that the Bombardier jet program takeover was worthwhile.
Law: First Nation in NWT clears a legal hurdle in case alleging KPMG helped businessman defraud community.
A police officer throws a can of tear gas at protesters in Minneapolis on Saturday.Stephen Maturen/Getty Images
In focus
The world adjusts to a new alignment
1. It’s been: One week since the U.S. President wrote to Norway’s Prime Minister that he “no longer feels bound to think purely of peace” in his ambition to annex Greenland, tying his escalating threats to not being awarded a Nobel Peace Prize. In a dramatic series of events at the World Economic Forum in Davos, global leaders debated a response to Trump’s threats of imposing strict new tariffs on the European countries that showed military support for the semi-autonomous territory of Denmark. Prime Minister Mark Carney went viral for a speech calling water wet (but more eloquently and at a risky moment), and Canada’s military has been modelling hypothetical responses to a U.S invasion.
That’s all in our rearview now. Sort of. We can certainly hope for a calm to settle after the summit brought all of these issues into sharper and alarming view. But we haven’t seen details about what Trump called a “framework deal,” which seems to have backed him away from fully going after Greenland. The President is not renowned for predictability, and has cancelled deals with entire nations over, say, television ads taken out by one of its provincial governments.
Markets will be on edge over Trump’s global threats, but his fight with officials in Minnesota over an immigration crackdown has also spread to Wall Street. Chief executives of Target Corp., Best Buy Co. Inc., General Mills Inc. and Cargill were among dozens of companies to sign a public letter yesterday calling for an “immediate de-escalation of tensions” in the state.
Trump’s warning to Canada, which was made on his social-media platform and decidedly light on detail, suggests a possibility it doesn’t escalate, but it’s possible the whole “TACO” idea isn’t as reliable as its popularity suggests.
No one thought he would tear up NAFTA, slap tariffs on allies, or force through a sweeping travel ban on Muslim countries – surely, advisers or courts or clear evidence of economic and diplomatic damage would ultimately sway him to back down on measures this disruptive? And yet.
So, Ottawa is back in his crosshairs – even after responding with assurances the country would not seek a free-trade deal with Beijing – and global leaders are still left facing a future in which their nations can do longer depend on the U.S. supporting decades-old systems of trade and defence.
2. Centre stage: The Bank of Canada and U.S. Federal Reserve are both expected to keep their trend-setting interest rates steady on Wednesday. If there is drama to be found, it will be south of the border.
The U.S. central bank’s announcement will be the first since Jerome Powell shared that the White House had threatened him with a criminal indictment over his testimony about the bank’s Washington renovation – a move the outgoing Fed chief has called a “pretext” to pressure the bank to force interest rates lower.
And we might learn the U.S. President’s official nominee to take Powell’s place when his term ends in May. No matter Trump’s choice, his escalating public attacks on Powell have raised questions over whether his successor will act independently of the Oval Office. That autonomy is important because it gives investors confidence that monetary policy has a longer shelf-life than political whims, and that policymakers feel free to make unpopular decisions to keep inflation in a healthy range.
3. The shipping news: Canada reports its merchandise trade balance for November on Thursday. That includes physical goods like cars, clothing, oil and metals.
In October, Statistics Canada reported a deficit – imports grew at a faster pace than exports – but the data suggested the country’s efforts to find export markets beyond the U.S. were bringing early results.
The Port of Montreal offered more signs last week pointing in the same direction(s). Container traffic rose nearly 4 per cent in 2025 as the port moved 1.51 million 20-foot equivalent units – an industry measure representing a standard shipping box. That’s a strong sign that trade with Europe, home to four of Montreal’s five biggest two-way trade partners, is heating up.
“We had prepared for a more significant downturn” as U.S. protectionism and uncertainty over tariffs bit into business activity, Montreal Port Authority chief executive Julie Gascon told The Globe. “Diversification has mitigated the effect on the country’s economy, which is reflected in container volumes. . . All of those strategies to diversify our markets are working.”
Let’s hope so, because a recently published study has found that U.S. trade policy toward Canada is three times more restrictive than the country’s average tariff rate, which Ottawa regularly touts as the lowest in the world.
The average tariff on Canadian imports was around 4 per cent in October. But the overall burden to U.S. consumers from steep tariffs on key products such as steel and automobiles was equivalent to a 12-per-cent across-the-board tariff, according to the U.S. National Bureau of Economic Research.
4. Gross! (Domestic product.) Those trade numbers are especially meaningful to Canada’s economy, which is largely predicated on the idea of freely accessing U.S. buyers. Friday’s report on November’s GDP is largely expected to follow in trade’s trajectory.
After Canada’s economic output shrank in October, Statistics Canada’s preliminary estimate pointed toward a slight rebound. Were it not for severe tariffs affecting Canada’s key manufacturing sectors, it might have been viewable without a microscope.
5. Big tech: Big yawn? Meta, Microsoft, Tesla, IBM and Apple are all reporting this week. In her weekly market setup, Amber Kanwar writes “the Mag 7 are Lag 7 in 2026, underperforming the S&P 500 and small caps.” Still, she notes, their 30 per cent of the market might make it prudent to watch.
Trump will likely have his TV locked on Larry Kudlow – and if last week is any indication, market reaction might play the most determining factor in his fights with the world and America’s Midwest.
More files we’re following
Notable domestic earnings this week include the two major railways and Rogers, which together should offer a snapshot of how the country’s goods and gadgets are moving. The rails have been slow and steady, but a worsening trade relationship between Canada and the U.S. wouldn’t help.
Charted
The drive to be No. 1
Carney is busily resetting Canada’s position toward China. You might want to do the same with yours, Ian McGugan writes. The Asian giant looms as one of the biggest potential sources of rewards for investors over the next couple of decades. It is also one of the bigger risks. Like it or not, your portfolio will be affected by what happens in Beijing.
Quoted
Canadians feel like they’re being cheated.
— Sylvain Charlebois, director of Dalhousie University’s Agri-Food Analytics Lab
What’s eating Canadian consumers the most? Try grocery prices.
Morning update
Global markets were subdued as traders remained on the sidelines following last week’s turbulence, while awaiting key earnings updates and central bank policy decisions later this week.
Wall Street futures were in the red, while TSX futures pointed higher as commodity prices climbed.
Overseas, the pan-European STOXX 600 was down 0.04 per cent in morning trading. Britain’s FTSE 100 edged up 0.05 per cent, Germany’s DAX slid 0.31 per cent and France’s CAC 40 gave back 0.33 per cent.
In Asia, Japan’s Nikkei closed 1.79 per cent lower, while Hong Kong’s Hang Seng edged up 0.06 per cent.
The Canadian dollar traded at 73.08 U.S. cents.