Monday Market Minute | Jul 27, 2026

Section 338 arrives without a CUSMA carve-out as Section 122 expires — and June CPI cools to 2.8%

What Moved

The tariff handoff this column has tracked since early July resolved last week — and a second, separate regime arrived alongside it. On July 24, the 10% Section 122 surcharge expired at its 150-day cap without an extension from Congress, and the forced-labour Section 301 duties took effect the same morning. Canada sits at the 10% tier, CUSMA-qualifying goods are exempt, and Section 232 goods, steel, aluminum, copper, certain energy, potash and critical minerals are excluded. Litigation over roughly five months of Section 122 duties continues on appeal.

Four days earlier, on July 20, the President signed three proclamations under Section 338 — the first time the statute has ever been used to levy a tariff. They impose an additional 50% on listed Canadian goods, from alcohol, dairy and motor vehicles to wood products, machinery, plastics and foodstuffs, with no CUSMA exemption and no fixed end date. The US estimates coverage at about US$20 billion of Canadian imports. The TSX fell 0.86% that day to 34,960.32, then recovered to 35,369.10 by Friday.

Also on July 20, June CPI came in at 2.8%, down from 3.2% and below the 2.9% consensus. Gasoline was up 20.5% year-over-year but fell 10.2% on the month; inflation excluding gasoline held at 2.2%, and trim and median core were 1.8% and 1.9%. Oil moved the other way: Brent futures touched $91.42 on July 20 and traded near $96.70 on July 24. Reports of where Brent settled on July 23 conflict, with one wire account putting it above $100.

Why It Matters

Until last week, the CUSMA carve-out was the mitigant for Canadian exposure to US trade policy. It still holds under Section 301. It does not hold under Section 338. That makes the new duty sector-specific rather than economy-wide, and it shifts the question for Canadian operating-company, agri-food or manufacturing exposure from "is it CUSMA-compliant?" to "is it on the list?"

On inflation, June captured a month of falling crude, and core below 2% suggests the spring spike was narrow. July's reading will capture the rebound.

Two items bear on the exempt market itself. The CSA proposed amendments codifying the listed issuer financing exemption at $25 million (up to $50 million for larger issuers), up from $10 million; comments close October 21. And in the Altmore MIC case, Ian Ross McSevney pleaded guilty to fraud and distributing securities without a prospectus, in a case involving roughly $5.3 million from about 30 Ontario investors between 2015 and 2019.

Signal to Watch

The FOMC meets July 28–29; its tone on energy-driven inflation matters as much as the decision. The Bank of Canada's Summary of Deliberations for its July 15 hold follows on July 29, and May GDP lands July 31. On trade, watch for implementation guidance on Section 338 and any Canadian response.