FX.co ★ Canada 10-Year Yield Eases on US Trade Tensions

Canada’s 10-year government bond yield eased to around 3.62% after briefly reaching a more than two-year high of 3.76% on August 21, as renewed trade tensions with the United States clouded the country’s economic outlook. In response to higher US tariffs following the collapse of bilateral trade talks, Canada announced retaliatory duties of 15% to 50% on roughly $20 billion in annual US imports, including metals, agricultural products, and motorcycles. At the same time, US President Donald Trump stated that tariffs on Canadian cars, trucks, auto parts, and steel would be increased to 50% starting January 1, 2027, alongside new levies on several other goods. The escalation in trade risks led markets to pare back expectations of a Bank of Canada interest rate hike this year, even as elevated energy prices continued to fuel inflationary pressures.