Insights 
VT 
The U.S. Secretary of Commerce announced a proposal for a 35% tariff on all Canadian goods not part of the USMCA. The deadline for this action is August 1, as set by President Trump.
The secretary mentioned that the situation might still be open to changes. He indicated that the next move depends on Canadian Prime Minister Mark Carney’s actions.
Deadline Looms Over Tariff Decision
With the August 1 deadline just hours away, the threat of a 35% tariff on a wide range of Canadian goods is creating serious tension. We are looking at a binary event that will sharply move markets, one way or the other. The most immediate impact will be on the USD/CAD currency pair, which is coiled for a big move.
The stakes are high, as two-way trade in goods not covered by the existing agreement was over $250 billion in 2024, based on recent Commerce Department figures. The market’s fear is visible, with the CBOE Volatility Index for the S&P/TSX 60 spiking over 30% this week alone. This is the kind of uncertainty that makes holding unhedged positions into the deadline a major gamble.
Traders should be looking at buying downside protection on Canadian assets as a primary strategy. This means purchasing put options on the iShares MSCI Canada ETF (EWL) or on specific Canadian exporters in the auto parts and resource sectors. These positions will pay off if the tariffs are implemented and Canadian stocks sell off.
Strategies For Potential Market Moves
For those willing to speculate, betting on a weaker Canadian dollar through futures or call options on USD/CAD is a direct play on the tariff news. The Canadian dollar has already slid to a two-year low around $0.70 USD, but it could fall much further if the tariffs are confirmed. Volatility is so high that option straddles, which profit from a large move in either direction, are also a viable, albeit expensive, strategy.
We are watching a playbook similar to the US-China trade disputes from 2018 to 2019, where market direction was dictated by headline risk for months. A last-minute phone call could spark a massive relief rally, squeezing anyone positioned too bearishly. Conversely, if the deadline passes with silence, expect a sharp and immediate downturn.
