Author: train2invest Admins

Canada’s trade deficit with the world narrowed in May from a record high the previous month, as tariffs continued to weigh on exports to the United States.

Statistics Canada reported on Thursday that the country’s trade deficit, which reflects the difference between its exports and imports, fell to $5.9-billion from $7.6-billion.

Exports to the United States slipped for a fourth consecutive month, decreasing by 0.9 per cent, as the White House targets some sectors of the Canadian economy with punishing tariffs.

This includes levies on steel, aluminum and automobiles, as well as on all goods that don’t comply with the continental free-trade agreement’s rules of origin. Last month, Mr. Trump doubled tariffs on steel and aluminum to 50 per cent.

U.S. tariffs are already slowing down the Canadian economy and forecasters expect it shrank in the second quarter.

The federal agency noted that the share of exports destined for the U.S. was 68.3 per cent in May, one of the lowest proportions on record. (The monthly average in 2024 was 75.9 per cent.)

The impact of the trade spat is particularly apparent in the automotive sector, where tariffs are slowing down trade in both directions.

Imports of motor vehicles and parts fell by 5.3 per cent, following an even sharper decline in April.

Imports of passenger vehicles and light trucks decreased to their lowest level in two years, falling by 9.7 per cent in May, as Canada implemented reciprocal auto tariffs on the U.S.

Meanwhile, exports to countries other than the U.S. continued to rise last month, increasing by 5.7 per cent and reaching a record high.

A sharp rise in gold exports drove up total exports to the world by 1.1 per cent, while imports fell by 1.6 per cent, marking the third consecutive decrease.

Prime Minister Mark Carney is trying to negotiate an economic and security agreement with the United States by July 21, in hopes of securing a break from tariffs for Canadian businesses.

U.S. President Donald Trump broke off talks last week over Canada’s implementation of a digital services tax targeting tech giants like Google and Netflix. However, talks have since resumed after Mr. Carney announced that the federal government would rescind the tax.

• Nonfarm payrolls increased a seasonally adjusted 147,000 for the month, higher than the estimate for 110,000 and just above the upwardly revised 144,000 in May.
• Market pricing shifted strongly following the payrolls report, with traders all but taking the chance of a July rate cut off the table.
• Government employment posted a large gain, leading all categories with an increase of 73,000 due to solid boosts in state and local hiring.

https://www.cnbc.com/2025/07/03/jobs-report-june-2025.html

U.S. President Donald Trump abruptly cut off all trade negotiations with Canada on Friday, citing Ottawa’s Digital Services Tax (DST) for the decision. The tax, enacted last June, targets U.S. technology companies that operate in Canada but pay little tax here. Under the new tax regime, the first payments are set to be collected on Monday, June 30. The Financial Post breaks down what you need to know about the DST and why it is infuriating Trump and Americans.

https://financialpost.com/technology/canada-digital-services-tax-infuriating-donald-trump

Will Canada maintain it?

For months, executives of U.S. tech giants have pressured American policymakers over Canada’s DST. Ontario Premier Doug Ford and Canadian business groups have also pressed the Carney government to abandon the DST. And while businesses and industry groups were holding out for a last-minute suspension of the DST, finance minister François-Philippe Champagne reconfirmed last Thursday that Canada is “going ahead” with the tax. “The (DST) is in force and it’s going to be applied,” he said. Parliament Hill’s firm stance on maintaining the DST comes despite a recent Group of Seven (G7) agreement that succeeded in axing the Section 899 “revenge tax” provision from Trump’s “big, beautiful bill” that would have taken aim at businesses from countries that the U.S. views as unjustly targeting American firms. Ottawa hasn’t ruled out shutting down DST discussions completely. “Obviously, all of that is something that we’re considering as part of broader discussions that you may have,” Champagne said last week, suggesting that the DST could be renegotiated given the ongoing trade talks between Canada and the U.S.

OTTAWA – Canada will proceed with a digital services tax (DST) on technology companies, which President Donald Trump called “a direct and blatant attack on our country” in a Truth Social post on Friday in which he said that his administration was “terminating ALL discussions on Trade with Canada effective immediately.”

On Friday, Canadian Prime Minister Mark Carney’s office issued a one-line response to the president’s announcement.

“The Canadian government will continue to engage in these complex negotiations with the United States in the best interests of Canadian workers and businesses,” it said.

https://www.foxbusiness.com/fox-news-world/canada-responds-after-trump-halts-trade-talks-over-digital-services-tax

Monday June 30

China PMI

Japan industrial production

ECB forum on central banking in Sintra, Portugal (through Wednesday)

–

Tuesday July 1

Canadian markets closed

Japan manufacturing PMI

Euro zone CPI and manufacturing PMI

Germany unemployment

(9:30 a.m. ET) U.S. Fed Chair Jerome Powell participates in a policy panel at ECB forum in Portugal.

(9:45 a.m. ET) U.S. S&P Global Manufacturing PMI for June.

(10 a.m. ET) U.S. ISM Manufacturing PMI for June.

(10 a.m. ET) U.S. construction spending for May.

(10 a.m. ET) U.S. Job Openings & Labor Turnover Survey for May.

–

Wednesday July 2

Euro zone jobless rate

(8:15 a.m. ET) U.S. ADP National Employment Report for June.

(9:30 a.m. ET) Canada’s S&P Global Manufacturing PMI for June.

Also: U.S. and Canadian auto sales for June.

–

Thursday July 3

Japan and Euro zone services and composite PMI

(8:30 a.m. ET) Canada’s merchandise trade balance for May.

(8:30 a.m. ET) U.S. nonfarm payrolls for June. The Street is expecting a gain of 113,000, down from 139,000 in May, with the unemployment rate rising 0.1 per cent to 4.3 per cent.

(8:30 a.m. ET) U.S. initial jobless claims for week of June 28. Estimate is 242,000, up 6,000 from the previous week.

(8:30 a.m. ET) U.S. goods and services trade deficit for May.

(9:45 a.m. ET) U.S. S&P Global Services/Composite PMI for June.

(10 a.m. ET) U.S. factory orders for May. Estimate is a gain of 8 per cent from April.

Earnings include: Richelieu Hardware Ltd.

–

Friday July 4

U.S. markets closed (Independence Day)

Japan household spending

Germany factory orders

(9:30 a.m. ET) Canada’s S&P Global Services PMI for June.

Eurozone economic sentiment weakened unexpectedly in June primarily driven by reduced confidence in industry and retail trade, a monthly survey data from the European Commission showed on Friday.

The economic confidence index fell to 94.0 in June from 94.8 in May. The score was forecast to rise to 95.1.

The industrial confidence index posted -12.0 in June, down from -10.4 a month ago. The reading was seen at -9.9. This fall was driven by declines across all three components, namely managers’ assessments of the current level of order books, stocks of finished products, and production expectations.

Due to deterioration in retailers’ assessment of the volume of stocks and their business expectations for the next three months, the retail trade confidence index fell to -7.5 from -7.2.

Likewise, the consumer confidence indicator dropped to -15.3, in line with the flash estimate, from -15.1 in May.

By contrast, the services sentiment index rose unexpectedly to 2.9 in June from 1.8 in March. The expected reading was 1.6.

Similarly, fuelled by builders’ employment expectations, the contractors’ sentiment index improved to -2.8 from -3.5.

Among the largest EU economies, the ESI dropped most significantly in France, followed by Spain and Germany. Conversely, the ESI remained broadly stable in Italy.

Japan’s retail sales growth eased to a three-month low in May and the unemployment remained stable, official data revealed on Friday.

Retail sales grew 2.2 percent on a yearly basis, slower than the 3.5 percent increase seen in April, data from the Ministry of Economy, Trade and Industry showed. This was the slowest growth in three months. Sales were forecast to grow 2.4 percent in May.

Month-on-month, retail sales fell 0.2 percent in May, in contrast to the 0.7 percent increase seen a month ago.

The unemployment rate remained unchanged at seasonally adjusted 2.5 percent in May, the Ministry of Internal Affairs and Communications reported. The figure also matched expectations.

The number of unemployed increased 720,000 from a year ago to 68.38 million. This was the 34th consecutive month of increase.

Another report from the Ministry of Internal Affairs and Communications showed that inflation in Japan’s capital softened to a three-month low of 3.1 percent in June from 3.4 percent in May.

Tokyo core inflation that excludes fresh food and energy, eased to 3.1 percent from 3.3 percent in the previous month.

China industrial profits declined notably in May as tariff tensions damped activity, figures from the National Bureau of Statistics showed Friday.

Industrial profits decreased 9.1 percent in May from a year ago. In the January to May period, industrial profits declined 1.1 percent from the same period last year.

The NBS reportedly said that operating revenue grew 2.7 percent. The steady growth is set to underpin a continued profit recovery in the coming months, the statistical office said.

Beijing aims to achieve growth of “around 5 percent” this year. But the International Monetary Fund forecast China to expand only 4 percent in 2025.

Despite the truce in the Middle East, crude oil posted gains on Friday in the wake of the US confirming readiness to sign trade deals with China and multiple other trading partners and indications of strong summer demand in the US.

WTI Crude Oil closed up by $0.28 to settle at $65.52 per barrel today.

August month Brent Crude was last seen trading up $0.18, to $67.91 per barrel today.

Oil prices initially surged on Monday after the US bombed Iranian nuclear sites last weekend but plummeted after the US President Donald Trump announced a ceasefire.

The anxiety about a long-lasting Middle Eastern conflict between Israel and Iran, which could have triggered a major supply crisis, has now faded due to the truce, which has been holding so far with no reports of violations by either side.

During the 12-day war, much of the risk-premium associated with oil which drove it to record high prices was due to the threat of disruption to the Strait of Hormuz. As much as 20% of global oil transit takes place through this strait.

As that threat has disappeared, investors are focused on pricing based on demand-supply fundamentals. As of now, globally supply is more than the demand.

A report from the US Energy Information Administration on Wednesday revealed that crude and oil inventories fell by 5.9 million barrels last week. Along with this, the high demand foreseen in the US due to the summer travel season also contributed to today’s earlier price rise.

Oil and energy traders are now focused on the upcoming July 6th meeting of OPEC+, where another hike in production by 411,000 bpd is likely to be approved.

The organization is keen on grabbing market share as production in North America and South America is increasing. Reports suggest that Russia, a key member, may agree to ramp up production.

Gold fell sharply on Friday, slipping to a nearly one-month low as investors move to riskier assets amid a backdrop of easing geopolitical tensions.

Front Month Comex Gold for July plunged $60.20 (or 1.8%) to $3,273.70 per troy ounce today. Gold lost around 2.9% this week.

Front Month Comex Silver for July fell 55.40 cents (or 1.5%) today to $36.037 per troy ounce.

In a significant trade development today, the world’s two major economic partners, the US and China, made further progress on the trade agreement announced by the countries last month in Geneva. Specifically, China has agreed to deliver much-needed rare earth minerals to the US.

A White House official said the US and China have agreed to “an additional understanding of a framework to implement the Geneva agreement.”

A spokesperson for China’s Ministry of Commerce subsequently said the two sides have “confirmed the details of the framework.”

The spokesperson said Washington would lift “restrictive measures,” while Beijing would “review and approve” items under export controls.

US Commerce Secretary Howard Lutnick told Bloomberg that 10 other deals with multiple other countries are coming up, suggesting a shift from the previous rigid stance on trade policies.

This news brought cheers to investors across the world, triggering a rally in the US financial markets and leading to a slump by gold.

On the data front, according to the numbers released by the US Commerce Department, consumer spending that accounts for more than two-thirds of economic activity edged down 0.1% last month to $21.441 trillion, suggesting the dent on consumer’s appetite brought on by tariffs.

The Commerce Department also said personal income fell by 0.4 percent in May after climbing by a downwardly revised 0.7 percent in April.

Additionally, the report said the personal consumption expenditures (PCE) price index inched up by 0.1 percent in May, matching the uptick seen in April as well as economist estimates.

The annual rate of growth by the PCE price index accelerated to 2.3 percent in May from 2.2 percent in April, which also matched expectations.

Meanwhile, the core PCE price index, which excludes food and energy prices, rose by 0.2 percent in May after inching up by 0.1 percent in April. Economists had expected another 0.1 percent uptick.

The annual rate of growth by the core PCE price index also accelerated to 2.7 percent in May from an upwardly revised 2.6 percent in April.

Economists had expected annual rate of growth by the core PCE price index to tick up to 2.6 percent from the 2.5 percent originally reported for the previous month.

Following today’s inflation data, all eyes are on the Fed’s decision on interest rates in the coming weeks.

Interest rates have been kept unchanged by the Fed 4.25% to 4.50% since December. High interest makes gold less favorable.