Trade talks collapse, but the positioning holds: Insights from Ilan Kolet - August 25, 2026

What happened at the negotiating table

For more than a year, Canada and the U.S. have been negotiating a renewal of CUSMA, the free trade agreement between the two countries. On July 1, the U.S. declined to extend the agreement in its current form, leading to a more challenging round of negotiations. While progress appeared to be building in recent weeks, talks broke down on Friday night when the U.S. proposed new terms that Prime Minister Carney described as unfair and uneconomic. Canada's negotiators subsequently returned to Ottawa without a deal. Shortly after midnight, the U.S. imposed a 50% tariff on approximately $20 billion of Canadian goods, including dairy products, alcohol and building materials. Canada responded by announcing matching tariffs, which are expected to take effect on September 8 and target sectors including steel, dairy and electronics. Ilan noted that news reports suggest negotiations are not expected to resume anytime soon, meaning the dispute could continue for some time.

A longer-term shift away from the U.S.

While the collapse of the talks represents a genuine escalation, it does not alter the broader trend the team has been monitoring for more than a year. Last summer, the team concluded that the drift away from the U.S. was not a temporary development but a more durable structural shift. By the fall, it was also raising concerns about the increasing political influence of U.S. institutions while building a more constructive case for Canada despite continued weakness in the domestic economy. Those views have helped shape the team's approach to portfolio positioning.

Building resilience through diversification

One example is the team's decision to diversify away from the U.S. dollar and U.S. assets, an approach it has been taking since the beginning of the year. Rather than reacting to recent developments, Ilan said the team has been positioning portfolios to be resilient in the event of this type of scenario. Ilan described the trade dispute as the type of geopolitical shock the team has been positioning for with commodities and gold.

The role of commodities and gold

The team has maintained exposure to commodities and gold as part of its approach to managing geopolitical uncertainty. Ilan noted that when trade relationships are disrupted, hard assets may hold their value better than financial promises. For that reason, commodities and gold have been used as potential hedges against the risks associated with geopolitical and trade-related shocks. The latest developments are an example of the type of environment the team had in mind when establishing those positions.

Why the outlook for Canada has not changed

Despite the near-term challenges created by the trade dispute, the team's broader view of Canada remains unchanged. The team believes Canada may be approaching an inflection point, supported by strong commodity demand and what it views as an increasingly attractive environment for global capital as the country works to reduce its dependence on the U.S. A prolonged trade dispute would represent a meaningful near-term headwind. However, Ilan does not believe it undermines the longer-term case for Canada. Instead, he said it highlights the importance of Canada's efforts to diversify away from reliance on the U.S.

Conclusion: Resilience rather than reaction