Trade talks between Canada and China have not sat well with the US administration. US President Donald Trump threatened Canada with 100% tariffs on Canadian products if the Canadian government signs a trade deal with China. The US believes a deal will allow China to dump cheap goods in Canada that will eventually find their way into the US. In other news, retail sales pushed higher in November but may have pulled back in December. Ongoing trade uncertainty could weigh on consumer sentiment in these first few months of 2026.

• Canada’s minister responsible for trade with the US said that Canada is not looking for a free trade deal with China. Rather, the Canadian government is seeking to resolve tariff issues with China. Canada agreed to lower tariffs on Chinese-made electric vehicles, while China will lower tariffs on Canadian canola imports.
• Canada-US tensions have risen over the past few weeks following Canadian Prime Minister Mark Carney’s speech at the World Economic Forum and Canada’s trade talks with China. Tensions could impede the review of the Canada-United States-Mexico Agreement (CUSMA), which may begin this summer.
• Back in Canada, Statistics Canada (StatsCan) reported on Friday that retail sales grew by 1.3% in November over the previous month. This marked the strongest increase since June. Sales were aided by the start of the holiday season and the end of a labour dispute in the B.C. liquor industry.
• StatsCan estimated that retail sales fell by 0.5% in December, suggesting consumers lost a bit of steam as the holiday season progressed.

Entering 2026, there is an uncertain outlook for consumer spending with sentiment remaining relatively low amid economic and trade uncertainty. Canada’s economy has remained resilient, but the threat of the end of CUSMA could result in tariffs on more products, which could impede overall economic activity.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.