Tariff Pressure Builds as Canada Avoids Recession
Strong GDP, Strong Banks, and a Choppy End to August
Hope you had a great month!
As August comes to a close today, Canadians have plenty to digest before heading into September:
Canada’s economy grew faster than expected.
The big Canadian banks delivered stronger-than-expected earnings.
Nvidia gave AI investors a fresh boost.
And the TSX still ended August higher overall after hitting fresh records during the month.
But the final week was not perfect…
The TSX slipped for a second straight week.
Gold and mining stocks pulled back.
Canada-U.S. tariff tensions stayed in focus.
And Fed Chair Kevin Warsh’s Jackson Hole comments made investors rethink the chances of another U.S. rate hike.
So the month ended with a familiar message:
Canada’s economy looks better than feared, but investors are still asking how long that strength can last.
Let’s break it down:👇🏾
📈 Market Pulse: TSX Ends the Week Lower, But August Still Looked Strong
🇨🇦 TSX Composite: (36,553.92 | -0.2% for the week): Canada’s main stock index ended Friday down 0.8% on the day and 0.2% for the week.
That was the TSX’s second straight weekly decline.
The biggest drag on Friday came from materials, which includes mining stocks. That sector fell 2.8% as gold dropped 3.1% after investors raised their bets on a U.S. rate hike.
Energy also fell 1.0% (-2.75% for the week) as oil settled slightly lower, while technology dropped 1.2%. Only three of the TSX’s 10 major sectors finished higher on Friday.
But the month-end picture still looked much better than the final day.
Earlier in the week, the TSX hit a fresh record close as bank earnings helped lift financials. And for August overall, Canada’s market still held onto a strong monthly gain.
🏦 Canadian Banks
All six major Canadian banks beat profit expectations this quarter. RBC, TD, CIBC, BMO, Scotiabank, and National Bank all delivered stronger results than analysts expected.
The main support came from capital markets, wealth management, trading activity, and stronger client activity. i.e. Banks made more money from areas like investment banking, trading, and wealth services.
The good news is that bank results looked stronger than expected. The caution is that bank stocks have already had a strong run, so expectations are high.
💡 Simple takeaway:
The TSX ended the week on a weaker note, but August was still a strong month. The market is showing strength, but it is getting more sensitive to gold, oil, interest rates, and trade headlines.
🇨🇦 Canada GDP: The Economy Bounced Back
The biggest Canadian economic update last week was GDP.
Canada’s economy grew at a 3.3% annualized rate in the second quarter, the fastest pace since 2023.
That was stronger than the Bank of Canada’s forecast of 2.5%, and the details were encouraging too:
Exports rose 3.6%
Household spending rose 0.8%
Business investment rose 2.3%
June GDP grew 0.3%
There was also an important revision.
Canada’s first-quarter GDP was revised to a 0.3% increase, which means Canada was not in a technical recession after all.
That is a big shift from the earlier concern that the economy had posted two straight quarters of contraction… but there was one warning sign:
Statistics Canada’s early estimate showed the economy was mostly flat in July.
💡 Simple takeaway:
Canada’s economy looked much stronger in the second quarter, which is good news. But investors still want to see if that strength can continue now that tariffs are adding new pressure.
💵 Tariffs: The Trade Fight Is Still Hanging Over Canada
Even with stronger GDP and bank earnings, tariffs stayed in the background.
The U.S. imposed 50% tariffs on about $20 billion worth of Canadian goods after trade talks broke down.
Canada responded with retaliatory tariffs on about $20 billion worth of U.S. goods, set to begin September 8.
Trump has now also threatened to raise tariffs on Canadian cars, trucks, auto parts, and steel to 50% starting January 1, 2027.
And for everyday Canadians, these tariff headlines can show up in real life. For example, if tariffs raise business costs, companies may pass those costs to customers, meaning you could pay more for things like groceries, cars, appliances, or everyday goods.
💡 Simple takeaway: Canada’s economy ended August looking stronger than expected, but tariffs could make the next few months more uncertain for businesses and consumers.
🇺🇸 U.S. Markets: AI Relief, But Rate Fears Return
U.S. markets ended Friday lower, but still finished the week higher.
For the week:
S&P 500: up 0.49%
Nasdaq: up 0.85%
Dow: up 0.53%
The big positive was Nvidia.
Nvidia beat earnings expectations and gave a rare long-term revenue forecast, saying revenue could rise 70% next fiscal year. That helped calm fears that the AI boom was fading.
Other chip stocks also rallied after Nvidia’s report, giving tech investors some relief… but by Friday, rate fears came back.
Fed Chair Kevin Warsh said the Fed still needs confidence that inflation is moving clearly toward its 2% target. Markets took that as a sign that another rate hike is still possible.
💡 Simple takeaway:
U.S. stocks got support from Nvidia and AI optimism, but investors are still nervous about inflation and whether the Fed may raise rates again. i.e. AI helped the market, but interest rates still had the final word.
🗓️ What to Watch This Week
This week starts with a few important things to watch.
⛽️ Oil and global markets are already in focus after fresh Middle East tension pushed crude prices higher.
🇨🇦 Canada’s August jobs report comes out Friday, and that will show whether the labour market is still holding up after July’s strong hiring number.
🇺🇸 In the U.S., investors will also watch Friday’s jobs reportbecause it could influence what the Fed does next on interest rates.
📈 Broadcom also reports earnings this week, and investors will be watching to see if it confirms the AI strength Nvidia showed.
💡 Simple takeaway: September starts with jobs, oil, tariffs, and AI earnings all in focus. That means investors may not get a quiet start to the month.
📝 Final Thought: My Finance Femster Take
August was a good reminder that the economy and the stock market can tell two stories at once. Canada’s GDP looked better, banks beat expectations, and the TSX still had a strong month overall. But tariffs, interest rate fears, and market pullbacks showed that risks are still very real.
And the reality is, these headlines can eventually touch your money. Strong GDP can affect rates and investor confidence. Bank earnings can tell us about consumer debt and mortgage stress. Tariffs can affect jobs, prices, and the Canadian dollar. And market swings can affect your TFSA, RRSP, pension, or long-term investing confidence.
That is why financial literacy matters. So you can understand what is happening and make better money decisions.
And that’s where having the right support can make a real difference.
If you’ve been trying to manage your money on your own but feel unsure about where to start, I offer a free intro call to see if my financial guidance program is the right fit for you.
You do not need to have it all figured out before reaching out. The goal is to help you understand where you are, where you want to go, and what steps make the most sense for your life.
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Keep learning, keep building, and keep making your money decisions with purpose.
Cheers 💫
Your Wealth Coach,
Finance Femster