President Trump turned up the heat again this week, announcing a 50% tariff on roughly $20 billion of Canadian goods, focused largely on autos, alcohol and dairy.

That sounds ugly, and it is, but there is one very important detail: the tariffs don't take effect until August 19th.

There is still time to make a deal. And we've learned something about Trump's negotiating style: he tends to start big. The opening demand gets everyone's attention, and then the negotiation begins. The eventual outcome can look considerably more reasonable than where it started.

As Canadians, we don't have to like the way the U.S. is negotiating. But we can't ignore economic reality either. As you can see from the chart below, the U.S. remains by far our largest customer, taking more than 70% of Canadian exports. You don't replace your biggest customer overnight.

Source: Trading Economics. Data as of 2025. Retrieved Jul 23, 2026

So, in the short term, Canada needs to negotiate hard. But realistically, this isn't the time for political theatre. Whether it is alcohol, dairy, or other longstanding irritants, the objective should be getting the best deal possible for Canada.

Longer term, maybe the bigger lesson is that Canada needs more customers.

We are one of the most resource-rich countries in the world. We have oil, natural gas, potash, uranium, nickel, gold, grains, and much more. Yet a huge amount of what we produce ultimately flows to one market: the United States.

If we really want more leverage in future negotiations, the answer isn't tougher rhetoric. It's pipelines, LNG terminals, ports, rail and infrastructure that allow Canadian resources to reach Europe, Asia and the rest of the world.

We shouldn't wait for a different U.S. administration to solve this problem for us. It will take years to meaningfully diversify our trade, but that's exactly why we should start now. Ten years from today, Canada could be negotiating from a very different position.

For now, make the deal. For the future, build some leverage!

I have also included a piece from our CIBC Economics team entitled “Show me the money: Measuring wealth-driven consumption”.

As always, if you have anyquestions, please feel free to give us a call at any time.

Have a great weekend.

Milan