Canada’s Consumer Price Index for July on Monday, 17 August, is expected to reflect a tick higher in headline CPI. This is 2 days before the latest round of U.S. Section 338 tariffs are set to take effect on Wednesday, 19 August.
Canada expects year-over-year price growth to rise to 2.9% from a previous 2.8% in June ’26. This increase was driven by a reacceleration in energy prices. Oil prices are still lower than peaks in April & May but bounced higher in July. This situation was as conflict in the Middle East continued to disrupt transportation through the Strait of Hormuz. Fuel prices were on average 25% above a year ago in July. This was up from a 20% increase in June.
Canada expects the pass-through from higher energy prices to broader consumer prices to remain constrained. Growth in airfares remains high, although growth in core measures’ prices has remained close to the 2% target. In July ’26, Canada looks for prices excluding food & energy products to tick up to 1.9% from a previous 1.8% in June. The Bank of Canada’s preferred median besides trim measures is likely to hold around similar rates. Food price growth likely edged lower, although it remained above 3%.
The latest U.S. tariff threats are significant, although manageable for Canada
A more important development is U.S. Section 338 tariffs, which targets about 5% of Canada’s exports. They are set to take effect on Wednesday, 19 August 2026.
The deadline has fast-tracked trade talks between Canada & the U.S. However, the odds of a full resolution of all trade irritants before Wednesday, 19 August, remain low. For the U.S. economy, the impact is likely to be negligible. This impact is due to the targeted products representing a small (0.5%). It’s a highly substitutable share of U.S. imports from the world.
As for Canada, as stated & in the latest forecast update, the impact may be bigger, although it is yet manageable. Canada estimates the new U.S. tariffs target 0.4% of Canada’s gross domestic product (GDP) besides jobs.
