07:51 AM EDT, 07/11/2025 (MT Newswires) -- After a period of apparent progress, Canada is in the crosshairs again after receiving a letter from United States President Donald Trump threatening 35% tariffs as of Aug. 1, said Bank of Montreal (BMO).

That would be separate from any sectoral tariffs, while USMCA exemptions would reportedly still apply. This isn't final as it's yet another concerning twist that prolongs the uncertainty on the trade file, noted the bank. Trump concludes by saying that, "if Canada works with me to stop the flow of Fentanyl, we will, perhaps, consider an adjustment to this letter."

Regardless, it's looking less and less like the endgame here will be one without some sort of lasting tariff on Canada and more broadly on other trading partners, stated BMO. Prime Minister Mark Carney has suggested that trade negotiations will now proceed to the Aug. 1 deadline.

The Canadian Labour Force Survey (LFS) at 8:30 a.m. ET is the key data release on Friday, pointed out the bank.

The Canadian economy continued to struggle under the weight of tariffs into the early summer. U.S. steel and aluminum tariffs doubled in June, which will hit those already struggling sectors even harder. That suggests Canada will see a third consecutive monthly drop in manufacturing employment for the first time since 2019 (excluding the COVID-19 pandemic), added BMO.

The question for Canada remains whether the tariff hit is broadening beyond directly-impacted sectors. So far, it looks as though the uncertainty surrounding the outlook has been holding back hiring, but has yet to lead to wider job losses. The bank is anticipating that theme to continue in June, with a modest 10,000 increase in employment.

While population and labor force growth have slowed this year, the pace of job growth likely won't be strong enough to keep the jobless rate from rising above 7% for the first time since 2016 (excluding the pandemic), according to BMO.

The bank will also be watching hours worked for insight into how economic momentum evolved into the end of Q2. Finally, wage gains look to continue slowing, consistent with increasing slack in the labor market

Investors will also get building permits for May at 8:30 a.m. on Friday.