Canadian Prime Minister said he has spoken with Trump and will "accelerate negotiations," while Canadian provinces refuse to lift the ban on American alcoholic beverages.

Canadian Prime Minister said he has spoken with Trump and will "accelerate negotiations," while Canadian provinces refuse to lift the ban on American alcoholic beverages.

Trade tensions between Canada and the United States continue to escalate. Several Canadian provinces are resisting a new round of tariff pressure from the U.S., insisting on maintaining sales bans on American alcoholic beverages, while the new tariff measures introduced by the Trump administration have again dampened expectations for an improved investment climate in Canada.

Ontario Premier Doug Ford said Tuesday that unless the U.S. lifts industry tariffs on cars and steel, he will not lift the province’s ban on American wine and spirits. He directly criticized Trump as "just a bully," emphasizing that Canada "must negotiate from a position of strength, not weakness."

Canadian Prime Minister Mark Carney also stated that the decision to lift the ban "should be made by each province independently" and, in his view, should only be advanced as part of an overall agreement. Carney also said he had spoken with Trump by phone, and "both sides agreed to accelerate negotiations in the coming weeks."

According to CCTV News , the White House released a statement on July 20 announcing an additional 50% ad valorem tariff on certain Canadian products. The new tariffs will formally take effect at 00:01 Eastern Time on August 19, and will be levied in addition to existing tariffs, taxes, and other charges.

This move has created new doubts about whether Canada can achieve a stable recovery of its investment environment, especially at a time that is particularly challenging for the Bank of Canada, which had just signaled signs of a recovery in corporate capital expenditures. Economists point out that weak core inflation combined with additional tariffs may open the door for another rate cut in Canada.

Provinces Take Tough Stance, Alcohol Ban Becomes Negotiation Chip

Since Trump launched the trade war last year, Ontario, Quebec, and other provinces have taken American wine and spirits off the shelves of government-run stores, costing US wine companies millions in sales. Although alcohol accounts for a small proportion of overall trade between the two countries, the move is highly visible and continues to provoke the White House.

US Treasury Secretary Bassent criticized Canada in an interview Tuesday for having "serious discriminatory practices" concerning dairy and American alcohol, and characterized the new tariffs as "reciprocal retaliation for Canada’s actions harming US businesses."

However, provincial premiers remain largely unmoved. British Columbia Premier David Eby made it clear at Charlottetown that "American wine and spirits will absolutely not return to the shelves." The premiers are gathering at a meeting in Charlottetown.

Saskatchewan Premier Scott Moe took a relatively moderate position, stating that if the federal government makes a request, each province must judge for itself, but stressed, "It’s the federal government at the negotiating table." Currently, Saskatchewan and Alberta still allow the sale of American alcoholic beverages in government stores.

International trade lawyer Mark Warner believes the provincial bans on alcohol "lack legal basis" and are a "rather blunt tool."

He noted that lifting the ban would have limited actual economic impact, and might actually help advance trade negotiations. "If Canadians don’t want to buy US bourbon or California wine in the first place, there’s no need for a ban—putting them back on the shelves won’t make anyone buy them."

New Tariffs Expanded, Recovery Expectations Hit Again

The new tariffs target Canadian packaging products, textiles, and horticultural goods, with the U.S. citing Canada's "unfair treatment" of American alcohol, automobiles, and dairy products.

Notably, the U.S. has stated that the newly tariffed goods are not exempted under the USMCA (United States-Mexico-Canada Agreement)—a clear shift from previous Trump administration practices of flexibility toward agreement-compliant products. Earlier this month, the U.S. refused to renew the USMCA with Canada and Mexico.

The timing of these new tariffs is particularly unfavorable for the Canadian economy, which has struggled with trade uncertainty for years.

Jeremy Kronick, CEO of Canadian think tank C.D. Howe Institute, said in an interview that such a "volatile, unpredictable" trade environment makes it difficult for Canadian businesses to plan. "Even if there’s a deal tomorrow, we can’t be sure it’s reliable—maybe it’s only temporary?"

Bank of Canada Governor Tiff Macklem had signaled optimism last week, saying that businesses are adapting to ongoing trade turmoil; Deputy Governor Carolyn Rogers also noted that the Carney government’s push for major projects such as the West Coast oil pipeline may improve business confidence. However, the threat of new tariffs is putting fresh pressure on these newly emerging optimistic expectations.

Economists: Rate Cut Window May Open Again

On the macro level, the Bank of Canada kept its benchmark interest rate at 2.25% for the sixth consecutive time last week, with current policy focused on assessing inflation risks posed by the Iran situation and rising energy prices.

But as new tariff clouds gather, Bank of Montreal economist Robert Kavcic believes that weak core inflation combined with more tariffs means any rate hike measures "must be extremely cautiously weighed."

He wrote in a report to investors: "Further deterioration in U.S.-Canada trade relations could even open the door to another rate cut."

From a longer-term perspective, Canada’s capital expenditure and productivity problems have been persistent. Commercial investment, excluding residential construction, has largely stagnated over the past three years and remains 9.5% below 2014 levels.

Desjardins Group’s Deputy Chief Economist Randall Bartlett warned that once the new tariffs are implemented, the economic damage will be "quite substantial." "Reduced exports are a direct channel of impact, while the decline in business investment caused by ongoing trade uncertainty will also drag on economic growth, and may put downward pressure on core inflation."

Although Canada’s economic stagnation may ease in the second quarter due to increased oil production, whether the recovery can continue largely depends on the direction of trade negotiations with the U.S.

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