In this week’s The Seven…

• Driving in the fog -  BoC in the world unknown
• Sputtering productivity - Is it lack of commercialization?
• Not so fast - Global trade still intact despite tariffs
• On the accelerator -  AI investment in the U.S.
• Destination Olds  - More AI data centres proposed in Alberta
• Heading north - What’s going in the Grande Prairie region? 
• Interesting Fact #1 - The price of a gold medal
• Interesting Fact #2 - Dining out on Valentine's Day
• Chart of the Week - Fueling service exports - Tourism in Alberta

“Life in the fast lane/Surely make you lose your mind/Life in the fast lane, yeah”

--The Eagles, “Life in the Fast Lane” (1977)

Another topsy turvy week on the trade front. Things are moving fast.

On February 11, the U.S. House of Representatives voted to end the so-called “fentanyl tariffs” on Canada. Sounds great, but keep the champagne on ice. This is more of a symbolic victory for Canada and provides no immediate economic relief. The House resolution still needs to pass the Senate and faces a near-guaranteed presidential veto.

The good news? We’re seeing U.S. political support for trade with Canada along with ongoing (but slow-moving) court proceedings that provide some challenge function to tariffs.

The ‘on and off’ tariff approach will make your head spin. But, sitting here on the day before Valentine’s, nothing much has really changed. Sectoral tariffs remain in place, along with general exemptions, as we inch our way to the mid-year review of CUSMA. For our forecast, we’d like to be more optimistic, but we’re assuming the status quo - sectoral tariffs stay in place through 2026 but CUSMA exemptions hold.

The key question in the early innings of 2026 is whether economic resiliency will remain the prevailing theme. U.S. jobs in January surprised to the upside this week, and unemployment remains low at 4.3%. Canada’s job market has cooled, but is still doing better than feared early in 2025. Alberta’s job growth, meanwhile, has surged ahead of the pack.

Our view is that, absent new major projects proceeding, we’re likely to see overall economic momentum slow, but not stall. At the same time, expect more balance to return to the labour and housing markets as population growth cools.

This week we were reminded of what’s really important. Our hearts go out to the community of Tumbler Ridge and all the families impacted by this terrible tragedy.

Can the Bank of Canada borrow your crystal ball?

On Wednesday, The Bank of Canada released their deliberations from their January rate decision. They talked a lot about how little they know about the future. For those searching for answers, this was somewhat unsatisfying (but at least they're honest).

Here are a couple quotes (emphasis added):

"In the context of an unpredictable environment with little historical precedent, it was unusually difficult to effectively assign weights and probabilities to the various risks surrounding the outlook."

"Members therefore agreed that it was difficult to predict the timing and direction of the next change in the policy rate."

This doesn’t change our view that the Bank is on a prolonged hold. If anything, it’s a reminder that, given the cloudy outlook, the Bank will remain in ‘wait and see’ mode with wiggle room to move if warranted.

Commercializing R&D - One piece of the productivity puzzle

Economists have been raising the alarm on the Canadian productivity problem for years. Solving it is harder. A silver bullet solution would be nice, but like most things in life, it’s a combination of factors.

We’ve long focused on the investment problem. Adding more capital for every worker, including the technology embodied in machinery and equipment, would go a long way to closing the gap with the U.S.

It’s not just bricks and mortar investment though. Investments in intellectual property (IP) and R&D also lag our peers. Further, converting R&D to success, through scaling of companies and commercialization of Canadian knowledge is something that’s also lacking.

The C.D. Howe Institute has a clever way of showing this. They plot trade in R&D services against net IP charges across advanced economies. Their finding is that Canada is a net exporter of R&D services, but pays significantly more than it sells for the right to use IP.

Their conclusion? “Because productivity and income growth hinge on the commercialization of innovation, Canada needs to improve its commercialization performance to remain globally competitive.”

This fits with the theme we’ve previously discussed, and also cleverly shown by the Business Council of Alberta, that innovation input is not translating into output.

The University of Calgary is on the case. Led by Professor Trevor Tombe, the UofC announced it has received a $6 million federal grant (over 15 years) to lead national research on Canada’s productivity.

Smaller than you think - Trump’s trade war didn’t ruin global trade

One of the reasons the book Freakonomics became a best seller is that it “explored the hidden side of everything.” It challenged conventional wisdom to uncover why things may not turn out as expected.

Here’s another one for you. A recent report by the Peterson Institute for International Economics, a leader in trade research, has uncovered that global trade patterns have largely been unshaken since the start of the trade war: “Two-way trade with the United States as a share of total trade changed very little among 19 impacted foreign partners trading with the United States in 2025.”

How could this be? For one, it’s still early days. You can’t change trading relationships overnight due to relatively fixed supply chains. There’s a chance we’ll see something different this year as we settle into the new world.  But there are other explanations the Peterson Institute offers:

• Front loading of exports prior to tariffs 
• Negotiated deals with countries post “liberation day” lowered effective tariff rates
• Limited retaliation against U.S. tariffs 

The lesson for Canada is that while expanding overseas is a worthwhile goal, geography and existing supply chain networks matter. Hence, getting a renewed long-term trade agreement with the U.S. remains key.

Bigger than you think - AI investment in the U.S.

Why is the U.S. defying the odds again, recording resilient GDP growth amid the trade war? Indeed, the Bank of Canada now forecasts that U.S. GDP will grow by 2.6% this year vs. only 1.1% in Canada. That makes four straight years of U.S. outperformance, despite a much smaller push from population.

AI is one powerful source of U.S. GDP growth. A build-out of AI centres and related technology was a major contributor to U.S. growth. Just how much is hotly debated, with some estimates as high as 50%, but others (factoring in imports) closer to 20-25% of growth. Resilient consumer spending is also a big factor.

According to the Wall Street Journal, the combined capital spending forecast for Meta, Amazon, Microsoft, and Alphabet is 2.1% of GDP, a larger number than the U.S railroad build of 1850-59 and the interstate highway system of 1955-70.

Heading North - What’s going on in GP?

I’ll be heading up north to Grande Prairie to present at the Growing the North conference next week. We did an economic profile on the city in yesterday’s edition of The Twenty-Four, but in case you missed it, here are some of the highlights.

Grande Prairie is one of the youngest urban centres in the province with a median age of 35, it is seeing distinct population growth patterns that are projected to outpace both Calgary and Edmonton through 2051. This youthful workforce is driving consumption and a tangible uptick in housing activity.

The region is well positioned on the Montney and Duvernay basins. Improved market access through the Trans Mountain Expansion and LNG Canada is resolving historical bottlenecks, while abundant gas reserves are attracting new energy-intensive industries like proposed AI data centers. Beyond energy, the city is cementing its status as a logistics hub for over 300,000 people and moving up the value chain in sectors like forestry, agriculture, and healthcare

Project update - AI data centres in Olds

It’s not just the U.S. that’s building data centres. Alberta has big ambitions given its access to abundant and lower cost energy sources. The latest proposals are two projects in Olds, Alberta: the Synapse Data Center and the Swiss-backed Data District (a division of Alcral AG) project. Olds was chosen for its location between Calgary and Edmonton, skilled labour force, and access to natural gas.

Interesting Fact #1 - Not all that glitters is gold

Though athletes in Milano Cortina describe winning an Olympic medal as “priceless,” a perfect storm in precious metals markets has pushed the value of both the gold and silver to historic levels.

A 2026 Olympic gold medal contains 500 grams of silver plated with 6 grams of pure gold. With gold prices now trading around $5,000 USD/oz and silver hitting multi-decade highs, fluctuating near $80 USD/oz, the raw material value of a single gold medal has climbed to approximately $2,500 USD (roughly $3,400 CAD). For context, this is more than triple the value of the medals awarded just four years ago at the Beijing 2022 Games (~$700 USD).

The second-place prize has also seen a massive valuation jump; a silver medal at the 2026 Games will be worth about $1,400 USD compared to ~$350 USD at the 2022 Games. Silver’s record rally reflects the convergence of declining confidence in fiat currencies, structural supply constraints, and rising industrial demand.

Interesting Fact #2 - Dining out on Valentines Day

Heading out for dinner on Valentines? You’re not alone. Just how much people spend on this day cannot be solved using conventional data. The usual go-to source, retail sales, is available monthly. Never fear, we can help solve this problem with ATB Mastercard daily transaction data.

Over the last five years, ATB Mastercard spending on dining and entertainment in Alberta is, on average, 36% higher than a typical day in February. But that’s misleading, as you need to account for the day of the week (spending is highest on weekends). Focusing on spending that takes place on the same day of the week in February, the uptick on Valentine’s is 16% higher on average.  

Chart of the Week: Tourism - The exporting industry few talk about

Is tourism an exporting industry? Your first reaction may be no. I'm sure other industries like oil and gas, agriculture, and autos come to mind.

But as the nation looks to expand its exports overseas (recall the PM’s goal to double non-U.S. exports over the next decade), tourism is worth a serious look.

Exports of ‘travel services’ totalled $28.5 billion in 2024, reflecting the amount nonresidents spent while visiting Canada.

As for Alberta, it’s leading the charge as we discussed on Monday. Our Chart of the Week shows Alberta outpacing the other large provinces in attracting foreign visitors in 2025. Nonresident visits rose 11% YTD through November in Alberta vs. -0.4% nationally.

What accounts for Alberta’s outperformance? I asked the attendees at a tourism summit in Edmonton this week and “more direct flights” was a popular response. Speaking of which, a new non-stop flight between Calgary and Abu Dhabi is set to launch later this year.

Answer to the previous trivia question: The trumpeter swan is the official symbol of Grande Prairie.

Today’s trivia question: What is the world’s largest passenger aircraft?