Tariffs re-enter the spotlight

Hello everyone and welcome to Market Week in Review for the week of June 5th, 2026. My name is Bay Chuan Lin. I'm a director and head of Canadian investment strategy here at Russell Investments. On this week's edition of Market Week in Review, we'll be discussing three major topics. First, tariffs are back. What investors should know. Second, we'll look at the latest US labor market data. And finally, we'll wrap up with a preview of the Bank of Canada announcement taking place next week. So, let's get started. The word tariff has once again made a comeback with the United States announcing this week tariffs on 60 countries worldwide. And these tariffs will be at a rate of either 10% or 12 and 1/2% depending on the specific country. Now, although this might seem like a pretty substantial announcement, it's important to understand the context of this new tariff. These new tariffs are being implemented under what's known as Section 301. Effectively, it's a statutory provision that allows the US to implement tariffs on trading partners after they've conducted trade investigations into some of those countries. And you'll notice that the tariff rates that are being imposed are actually very similar to the tariff rate that was previously in effect under Section 122. And there's a reason for that. The Section 122 tariffs that are being implemented against global countries, those tariffs can only exist for a time-limited amount. Without additional congressional authorization, those tariffs would lapse or expire after a certain amount of time. And so, effectively, what the US government is trying to do is they're trying to use these Section 301 tariffs to basically replace the temporary tariffs under Section 122. And because these new tariffs are meant as a different way of implementing the previous tariffs rather than an intention to actually raise tariff rates significantly above current levels, we think that these new tariffs are not going to have a significant adverse impact onto the US economy. And we think that by the second half of this year, the inflationary and growth hits from the tariffs might have faded away. Now, another key trade watch point will be the upcoming USMCA or Kuzma as it's called in Canada negotiations. And already we're seeing some headlines that the United States wants to tighten up the so-called rules of origin requirement. And this is similar to what we saw when the USMCA was negotiated in the first instance. When the USMCA replaced NAFTA, the US government sought to tighten up the rules of origin requirements, which effectively meant that goods that were to be exempt from tariffs would need a higher percentage of North American content to be eligible for tariff exemptions. And so in this latest negotiation, we expect the US to continue to push for even tighter rules of origin requirements. Now, of course, raising the rules of origin requirements does have the effect of narrowing what goods are subject to duty and tariff exemptions, and ultimately it does at the margin raise the effective tariff rates. But as long as we don't get a wholesale revamping of USMCA, then ultimately we still expect that the tariff rates will be manageable. Now, of course, we're still waiting for a final signature of the trade deal, and the path towards getting a final signature, even though our base case is we do expect a deal ultimately be reached, the path towards that might still have some twists and turns ahead. Next, let's pivot and talk about the US labor market. We're seeing some pretty strong signs that the US labor market is in good shape. This week so far, we've seen job openings come in higher than consensus expectations, so there's more jobs available for workers to apply to. We've also seen that the private sector hiring data from both ADP and Revelio Labs both show that the United States generated more than 100,000 new jobs in the month of May. Now, of course, the gold standard report is going to be the nonfarm payrolls report we're getting on Friday, but ultimately we do think for now it looks like the confluence of factors suggests that the US labor market is in good shape, which should ultimately mean that the US economy is still very much on track for a robust year of resilient growth. Finally, let's pivot and talk about Canada once again. Unlike in the US, the Canadian labor market has been more fragile, and part of that is due to trade policy uncertainty, because until a final trade deal gets signed between Canada, US, and Mexico, then Canadian businesses are a lot more reluctant to hire and to invest in new equipment. And that is actually one of the reasons why we've seen weak economic growth, and in fact, Canada actually entered a technical recession recently. Now, from our perspective at Russell Investments, we continue to think that 2026 economically will be a challenging year for Canada. We're probably going to see more dampening effects on growth until a trade deal ultimately gets signed. And so, even though we expect the Bank of Canada to keep rates steady at next week's meeting, we ultimately think that there's a good chance the Bank of Canada might have to cut rates once again this year. And part of that will be influenced by the Canadian jobs numbers, which will also be released tomorrow. Which will also be released on Friday, June 5th. That's all for now. Thanks for tuning in, and we'll see you next time on Market Week in Review. Hi, I'm Sophie Antelme head of portfolio and business consulting at Russell Investments. If you liked what you just saw and heard, consider subscribing to our YouTube channel or check us out on LinkedIn. Thanks for tuning in.