Trade tensions and cautious monetary policy continue to shape the global economic landscape. The U.S. reached trade deals with Japan and the EU, while Canada failed to strike one. Major central banks, including the Bank of Canada, U.S. Federal Reserve, and others in Europe and Asia, held interest rates steady. The Canadian economy posted a significant trade deficit in May.
August 7, 2025
Introduction
Global equity markets moved slightly higher over the month of July. Investors were encouraged by the U.S. reaching several trade agreements, particularly with Japan and the European Union (“EU”). However, China and the U.S. were unable to reach a final agreement. Overall, economic data was solid but showed that global economic activity is slowing.
Several central banks, including the Bank of Canada (“BoC”), the U.S. Federal Reserve Board (“Fed”) and the European Central Bank (“ECB”), held meetings in July and elected to keep their policy interest rates steady. All are closely monitoring the potential impact of tariffs on their domestic economies. The U.S. economy expanded in the second quarter, rebounding from a contraction in the first quarter. Still, growth was underwhelming over the first half of 2025. China’s economy also expanded in the second quarter. Europe’s economy grew slightly, posting a slowdown from the first quarter.
The S&P/TSX Composite Index moved higher over the month, reaching new highs along the way. Communication Services was the best-performing sector. U.S. equities also advanced and reached a new record. Yields on 10-year government bonds in Canada and the U.S. increased. Oil prices finished higher over the month, while the price of gold was largely unchanged.
On August 1, U.S. President Donald Trump announced tariffs on several countries around the world ranging between 10% and 41%. These tariffs are expected to go into effect on August 7. The President also announced he was raising tariffs on Canadian goods that are not included in the United States-Mexico-Canada Agreement to 35%.
