CIBC remains cautiously optimistic amid USMCA fluctuations

LootboxPhobia · 2026-02-19T01:11:45+00:00

CIBC economist Avery Shenfeld's report indicates that despite escalating trade tensions between the United States and Canada, Canadian export goods are expected to maintain duty-free status. He believes that the legal framework of existing trade agreements allows most goods to avoid new tariffs, although political pressure may slow down the government's tough measures. However, ongoing exit threats could impact long-term business confidence and suppress the expansion of Canadian industrial capacity.

LootboxPhobia

2026-02-19 01:11:45

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Investing.com - According to a recent report by CIBC economist Avery Shenfeld, despite escalating trade rhetoric from Washington, Canadian export goods are likely to maintain their current duty-free status. This assessment forms the basis of the bank’s latest economic outlook, expecting most goods shipped to the U.S. to avoid new sector tariffs.

Shenfeld believes that the current tensions largely reflect high-risk negotiations during the initial drafting of the USMCA. “We set aside the White House’s rhetoric because we’ve seen this kind of situation before,” Shenfeld said when discussing the president’s public complaints about Canadian trade practices.

The legal framework of the existing agreement provides multiple pathways that align with a “baseline scenario” of economic stability in Canada. Shenfeld pointed out that even if the trilateral review fails to reach a clear conclusion, the agreement could remain in effect until the sunset clause expires in 2036.

Domestic political pressure in the U.S. may also prevent the government from pursuing a scorched-earth policy on continental trade. “Greer and others in the government have also heard significant support from American business groups for extending the trade agreement,” Shenfeld wrote in his analysis.

Market behavior indicates that investors currently share CIBC’s view rather than pricing in significant trade frictions. Shenfeld noted that if a high-tariff outcome were truly expected, the market would not be pricing in the unchanged overnight interest rate in Canada for the rest of this year.

Nonetheless, the economist warned that ongoing threats of withdrawal continue to undermine long-term business confidence on both sides of the border. Shenfeld summarized that while export growth may continue, “persistent doubts will serve as a barrier to capital spending on goods sectors aimed at expanding Canadian industrial capacity.”

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