The EU and Canada are exploring a conceptual ‘associate membership’ expected to result in closer ties.[1 & 2]
President Trump has threatened tariffs or trade restrictions on the EU if the proposal is viewed as harmful to US interests.[3]
The Federal Reserve raised interest rates in the US for the first time in three years.[4]
A history of scepticism
The cornerstone of the White House was laid on 13th October 1792 by President George Washington, who prayed that “none but honest and wise men ever rule under this roof”. [5]
22 years later, British forces marched into Washington, D.C. and set fire to the White House in retaliation for the American burning of York, Upper Canada (now Toronto) in April 1813.[6]
Canada became a self-governing dominion in 1867 and relations with the US were generally peaceful but marked by border disputes.[7] Trade ties grew steadily despite tariff friction; a 1911 free trade agreement was negotiated but rejected by Canadian voters, partly out of fear of American economic domination.[8]
Two world wars and a cold war alliance brought the countries closer together, and the Canada-US Free Trade Agreement was signed in 1988, phasing out most tariffs[9], with Mexico joining in 1994.[10] Canadian fears never dissipated, however, that closer ties with a much larger neighbour would erode their economic independence, industries and national identity, and even lead to eventual political absorption.
President Trump has more recently accused Canada of treating the US unfairly on trade, citing border and fentanyl issues, then dairy, auto and alcohol practices, and the trade deficit. Canada remains the US’s second largest trading partner[11], yet that deficit is small next to those the US runs elsewhere.[12]
Source: https://economics.td.com/ca-canada-us-trade-balance
Tensions have increased with a trade war breaking out between the two countries. Canada has begun looking further afield for allies and in speeches this week, both the President of the European Commission, Ursula von der Leyen, and the Prime Minister of Canada, Mark Carney, have expressed a desire to work more closely, with Canada mooted as a potential candidate for a new ‘associate membership’ of the EU.[13]
President Trump, in response, has said he will put very serious tariffs or stop trading with Europe if he thinks the European Union's push to make Canada a potential associate is harmful to the US.
The Fed weighs in
The Federal Reserve has raised interest rates by 0.25% and projections suggest an additional hike may come later this year to contain inflation. The rate increase defied President Donald Trump, who has said on social media that US rates should be at 1% or lower.[14]
Bowmore portfolios
Writing before the US markets open on 17th September, futures are pointing higher across the NASDAQ and S&P indices.[15] This may be a result of the Fed regaining its inflation fighting credibility, investors buying the dip, or perhaps the fall in oil prices driving risk assets.[16] Markets in Europe and the UK are rising in sympathy, providing a tailwind for the equity portion of the portfolio.
Equities generally perform worse when rates rise, and they have fallen so far in September as data releases suggested the US economy is more inflationary than previously thought. However, more than anything, markets dislike uncertainty, and much of that has now been removed, which may bring further relief to investors. We are making no changes to equity positioning on the back of this week's news.
Rising rates are also negative for bond prices. However, the duration of our portfolios is deliberately low, leaving them largely insulated. In any case, as the chart below shows, when rates climb higher the predicted future five-year returns increase, creating a more attractive entry point. Those projections are estimates, not guaranteed to continue, and returns will vary.
Source: AlphaTerminal, data as at 18/09/2026
The comments above reflect Bowmore's current investment views and are provided for information purposes only. They do not constitute a personal recommendation or investment advice, and future market conditions and investment outcomes may differ from those anticipate
The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a guide to future performance.
Sources:
1. Mark Carney Calls on Closer Canada-EU Alliance to Defend Sovereignty - Bloomberg
2. Canada welcomes EU proposal to become 'associate member' - BBC News
3.. Trump Floats EU Tariffs If Canada Invite Deemed a ‘Hostile Act’ - Bloomberg
4. Fed Rate Decision: Raises Interest Rates as Warsh Bucks Trump - Bloomberg
5. Today in History - October 13 | Library of Congress
6. Burning of Washington - Wikipedia
7. Alaska boundary dispute - Wikipedia
8. How freer trade with the U.S. lost the Liberals the 1911 federal election | TVO Today
9. Canada–United States Free Trade Agreement - Wikipedia
10. North American Free Trade Agreement - Wikipedia
11. https://economics.td.com/ca-canada-us-trade-balance
12. https://economics.td.com/ca-canada-us-trade-balance
13. Mark Carney Calls on Closer Canada-EU Alliance to Defend Sovereignty - Bloomberg
14. Fed Rate Decision: Raises Interest Rates as Warsh Bucks Trump - Bloomberg
15. Stock Futures Surge as Wall Street Buys the Dip Following Fed Selloff
16. Crude Oil - Price - Chart - Historical Data - News