The tariff throwdown between Donald Trump and Justin Trudeau has slowed Canadian corporate bond sales to a trickle over the past week as investors demand a higher premium to hold loonie debt.

The United States president’s looming 25 per cent tariff on Canadian goods — which briefly took effect last week before being paused until April — threatens to send the Canadian economy spiralling into a recession, spurring job losses and price spikes that fuel inflation. Canada’s vulnerability in the trade war has bubbled up in a credit market that has historically been largely indifferent to macro risks.

In response to all the saber rattling, bond holders are asking for bigger premiums. Canadian corporate credit spreads shot to the widest level relative to government bonds in about five months on Tuesday, according to a Bloomberg gauge. Bond sales from Canadian companies are slowing, as are offerings from foreign companies considering borrowing in Canadian dollars.

“One could infer that the trade war is already impacting the ability of Canadian corporates to fund at competitive levels in their domestic market,” said Etienne Bordeleau, vice president and portfolio manager at NinePoint Partners LP.

That kind of spread widening, unusual for Canada, shows the nation’s greater dependence on cross-border trade with the U.S., according to Randall Malcolm, senior managing director at asset management firm SLC management.

“For this reason, the Canadian bond market has also been more reactionary to the constant tariff news flow, and this additional volatility has made Canadian issuance more difficult,” Malcolm said.

Some relief could be on the way, the Bank of Canada is expected to deepen interest rate cuts later this week. That would lower the overall cost for domestic borrowers and counter the wider risk premium, which remains historically tight despite recent volatility.

In the meanwhile, the Canadian new issues market has largely ground to a halt since the tariffs were first put into place last Tuesday. The only deal to surface came from Canadian defence contractor Top Aces, which sold a $200 million bond at a nine per cent yield. The deal comes just as Ottawa is getting more serious about boosting defence, now that the U.S. is no longer a trusted ally.

For companies with access to global debt markets, Canada is simply not attractive at the moment.

Better value elsewhere

A drought in so-called maple-issuances — loonie-denominated debt sold by non-Canadian firms — has been even more pervasive.

So far this year, just one U.S. company — Prologis Inc. — has come to the Canadian debt market for $550 million in funding. For the same stretch last year three U.S. firms sold more than $2 billion, according to data compiled by Bloomberg.

Foreign corporations have so far failed to hit the maple market because wider credit and swap spreads currently make it uneconomical, Bordeleau told Bloomberg.

Canada can’t compete with funding conditions in core markets like the EU or U.S., a spokesperson for German’s KfW Development bank said via email. “This essentially applies to other issuers in the SSA market as well, and that is why we have seen almost no supply from issuers outside of Canada in 2025,” she added, referring to supranational, sovereign and agency debt.

KfW currently has more than $2.65 billion in Canadian dollar bonds, including a $500 million note that matures later this month, according to Bloomberg records.

KfW is not alone. BNG bank, one of the Netherlands’ biggest issuers, has nearly $230 million in Canadian dollar bonds maturing later this year, on top of $330 million that matured in February, according to data compiled by Bloomberg. So far, it’s avoiding the maple market.

“The swap of euro level from Canadian dollar hasn’t favoured us over the last two years,” said Michiel Matthijssen, senior funding officer at BNG. BNG has issued bonds in sterling, Australian dollar, Swiss franc and Chinese yuan this year, data compiled by Bloomberg show.

BNG has historically been an active issuer in Canada, Matthijssen said. “We’d like to issue again, that’s why we’re monitoring it continuously.”

—With assistance from Daniel Covello.

Bloomberg.com