Scotiabank Market Points U.S. and Canada rates update
Aug 13, 2025
Boris Sender is the Director of U.S. Rates Strategy at Scotiabank, while Roger Quick leads Canadian Rates Strategy. They delve into the impact of U.S. tax cuts and tariffs on economic growth and job creation. The conversation highlights Canada’s resilience in trade tensions and the implications of shifting fiscal policies. They analyze labor market trends affecting the Federal Reserve's decisions, along with strategies for navigating Canada’s interest rate landscape amid rising deficits and infrastructure funding needs.
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Tax Cuts Create Peak Stimulus In 2026
- The U.S. tax bill front-loads tax cuts while delaying spending cuts until 2027, creating peak stimulus in 2026.
- That timing implies a near-term growth boost and larger deficits concentrated before spending reductions take effect.
Tariffs Partially Offset Tax Cut Gains
- Tariffs act like border sales taxes and recent trade accords trimmed the effective U.S. tariff rate to about 15% today.
- Net of the tax bill, Boris estimates a modest revenue collection benefit of roughly $150–$200 billion from the tariff and tax mix.
Canada Largely Exempt From Major Tariff Hits
- Canada largely avoided the worst of U.S. reciprocal tariffs under the free trade agreement, leaving its effective tariff rate near 5%.
- Still, elevated global tariffs and uncertainty will slow Canada's growth over time and complicate business planning.