Canada’s economy contracts due to tariffs, ministers try to re-engage U.S. on trade and Canada Post reports steepest-ever quarterly loss: Business and investing stories for the week of Aug. 31

Getting caught up on a week that got away, or tuning back in as summer winds down? Here’s your weekly digest of The Globe’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.

Canada’s economy contracts sharply in second quarter as tariffs hit exports

As Ottawa prepares to drop some retaliatory tariffs on U.S. goods starting Monday, the Canadian economy contracted sharply in the second quarter as U.S. President Donald Trump’s tariffs hammered exports and weighed on business investment. Real gross domestic product declined 1.6 per cent at an annualized rate, the first quarterly contraction in nearly two years, Statistics Canada reported on Friday, in line with the Bank of Canada’s projection but considerably worse than Bay Street analysts were anticipating.

As Mark Rendell reports, the data offer the clearest picture yet of the impact the barrage of tariffs is having on this country’s export-oriented economy. A massive 26.8-per-cent annualized drop in exports led the second-quarter downturn, with automobile and industrial machinery exports hit particularly hard. Imports also declined 5.1 per cent. The uncertainty created by the trade war also weighed on business investment, which fell at an annualized pace of 10.1 per cent in the second quarter, the worst result since 2016, outside of the COVID-19 pandemic.

Meanwhile, a U.S. appeals court has struck down the core of Mr. Trump’s tariff strategy, declaring that it is illegal for him to use emergency legislation to impose levies on Canada and many other countries around the world. The 7-4 decision by the U.S. Court of Appeals for the Federal Circuit will not take effect until October and Mr. Trump immediately vowed to appeal, making it likely that the Supreme Court will have the final word.

Also on Friday, new Statistics Canada figures show this country collected $3.61-billion in import duties in the second quarter, up 142 per cent from $1.49-billion the year before but lower than Ottawa’s projections. The tariff income accounted for 2.8 per cent of all federal revenue in the quarter, the highest level since 1994, on a seasonally adjusted basis. Jason Kirby has a breakdown of the key figures.

Ministers meet with Lutnick, Attorney-General in Washington in hopes of re-starting trade talks

Ottawa continued its efforts to re-engage the White House on trade with two high-level meetings in Washington this week. Canada-U.S. Trade Minister Dominic LeBlanc – along with Ambassador Kirsten Hillman and Marc-André Blanchard, Prime Minister Mark Carney’s chief of staff – met with U.S. Commerce Secretary Howard Lutnick on Tuesday. As Adrian Morrow reports, a Canadian government official told The Globe this country’s focus is on getting U.S. President Donald Trump to lessen tariffs on several key industries, including autos, steel and aluminum, after the two countries failed to reach a trade deal earlier this month.

A day later, on Wednesday, Justice Minister Sean Fraser, Public Safety Minister Gary Anandasangaree and fentanyl czar Kevin Brosseau met with U.S. Attorney-General Pam Bondi about border issues, and Mr. Fraser’s spokesperson said there was “acknowledgement” from the Americans of Canada’s efforts to toughen controls and crack down on fentanyl. While the meeting was not explicitly about trade, the two issues are closely linked: Mr. Trump imposed one set of his tariffs on Canada ostensibly to punish the country for not doing enough to secure the border and keep fentanyl out of the U.S.

Canada Post reports steepest-ever $407-million quarterly loss, blames union overtime ban

Canada Post reported a $407-million quarterly loss before tax this week – it’s steepest ever – and blamed labour uncertainty for a drop in packages handled and revenue at the financially challenged postal service. The Crown corporation’s parcel volumes and revenues both fell by about 37 per cent from the comparable quarter a year earlier. Canada Post says the Canadian Union of Postal Workers’ overtime ban, which began on May 23, drove customers to other parcel carriers, and more than half of its year-to-date losses occurred in June.

But as Nojoud Al Mallees reports, the postal service has had financial issues since before the contract dispute. Canada Post has been losing billions of dollars cumulatively over several years as letter-mail deliveries decline and low-cost competitors shrink its market share for package delivery. CUPW and Canada Post have failed to reach a collective agreement for 55,000 postal employees in nearly two years of bargaining, including a 32-day strike ahead of the busy 2024 holiday season. Now, after workers’ voted to reject the Crown corporation’s latest offer earlier this month, the two sides are once again back at the bargaining table. Here’s everything you need to know about the contract dispute.

Decoder: Canada’s annual job growth barely above zero in June, payroll survey shows

Canada’s job market is flatlining as the trade war takes its toll, with payroll employment growing by only 0.2 per cent annually in June, according to Statistics Canada. In fact, payroll employment peaked in January on a seasonally adjusted basis and has yet to reclaim that high. And if just two leading sectors, health care and public administration, are excluded, Canada’s job market has been outright shrinking since last August. Jason Kirby took a closer look at the latest data in this week’s Decoder series.

And for young people in particular, the job market’s summer funk is far from over. As of July, the youth unemployment rate (for those 15 to 24) was 14.6 per cent, the highest since 2010, save for the first years of the pandemic. Less than 54 per cent of youth are actively working, the lowest since the late 1990s excluding the worst parts of COVID-19. Young Canadians are sometimes applying to dozens, even hundreds, of jobs with no luck but lots of frustration. But as Matt Lundy and Aajah Sauter report, the problem has serious long-term economic implications but no quick fixes.

An Ontario town dreads garbage day as province plows ahead with landfill

Dresden, population 2,800, is a special place, said Martha Fehr, the 22-year-old owner of a chip shop across from the horse raceway. The town is growing with housing developments, a Christmas light competition and night markets that bring in thousands of visitors from the surrounding area. Most of Ms. Fehr’s childhood friends have come home, she said, preferring the sense of community found here to big-city life.

But that small-town charm may be about to change, Ms. Fehr and many others in Dresden worry. A landfill and waste processing facility is slated to be developed less than 800 metres from the downtown core, and the project is moving forward despite fierce opposition from the municipality. Ms. Fehr says it’s a threat to her business and others. But as Scott Van Haren, Matthew McClearn and Kate Helmore report, the fight also points to bigger issues for Ontario’s waste. If the Doug Ford government allows the Dresden approach to be replicated, many more communities could find themselves hosting reopened, greatly expanded landfills – and with few options at hand to oppose them.

Prepare for the week ahead with The Globe’s investing calendar.

Moira Wyton
Read More