Reports suggest US Treasury Secretary Mnuchin has urged President Trump to exempt Canada from the tariffs on steel and aluminium, points out the research team at BBH.
Key Quotes
“Given the President’s focus on the bilateral balances and that nearly half of the US steel imports come from Canada, an exemption seems unlikely, no matter how much the meaning of national security needs to be debased to consider it a threat. Still, this could be an inducement, if Trump’s’ druthers for bilateral agreements and may attempt to return NAFTA to its roots, which is a US-Canadian free-trade agreement. A year ago, Canada’s Trudeau seemed more willing to consider such a course than he appears to be now.”
“The US reports the final productivity and unit labor costs for Q1. The revisions follow GDP and hence the risk that productivity is shaved to 0.6% from 0.7% and unit labor costs edged up to 2.8% from 2.7%. Unit labor costs, more than average hourly earnings and the employment cost index show a more complete picture by putting the wages/benefits in the context of output (productivity). The US also reports the April trade balance. In March it fell to $49 bln from $57.7 bln. The median forecast is for little change, though we suspect it may have risen on the back of growth differentials and stronger US consumption.”
“Canada also reports its merchandise trade balance and building permits for April. The IVEY PMI for May is also on tap. Although the uncertainty around NAFTA continues, we continue to think a Bank of Canada rate hike as early as next month cannot be ruled out.”
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