Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials HomeNewsPosthaste: Trade war escalation could put Canada's credit rating at risk, warns FitchMore tariffs would put pressure on both federal and provincial ratingsLast updated 51 minutes ago Canada's credit rating could take a beating if the trade war escalates, says rating agency. Photo by National PostSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorCanada’s AA+ rating can withstand the most recent volleys in the trade war with the United States, but further escalation would put pressure on the credit profiles of both federal and provincial governments, Fitch Ratings warned this week.Canada imposed tariffs on $27.6 billion worth of U.S. goods on Tuesday, matching dollar for dollar the Section 338 duties that U.S. President Donald Trump launched on Aug. 22 after trade talks collapsed.In response, Trump slapped a ban on a range of goods from alcohol to motorcycles to dairy products, aluminum and furniture to take effect Sept. 29.Breaking business news, incisive views, must-reads and market signals. Weekdays by 9 a.m.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Posthaste will soon be in your inbox.We encountered an issue signing you up. Please try againAs it stands now, U.S. tariffs cover about 5 per cent of Canadian exports to the United States while Canadian tariffs cover for about 7 per cent of U.S. exports to Canada, said Fitch in a report this week.“Further escalation could test Canada’s resilience to the measures,” it warned.The tariff impact will vary across the country, hitting Ontario and Quebec, both of which Fitch rates AA-‌/stable, the hardest. British Columbia, rated AA-‌/negative, is also vulnerable because of its forestry and metals industries.In a trade war, the numbers weigh heavily in favour of the Americans. Canada sells about 75 per cent of its exports to the United States, equal to almost 20 per cent of the country’s gross domestic product.The United States sells only 15 per cent of its exports to Canada, about 1 per cent of its GDP. “Canada therefore faces much larger trade exposure,” said the Fitch team led by director Joshua Grundleger. “Even so, political considerations may limit how much this asymmetry strengthens the U.S. negotiating position.”Unlike earlier tariffs, the Section 338 penalties apply regardless of compliance to the Canada-United-States-Mexico-Agreement (CUSMA), showing that the U.S. can bypass that trade deal with other legal authorities.However, Section 338 has never been used this way before and has not been tested in court, Fitch points out.“That could invite challenges and weaken the durability of any tariff regime built on it,” said the report.Nathan Janzen, assistant chief economist at Royal Bank of Canada, said the United States’ latest response to Canada’s retaliatory tariffs “may sound alarming, but they represent a relatively minor escalation in the trade war.”“The real risk remains further escalation into a tit-for-tat trade war covering a much larger share of trade — something that hasn’t occurred with this latest development yet,” he said.What are the risks of further escalation?Trump has promised to double tariffs on autos and parts to 50 per cent starting Jan. 1, 2027. This escalation would hurt both countries because the auto industry is heavily integrated, but it would weigh more heavily on Canada’s growth and external balances, said Fitch.It could also complicate North American trade talks between the U.S., Canada and Mexico.Fitch said further escalation in metals is possible as well because of the trade tensions surrounding steel and aluminum.But it’s not like the United States has nothing to lose.Tariffs will fuel inflation in both countries, but the U.S. is in a more precarious situation on this front than Canada.Fitch said in the U.S. more pressure from tariffs weakens the case for Federal Reserve rate cuts and works against efforts to curb the rise in Treasury yields, which have soared to disturbing heights lately.In Canada lower underlying inflation gives the Bank of Canada more flexibility.The rating agency said it would be monitoring whether courts uphold Section 338, whether Canada reduces its dependence on U.S. trade and how political events — such as the U.S. midterm elections and Alberta’s referendum on separation in October — unfold.Sign up here to get Posthaste delivered straight to your inbox.More than one in four new vehicles in Canada now uses an alternative-fuel platform, says BMO Capital Markets chart for today — with hybrids leading the charge.Hybrid vehicles are most popular in Quebec, where registrations are up almost 45 per cent year to date. They are up 19 per cent in Ontario and 6.5 per cent in British Columbia.Battery electric vehicles also saw a 26-per-cent bounce thanks to the return of federal purchase incentives.Today’s Data: United States inflation numbersEarnings: The Kroger Co.A reader is about to receive an inheritance of about $18,000 from her mother and wonders how best to use the gift. Credit counsellor Mary Castillo suggests using the money to clear debt, keep a modest safety cushion and set aside a small amount in her mother’s memory, but first she advises the reader to take a pause. Find out moreInterested in energy? The subscriber-only FP West: Energy Insider newsletter brings you exclusive reporting and in-depth analysis on one of the country’s most important sectors.Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@postmedia.com with your contact info and the gist of your problem and we’ll find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course).Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff and Bloomberg.Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com.Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.