Good morning. Mark Carney’s ambitions have shifted since winning the race to become leader of the Liberal Party. Where once he spoke of victory in a trade battle with the U.S., even a tie might now be tough. That’s in focus today – along with a look at why China is winning the world’s favour.

Cost of living: Canada’s annual inflation rate ticked up to 1.9 per cent in June and underlying price pressures remained sticky, reinforcing expectations that the Bank of Canada will hold off from cutting interest rates this month.

Telecoms: Rogers is launching a direct-to-mobile satellite service for remote areas.

• U.S. banks’ second-quarter earnings season continues today with Bank of America, Morgan Stanley and Goldman Sachs.
• The U.S. Producer Price Index and the Federal Reserve’s Beige Book will offer fresh insight into inflation and business sentiment ahead of the Fed’s next rate decision later this month. Pressure is building on the bank to cut.

In his victory speech after winning the Liberal leadership race, Mark Carney vowed to lead both the party and the country to victory as they stared down an uncertain future.

“Americans should make no mistake,” he said. “In trade, as in hockey, Canada will win.”

He promised to keep the retaliatory tariffs imposed by Justin Trudeau in place until America “shows us respect.”

He made good on the first promise, pulling off a minority government in April after months of polling put the Conservatives far ahead. But it’s hard to say whether anyone – in particular in Canada – has won much in the four months since he took office.

Inflation numbers from the two countries yesterday underscored the cost of the continuing standoff. Consumer prices in Canada rose 1.9 per cent in June, up from 1.7 per cent the month prior. In the U.S., inflation climbed 0.3 per cent in June, pushing the annual rate to 2.7 per cent and bringing core inflation close to 3 per cent. Economists say tariffs are beginning to ripple through U.S. supply chains, and the added costs likely haven’t fully worked their way through to consumers.

Lowering expectations

For Canada, any hopes of wiping out tariffs on imports into the U.S. seem to be increasingly remote. About two weeks after the country’s envoy to Washington insisted that the negotiating team’s goal was to get all of the tariffs lifted as part of a deal this month, Carney said that is becoming less likely.

“There is not much evidence at this moment of agreements, arrangements, or negotiations with the Americans for any country, any jurisdiction, to have a tariff-free deal,” he told reporters in French yesterday before a meeting with his cabinet.

The acknowledgment is putting a spotlight on Carney – a former central banker whose “elbows up” message resonated with the Canadian electorate – and his ability to secure meaningful advances. The Prime Minister has met U.S. demands to step up military spending, scrapped a long-planned digital services tax a day before its implementation, and hit pause on reciprocal tariffs – only to be met by higher tariffs on some Canadian imports. Yesterday, Canada’s steel industry warned that any trade deal with the U.S. that includes tariffs will have a dire impact on domestic producers.

It would also suggest that Canada will have to embrace another of Carney’s key messages: that Canadians “need to recognize the commercial landscape globally has changed” in a fundamental manner because of Trump. “We will continue to focus on what we can most control, which is building a strong Canadian economy,” he said.

Building hits a bump

Central to that ambition is Bill C‑5, Carney’s effort to reduce U.S. dependence by fast‑tracking trade corridors and resource projects.

But those hopes are already facing legal pushback. On Monday, nine Ontario First Nations asked the Superior Court to strike down both Carney’s Building Canada Act and a similar Ontario law that allows governments to waive environmental reviews, archeological surveys, and species protections for projects deemed in the national interest.

Critics call the bill a shortcut at odds with Carney’s promise to build trust with First Nations and broaden economic participation.

Proponents, such as Alberta Premier Danielle Smith, are hoping the bill will make it easier to build new pipelines – arguing that new export capacity is necessary to ship more oil to Asia.

Carney has said he prefers not to negotiate in public, which may explain why yesterday’s aside landed with such force. Four months in, the path to victory in Canada’s battle with the U.S. is getting even harder to see.