Introduction
Canada's stock market experienced significant declines amid escalating trade tensions following U.S. President Donald Trump’s renewed tariffs, raising concerns over a potential recession.Context
The Toronto Stock Exchange's S&P/TSX composite index saw a notable drop of 3.29%, closing at 24,474.92 points. This marked the index's worst daily decline since June 2020. On the preceding Wednesday, Trump announced a baseline tariff of 10% on all imports, coupled with higher duties on several key trading partners.Developments
Despite the new tariffs, Canada largely escaped additional levies, as goods compliant with the agreement between the U.S., Mexico, and Canada will remain exempt, except for automotive, steel, and aluminum products. However, concerns persist as Canadian exports to the U.S. are still subjected to a 25% tariff. Brian Madden, chief investment officer and portfolio manager at First Avenue Investment Counsel, noted that investors are not reassured, as the risk of retaliation from Canada remains high. Prime Minister Mark Carney indicated that Canada is prepared to respond aggressively, which could escalate tensions further.On the S&P/TSX, the information and technology sector dropped 7%, reaching its lowest point in five months, with Shopify experiencing a sharp decline of 16.1%. The energy sector fell 4.3% following OPEC+'s decision to accelerate the unwinding of oil output cuts in May, exacerbating the losses triggered by the tariffs. The materials sector also declined by 3.6% as base metals, including copper, hit a one-month low amid fears that the tariffs would dampen industrial metal demand.