Monday Market Minute | Aug 24, 2026

Canada–US talks break down and 50% Section 338 duties take effect — as July CPI firms to 3.0%

What Moved

On August 21 Prime Minister Carney suspended negotiations with Washington, saying the US "asked too much and offered too little"; USTR Greer replied that Canada "wanted more." At 12:01 a.m. ET on August 22 the Section 338 duties signed in July took effect: an additional 50% on listed Canadian goods — the first-ever tariff under that statute. It carries no fixed end date and, unlike the forced-labour Section 301 regime that replaced Section 122 on July 24, no CUSMA exemption. The US estimates the covered goods at roughly US$20 billion of Canadian imports.

The 60-day US–Iran MOU window lapsed on August 17 without a deal, and Brent futures rose to $93.73 on August 20 on new US sanctions. July CPI, released August 17, came in at 3.0% against a 2.9% consensus, with gasoline up 25.7%; trim and median core held at 1.9% and 2.0%. The same day, lenders raised fixed mortgage rates by 5 to 20 basis points as the five-year Government of Canada yield reached 3.313%. CREA's July sales rose 0.5% month-over-month, a fourth straight gain, and the MLS Home Price Index edged up 0.1% — the first national monthly gain since November 2024 — though it remains 3.3% below a year earlier. The loonie firmed to 1.3760 per US dollar on August 21.

Why It Matters

Through the spring, the working assumption for Canadian cross-border exposure was that CUSMA-qualifying goods were insulated. For the goods Section 338 covers, that assumption no longer holds. The shock is sector-specific rather than economy-wide — alcohol, dairy, motor vehicles, wood products, machinery and consumer goods — so its weight in a private portfolio depends on what the underlying companies make and where they sell it.

Rates matter as much. Headline inflation is near 3% on energy while core sits around 2%, and markets are already passing higher yields through to fixed mortgage pricing before the Bank of Canada has moved. A Bank of Canada staff analysis, reported by The Canadian Press, sized private lending by Canadian investors — plus bank lending to private-credit funds — at roughly $500 billion, mostly in the US, and flagged "potential channels of contagion" if a sharp foreign downturn arrived. It is a measurement of exposure, not a forecast of an event.

Signal to Watch

Consumer credit data arrive early in the week, with Equifax's Q2 report today and TransUnion's on August 25 — the first read on household repayment as rates firm. Q2 GDP lands August 28; the advance estimate pointed to 3.4% annualized against the Bank's July projection of 2.5%. Beyond the data, watch how Ottawa responds to the August 22 duties, and how the September 2 Bank of Canada decision weighs firmer headline inflation against a trade shock that has just widened.