Edward Meir's week in review and thoughts for the week of Aug. 24, 2026

On the cusp of a sweeping US-Canada trade deal…

As it turned out, the talks with Canada were not only focusing on the $20 billion but also addressing more substantive issues, including the reduction of US duties on Canadian-built cars and trucks (to 15% from 25%) and on cutting Canadian steel and aluminum tariffs (to 25% from 50%). In turn, Canada would relax its tariffs on a number of items, including alcoholic beverages, cheese, and US vehicles. In addition, there were discussions of a longer-term trade deal, along with talks about “strategic” cooperation in a number of other areas.

All of this pointed to a significant breakthrough in the troubled bilateral relationship, and the markets duly noticed. In the metals space, for example, we saw a 20-cent/lb. plunge in the forward Midwest aluminum premiums while there were signs that US steel prices could come off the boil as well. Indeed, shares of several prominent US-based aluminum and steel companies were hit hard on Thursday, including Steel Dynamics, Nucor, and Century Aluminum. Investors perceived that these companies would now be operating with tighter profit margins if the lower duties materialized.

…until talks collapsed late on Friday

In the end, none of this goodwill came to pass. Instead, the talks collapsed late on Friday after the US markets closed, with each side blaming the other for making unrealistic, last-minute demands. As a result, the 50% US tariffs have now kicked in. For his part, Prime Minister Mark Carney promised to retaliate “dollar for dollar” and did just that on Saturday.

Ottawa announced it would impose 50% tariffs on an equivalent amount of US exports starting on Sept. 8. Carney also warned his nation was now at economic “war” with the US. Despite all the shrill talk, it is possible that the two sides could resume their talks and eventually reach a deal, as this seems to be a pattern we have seen emerge in previous discussions. But at least over the short term, we are looking at a worrying tariff escalation, with President Trump already saying that he is considering next steps.

The breakdown in the US-Canada talks also underscores one of the least talked about problems with tariffs. Imposing them is relatively easy (provided they are not overturned by the courts). But what about removing them? A number of industries have grown accustomed to the protection tariffs afford. They will fight tooth and nail to keep them in place. Politicians usually buckle under this backlash, and we suspect this is what happened here.

Meanwhile, Bloomberg cited research from the University of Calgary estimating that if the US tariffs remain in place, Canada could lose almost 90,000 jobs. The impact would be felt most acutely in the machinery, electronics, plastics, furniture, wood, paper, chemicals, and cosmetics industries. British Columbia, Ontario, and Quebec would be the worst-hit provinces, the research added. The damage to the US would be far less, but there certainly will be some.

A sloppy week for markets

Meanwhile, markets had a sloppy week. Equities turned wobbly on account of stepped-up volatility in the US Treasury markets after Secretary Scott Bessent introduced a measure to purchase long-term debt in an attempt to lower long-term rates. (The Treasury would sell short-term debt to fund these purchases).

The bond market reacted positively to the move at first as long-term rates (used to set mortgages) moved sharply lower. But the following day, investors perceived the Treasury’s move as being too “gimmicky”. For starters, the $4 billion of purchases (per operation) was limited to a two-month period starting in September and was seen as inconsequential in a $31 trillion bond market.

Elevated oil prices also contributed to upward pressure on rates and were another reason why the intervention failed. But most importantly, the move failed to address more pressing issues investors were concerned with, namely, mounting US spending and debt. In fact, on the latter point, we learned last week that total US debt crossed $40 trillion for the first time ever.

Treasuries, equities, and oil

By week’s end, the Treasury markets gave the Bessent move a thumbs down. The two-year note yield settled up six basis points to 4.23%, while the 10-year note yield ended up four basis points at 4.737%. (Ironically, short-term rates, which were not the target of Bessent’s intervention, ended up being higher than long-term rates by week’s end).

Equity markets ended lower last week, with the Dow losing almost 1%. The S&P-500 and the NASDAQ each lost 1.4% and 2.1%, respectively. Semiconductor stocks started the week on a strong note. But by the end, selling in some of the memory, optical, and AI-related names weighed on the sector.

Oil prices provided yet another headwind for equities last week. WTI crude prices climbed by 5.4% as the deadlock in the Gulf continues. President Trump renewed threats of additional economic sanctions on Iran as well as on its trading partners, keeping oil prices elevated. Meanwhile, vessel traffic through the Strait of Hormuz remains minimal. Red Sea traffic is also unsteady given ongoing Houthi attacks on Saudi vessels.

Base metals

In the base metals space, we saw a mostly mixed session last week. Tin and aluminum both ended lower, the latter coming off on account of the perceived progress in the US/Canada talks. Copper ended slightly higher on the week despite rising LME stocks.

In this regard, inventories rose by 40,000 tons on the week, an increase of almost 20%. The increase did lead to a sharp drop in the copper spreads. By Friday, the cash-to-three’s backwardation collapsed to about $60/ton from a high of $550 seen at the start of the week and prior to the stock increases.

Outside of copper, nickel and zinc both ended up by about 1.6% on the week. Lead ended just about flat.

Gold and bitcoin shine

Two sectors that did very well last week were gold and bitcoin. Bitcoin tacked on about 20%, while gold rose by about 5%, ending Friday at a three-month high. Both were reacting to a weaker dollar, which struggled to move higher despite rising rates. Investors were instead more concerned by the stand-off in the Gulf and the clear lack of progress in resolving US fiscal and debt issues.

Monday could be a downer

We suspect Monday will usher in a broad-based selloff in both the equity and commodity markets. The collapse in the Canada-US trade talks will weigh on sentiment. And Treasury Secretary Bessent’s ill-conceived meddling in the bond markets, coupled with an unsettled situation in the Persian Gulf, are additional negatives.

Macro readings and other news from the past week

• The August Empire State manufacturing index came in at 20.6 (consensus 11.0, prior 15.6). There was a sharp uptick in the August Philadelphia Fed Index as well (to 47.4, almost double the consensus reading and also ahead of last month’s equally strong 41.4 reading). On a related note, July industrial production came in at 0.2% (slightly below the prior reading of 0.3%). Gains were registered in all three major industry groups, led by a 0.5% increase in utilities stemming from higher air-conditioning use. The second component of the IP index, manufacturing, increased by 0.2% and was up 1.2% year-over-year (y/y). Mining, the third category, rose by 0.2% month over month (m/m) and was up 1.0% y/y.

• In housing news, the August National Association of Home Builders (NAHB) housing index came in at 35, in line with the consensus and the prior month’s reading. July housing starts came in at 1.239 million (consensus 1.360 million) and were down from last month’s 1.415 million reading. The key takeaway here shows broad-based weakness in single-unit starts—down 9.9% y/y and dropping to their lowest levels since November of 2022. July pending home sales fell by 2.3%. But at least this was an improvement over the 4.8% decline seen last month. Single-family permits rose by 2.5% but remain close to three-year lows. Separately, builder confidence edged up to 35 from 34 in August but stayed below 40 for a 16th straight month. At least 30% of builders reported cutting prices.

• The latest results from Home Depot and Lowe’s point to continued resilience in repair and maintenance spending. But there are signs of weaker demand for more expensive remodeling. Home Depot’s Q2 sales increased 5.7% to about $47.9 billion, with comparable sales up 1.3%. Lowe’s lowered its full-year comparable-sales forecast to show no growth for this year. The company said consumers remain cautious about taking on larger projects.

• The US data-center investment boom is increasingly feeding into conventional industrial demand. Reuters reports that Generac is spending $250 million to expand its generator production and has a $1.6 billion backlog tied to data centers. Siemens is investing more than $200 million in two new US plants as well. The spending wave is also benefiting suppliers of cooling and electrical equipment, construction machinery, bearings, cables, pipe, and prefabricated building materials.

• No surprise here, but the release of the Federal Open Market Committee (FOMC) minutes revealed additional monetary tightening remains a possibility for the Fed going forward. Although most participants supported keeping rates unchanged last month, several favored a 25-basis-point increase.

• Weekly initial and continuing claims both continued to show very restrained activity and did not set off any particular alarm bells in the labor markets.

• We got a series of poor macro numbers out of China this past week. Chinese industrial output expanded by 4.5% in July vs. a year earlier, short of estimates and well below the 5.3% reading seen in June. Retail sales were up by just 0.6%, also falling short of last month’s already low reading of 1%. The fading effects of the government’s trade-in subsidy program weighed on retail spending. Most surprising was the slump in fixed asset investment—off 6.7% for the first seven months of the year and worse than the 5.7% slide seen in June.

• But while overall fixed-asset investment fell in China, investment in information transmission industries rose 26% y/y. Communications and electronics manufacturing rose by 8% y/y. These sectors (just like in the US) are clearly thriving. Auto sales declined for a 10th straight month in July as well, although at a slower pace. Exports were a bright spot, up 24% y/y. But robust as exports and IT spending were, they are not strong enough to lift China’s economy onto a broader growth trajectory. The government blamed weather for some of the dreary numbers, citing hot temperatures and heavy rainfall in July. Although there is some truth to that, the general macro trend has nevertheless been deteriorating for some time now.

• Conditions in China’s property sector are getting worse. Property investment fell by 19.2% in the first seven months of the year vs. last year, widening from the 18% drop seen in January-June. Sales by floor area declined 11.8% in January-July, after falling by 11.6% in the first half. New construction starts were off 24% year to date (ytd). New home prices were also down by 3.2% from a year earlier and off by 0.1% m/m. Of the 70 cities surveyed, only 17 recorded m/m price gains in July.

• Reuters reports that China’s steel mills reduced production of hot metal, crude steel, and finished steel in July vs. the same month of 2025. The three categories fell by 4% on average vs. year-ago levels. The January-July cumulative total was off by 3% for hot metal and crude steel. Finished steel products held up better, down by only 1.2% y/y.

• Japan’s flash manufacturing PMI increased to 55.1 from 54.5, while new orders grew at their fastest pace since January 2018. Manufacturers also reported the strongest increase in overseas demand in more than eight years, helped by semiconductor and AI-related business. Services improved as well, lifting the composite PMI to 53.4 from 52.7.

• European business surveys improved in August, with manufacturing leading the way, something we are seeing in most other geographies. The Euro-zone factory PMI rose to 52.8, its highest in more than four years, while new orders posted their strongest increase in 40 months. Meanwhile, export orders returned to growth for the first time since 2022. Germany’s manufacturing PMI climbed to 54.1 from 52.2.

• Reuters reports that global primary aluminum output in July fell 1.7% year on year to 6.16 million tons, this according to data from the International Aluminum Institute.

This week’s US macro readings

Nothing comes out on Monday. On Tuesday, we get July new home sales (expected at 619,000, last 628,000) followed by the June Case-Shiller home price index and August consumer confidence readings (expected at 90.1, last 90.8).

On Wednesday, we get July durable goods orders (expected at 0.5%, last 0.3%) as well as the second estimate for Q2 GDP (expected at 1.5%, unchanged from the first estimate). We also get July personal income and spending figures on Wednesday (expected at 0.2% and 0.1%, respectively, vs. the previous readings of 0.2% and 0.3%). Finally, on Wednesday, we get the last of the three inflation indicators—the July PCE price index. The month-over-month reading is expected to come in at +0.1 vs. last month’s 0.1% decline, while the annualized rate is expected at 3.6% (last 3.7%). The core PCE is expected to increase by 0.2% on the month (last 0.1%). The annualized core should increase by 3.3%, unchanged from the month prior.

Thursday brings us weekly jobless claims (expected at 206,000, unchanged from the previous month). On Friday, we get the August Chicago PMI (expected at 57.9, last 57.6), followed by the University of Michigan confidence index (expected at 51, last 55.2).