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Globe and Mail
13 minutes ago
- Globe and Mail
The Weekly Setup: What every investor needs to know about tariffs, Aritzia and job numbers
This week featured a lot of heat warnings at the kids' camp. The teens in charge have taken to handing out unlimited freezies. How can I explain to these well-meaning pre-adults the consequences of giving seven freezies to a five-year-old in one day? Maybe letting a deranged raccoon loose in their pantry would help them understand what we are dealing with at home. Here are five things to watch for this week: Want ads: Economists estimate Canada added zero jobs in June. That's not a typo. The consensus estimate for net job growth in a country of 20.7 million workers is 0.0. The unemployment rate is expected to advance to 7.1 per cent – the highest since the pandemic peak, or, apart from that, since April, 2016. Tariffs provide ample reason for pessimism. The manufacturing sector could post a third straight month of job losses, notes Benjamin Reitzes, Bank of Montreal managing director for Canadian rates and a macro strategist. 'U.S. steel and aluminum tariffs doubled in June, which will hit those already struggling sectors even harder,' Mr. Reitzes wrote in a note to clients. The data will be key for the Bank of Canada, which is set to make an interest-rate decision at month's end. The central bank has held rates steady at 2.75 per cent for two consecutive meetings, but the market is pricing in only a slight chance of a rate cut. If payrolls disappoint, this could sway the odds in favour of another cut. Let's make a deal: The deadline for deals with the United States on tariffs is fast approaching. President Donald Trump set July 9 as the deadline for country-based tariffs to begin on trading partners without deals in place. With the deadline days away, deals have only been hammered out with Vietnam and Britain. Although the U.S. and China have agreed to a truce, which involves cooling it on reciprocal tariffs and lowering export controls, Canada has promised a deal by July 21. Does a deal matter to markets? The S&P 500 INX and the TSX TXCX are at record highs. So far, tariffs aren't hitting inflation; does that mean companies are absorbing them at the expense of margins? Could margins be the undoing for investors? BMO chief investment officer Sadiq Adatia says tariffs may actually increase a company's profitability. 'Let's say a 10-per-cent tariff is imposed on goods crossing the border,' he said on my podcast. 'Most consumers think prices will go up by 10 per cent. But only 40 per cent of the product's cost comes from raw goods. So, 10 per cent on 40 per cent is only a 4-per-cent tariff. Companies know people expect 10 per cent, so they might raise prices by 7 per cent and say, 'We're doing you a favour. We're not doing 10.' But they've increased their profits by another 3 per cent.' High fashion: Someone forgot to tell Aritzia Inc. ATZ-T there's a consumer slowdown. The stock hit a record high last week, creating an interesting set-up for quarterly results due Thursday after markets close. Aritzia is expected to show a 150-per-cent rebound in profitability and a nearly 15-per-cent jump in same-store sales. In this economy? Apparently. With the stock trading at a hefty premium to peers (UBS estimates it at 48 per cent) it will make the quarterly results a nail-biter. Will Aritzia continue to buck the trend of weak consumer growth? Can it continue to manage around tariffs? As with most companies, it may come down to the outlook it provides. 'We believe the 'bar' for the event is ATZ maintains its FY26 operating guidance and provides a 2Q26 outlook supportive of the Street's C$0.37 EPS forecast,' Mauricio Serna of UBS wrote in a preview note. Jamie Murray of Murray Wealth Group flagged Aritzia as a winner on my podcast back in February. It promptly went straight down before recovering and reaching new highs. He's still holding. 'They've beat quarterly guidance by at least 5 per cent the past 3 quarters and we expect a similar result,' he wrote in an e-mail. Hungry for change: Shares of MTY Food Group Inc. MTY-T have been grinding lower for years, and this week investors will get to assess if catalysts for the stock remain elusive when it reports results on Friday. MTY is known as a food-court purveyor of such brands as Manchu Wok and Mr. Sub, but it has diversified and has many free-standing restaurants. It is also known for its growth-by-acquisition business model – except recently it hasn't been growing or acquiring. Its last deal was in 2022 for Wetzel's Pretzels. While sales of that brand are strong, other brands haven't fared as well and same-store sales have struggled for five consecutive quarters. Even so, it is worth pointing out that MTY is a cash-flow machine reliably spitting out more than $100-million a year. Bank of Nova Scotia's John Zamparo wondered out loud, in a June note to clients, if this makes MTY an attractive takeout candidate. 'MTY's valuation is overly punitive,' he wrote, noting that MTY owns 90 brands but only three are interesting to investors (Wetzel's, Cold Stone, sweetFrog). 'Strategic buyers typically want simpler businesses … which leads to private equity as the likeliest acquirer,' Mr. Zamparo said. Turbulence: Delta Air Lines Inc. DAL-N reports Thursday and will give investors a sense of travel demand. Between tariffs, geopolitics and a spike in gas prices, not to mention generally lower travel into the U.S., there was no shortage of volatility for airlines. We will see how all of this plays out. The airline is poised to report a 7-per-cent drop in revenue and 12-per-cent drop in earnings per share. In the Money with Amber Kanwar brings you actionable insights from top portfolio managers and business leaders. New episodes out Tuesdays and Thursdays.
Globe and Mail
2 hours ago
- Globe and Mail
Environment group warns against repealing federal EV mandate
An environmental think tank is warning the federal government against repealing its electric vehicle mandate, instead suggesting that politicians should be helping to put more EVs on the road. In a statement published Friday, Clean Energy Canada gave three recommendations to the federal government to help deliver affordable EVs to Canadians for less than $40,000. The group, based out of Simon Fraser University in British Columbia, said Ottawa should retool its EV mandate by revisiting its near-term targets to help the auto sector 'weather this temporary storm' of slumping EV sales. 'Any additional flexibility added in the regulation should be designed to achieve other EV-related goals, such as delivering more affordable EVs and building out Canada's charging network,' says the statement by executive director Rachel Doran and director of public affairs Joanna Kyriazis. The plea comes on the heels of auto manufacturing leaders meeting with Prime Minister Mark Carney last week, in which the CEOs repeated their calls for the mandate to be repealed. Starting next year, the mandate would require 20 per cent of all new light-duty vehicles sold in Canada to be zero-emission vehicles. Those also include plug-in hybrid electric vehicles. The target rises annually to 100 per cent by 2035. Recent data from Statistics Canada suggests EVs accounted for 7.53 per cent of all new vehicles sold in April. Following the meeting, the head of an organization representing Ford Canada, GM Canada and Stellantis said he was 'cautiously optimistic' the government would take action on the mandate. Clean Energy Canada also called on Ottawa to re-fund the EV incentive program, but to be clearer as to when the program will be phased out. The government launched the Incentives for Zero-Emission Vehicles program in 2019, which gave car buyers up to $5,000 toward the cost of an electric vehicle. The program was abruptly suspended back in January when its funding ran out. It has left many dealerships on the hook for the rebate if they hadn't already sent in their claim before the program ended. The federal government put nearly $3 billion into the program during its lifespan. 'The rebate should start at $5,000 and decline by $1,000 each year, providing consumers and automakers with a well-communicated phaseout that avoids periods of artificially lowered EV sales as buyers await the return of rebates or at least clarity,' Clean Energy Canada says. A similar policy is in place in Quebec. Federal ministers have said in recent months that the government was working toward bringing back consumer incentives on EVs. Opinion: Ottawa, bring back Canada's EV incentive program Those promises faced criticism from automakers themselves because, without implementing a rebate, EV sales are slumping further, as buyers wait for the rebates to come back. Clean Energy Canada also called on the federal government to reconsider its approach to cheaper EVs from China, which are subject to a 100 per cent tariff which took effect in October. Ottawa is scheduled to review the measure later this year. 'Allowing in a limited quota of these affordable vehicles while also recognizing EU-approved vehicles … would open Canada's vehicle market to fill important market gaps, drive innovation and ultimately make our auto sector more competitive,' the group says.
CBC
2 hours ago
- CBC
Trump's global tariff pause is supposed to expire soon. What's at stake for Canada?
U.S. President Donald Trump's three-month pause on his sweeping global tariffs is set to expire in just a few days, unless he opts to give countries extra time to negotiate deals — as his advisers have suggested this weekend. Ahead of the deadline, some trade experts say Canada still faces big risks, despite avoiding that round of levies back in April. "What the president needs is a bunch of wins by July 9 because he needs to show that his strategy is working," said Inu Manak, a fellow for trade policy at the Council on Foreign Relations, during an interview with CBC's The House that aired Saturday. On April 2, Trump held up a list in the Rose Garden of the White House and announced what he called "reciprocal tariffs" on more than 150 countries, including China and the European Union. The rates for individual countries on the list varied from 10 per cent to more than 40 per cent. Canada wasn't on that list, though other tariffs Trump had previously imposed on Canadian goods remained. One week after he unveiled the list, the president backed down and said he would freeze the global tariffs for 90 days to allow each country to negotiate deals with his administration. The problem for Canada is Trump hasn't closed many deals in those 90 days, Manak said. So far, the U.S. has reached agreements with Britain and Vietnam. Negotiations with other top markets like China, India, the European Union and Japan are ongoing. "If we don't see a lot of deals coming out of this, what we're likely to see is [Trump] to get more agitated and ask for more concessions from the countries that he knows he can push a little harder," Manak said. "So I think for Canada, that would be a very bad situation." Carlo Dade, international policy director at the University of Calgary's School of Public Policy, told CBC News "there's a risk every day of the week that [Trump] decides to come after Canada. That is not an exaggeration." "We're open to this potential as long as the president has unrestrained power to implement tariffs whenever, wherever, however he wants," he said. Trump used a law called the International Emergency Economic Powers Act (IEEPA) to apply the worldwide tariffs and his earlier fentanyl tariffs on Canada and Mexico. The law is intended to address "unusual and extraordinary" threats during national emergencies. In late May, the New York-based U.S. Court of International Trade ruled Trump exceeded his authority by invoking IEEPA. The White House swiftly appealed and a federal appeals court allowed IEEPA tariffs to remain in effect while it reviewed the decision. WATCH | Europe gets a reprieve on tariffs: Trump delays tariff threat on EU to July 1 month ago Duration 2:52 U.S. President Donald Trump says he will delay his 50 per cent tariff on imports from the European Union until July 9 after a weekend phone call between Trump and European Commission President Ursula von der Leyen. Manak said another challenge is Trump isn't facing political consequences for his tariffs right now — and no major economic fallout, either. "Right now, he's kind of sitting at a point where he feels he can kind of get away with maintaining the pressure that exists. And that pressure is enough to get other countries to the table," she said. At a White House news conference at the end of June, Trump told reporters the U.S. "can do whatever we want. We could extend [the July 9 deadline]. We could make it shorter. I'd like to make it shorter." On Sunday, U.S. Treasury Secretary Scott Bessent suggested the July 9 deadline is being pushed back by about a month. He said on CNN's State of the Union that the Trump administration would send letters to trading partners "saying that if you don't move things along, then on Aug. 1 you will boomerang back to your April 2 tariff level." "So I think we're going to see a lot of deals very quickly," Bessent told host Dana Bash. He also said Aug. 1 is "not a new deadline." Commerce Secretary Howard Lutnick told reporters Sunday the higher tariffs would take effect on Aug. 1, but Trump was "setting the rates and the deals right now." Is there opportunity for Canada? Fen Osler Hampson, co-chair of the Expert Group on Canada-U.S. Relations at Carleton University, said Canada could leverage the economic uncertainty from Trump's tariffs and "put the pedal to the metal" to expand trade with European and Asian allies. Hampson added that Canada already has good trading relationships with those regions through the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). WATCH | Trump isn't pleased with taunts of 'chickening out' on trade: Does Trump 'always chicken out' on tariffs? 1 month ago Duration 5:34 Investors are poking fun at U.S. President Donald Trump's on-again, off-again tariff threats, calling it 'TACO' trade — which stands for 'Trump Always Chickens Out.' When asked about the term, Trump called it a 'nasty question.' CBC's Katie Simpson reports. With U.S. tariffs, Hampson said those countries are "going to be looking for other market opportunities, both to sell and buy. I think our challenge is to get serious and to realize the real dividends that can come from those two major regional trading agreements." Diversifying Canada's trading partners is one of Prime Minister Mark Carney's top goals — and a key objective for International Trade Minister Maninder Sidhu. "I think Canada has a lot to offer and we should be screaming that at the top of our lungs," Sidhu told CBC's The House in an interview that aired Saturday. Canada has already deepened its trade relationships with countries such as Ecuador and the United Arab Emirates since Carney and Sidhu came into office. But key markets that could make a big dent in easing Canada's reliance on U.S. trade — like the U.K., India and China — are thornier due to fraught diplomatic relationships and other irritants. Colin Robertson, a former Canadian diplomat and vice-president at the Canadian Global Affairs Institute, agreed that Canada can do more trade with other countries, but added a note of caution: businesses, not governments, are the only ones who can decide which companies they trade with. "Ultimately, business has to see a business opportunity," Robertson said, adding that the U.S. continues to be the market with the easiest access for Canadian businesses. On The House, Sidhu told guest host Janyce McGregor that Canadian businesses were indeed comfortable dealing with the U.S., but now they're asking him to help facilitate access to more countries. Canada-U.S. trade talks Carney and Trump continue to negotiate a Canada-U.S. trade deal, after setting a deadline of July 21. Hampson said the deadline helps Canada hold the Americans' attention as the Trump administration negotiates with other countries. The Americans also have an interest in getting a deal done soon, Robertson said. Canada and U.S. restarted negotiations Monday morning, Carney says 6 days ago Duration 1:15 Prime Minister Mark Carney says he had a 'good' conversation with U.S. President Donald Trump on Sunday, and that the two leaders will keep working to reach a deal by July 21. The federal government scrapped the digital services tax over the weekend after Trump paused all trade talks. "If [the Americans] can't do it with Canada, their ally and their partner, it's much harder to do with Mexico, much harder with China," he said. "We should be the lowest of the hanging fruit from the American perspective." Trade discussions hit a roadblock in late June when Trump announced he would walk away from the negotiating table over Canada's digital services tax. The federal government scrapped the tax a few days later and discussions got back on track. Robertson said he's a bit skeptical about how far Canada will get with the U.S. by July 21, but adds that Trump enjoys declaring victory even if the agreement is "only 80 per cent of the way there." "Would we settle for 80 per cent? Be basically there and leave the rest to be cleaned up? I think so," he said. "Because if Trump's taken his eye off it and says it's basically there, then that's sufficient from where we're coming from."
