Canadian markets have reacted cautiously to the potential trade deal that would scrap new US tariffs, with the Canadian dollar only modestly stronger while Government of Canada (GoC) bonds and TSX futures remain broadly unchanged, according to Scotiabank Economics in a note Wednesday.
President Donald Trump's late Tuesday announcement amounts to a three-day delay of the planned 50% tariffs on roughly $20 billion of Canadian imports, along with a postponement of Canada's retaliation, as the two countries seek to reach a deal.
The key question is what the agreement actually entails, wrote Scotiabank Vice-President & Head of Capital Markets Economics Derek Holt in the note.
Trump has provided few details, while the US Trade Representative points to broad commitments on market access, economic security and digital trade. Canadian Prime Minister Mark Carney has taken a more measured tone, saying substantial progress has been made but important work remains, added the bank.
As a consequence, markets will seek clarity on the deal's substance, enforcement and implementation timeline before fully embracing the announcement, added the economist.
For now, the tariff delay is positive, but significant uncertainty remains, said Scotiabank.