TSX shrugs off new 50% U.S. tariffs as loonie slips and economists tally the damage
After talks collapsed, 50% U.S. tariffs on about US$20 billion of Canadian goods took effect; the TSX still rose Monday while the dollar fell to 72.24 cents US.
Canadian markets got their first trading-day look at a re-escalated trade war on Monday, and the reaction was more muted than the headlines. The S&P/TSX composite index closed up 93.89 points at 36,714.12, even as the Canadian dollar slipped to 72.24 cents US from 72.67 cents US on Friday.
Over the weekend, the United States imposed 50% tariffs on about US$20 billion of Canadian products after negotiations in Washington collapsed on Friday. The duties took effect at 12:01 a.m. Eastern on Saturday when a U.S. deadline expired. On Monday, President Donald Trump threatened to raise tariffs on all Canadian vehicles, auto parts and steel to 50% on Jan. 1.
What was hit
The new duties cover roughly 5% of Canada's exports to the U.S., according to economists cited by BNN Bloomberg, and a range of goods from cement, honey and alcohol to textiles, furniture and toiletries. Canadian estimates of the value covered are around $28 billion.
Prime Minister Mark Carney said U.S. negotiators had added last-minute terms that were unfair, including provisions that would have limited Canada's ability to make trade deals with other countries. U.S. Trade Representative Jamieson Greer blamed Canada for declining to finalize the deal. Carney has promised dollar-for-dollar retaliatory tariffs by Sept. 8.
Counting the cost
University of Calgary economist Trevor Tombe estimated, using Statistics Canada input-output data, that about 87,000 jobs are at risk: roughly 52,000 directly and about 35,000 more through suppliers and service providers. By his estimate, Ontario could lose 36,100 jobs, Quebec 18,300 and British Columbia 11,200, with machinery, electronics, plastics and rubber among the hardest-hit industries.
- Capital Economics' Bradley Saunders put Canada's effective U.S. tariff rate at 5.6%, up from 2.9%
- Bank of Montreal expects the tariffs to cut growth by half a percentage point
- BMO's Robert Kavcic said the breakdown came just as growth "looked to be finding better momentum"
Why markets held up
The tariffs cover a small slice of total exports, so the vast majority of Canadian shipments to the U.S. were not affected by this round. Commodities also cushioned the index: December gold rose US$17.20 to US$4,697.80 an ounce, supporting miners, although October crude fell US$2.05 to US$85.01 a barrel.
The risk is that the conflict widens. Trump's threat on autos and steel, the planned Canadian retaliation and the looming review of the Canada-U.S.-Mexico Agreement all add uncertainty. Tombe warned that uncertainty itself could cause a "much larger economic hit" than the tariffs, because businesses tend to delay investment when trade rules are unclear.
What it means for you
A single calm trading day does not mean the trade dispute is priced in. Sector exposure matters: manufacturers in Ontario, Quebec and B.C. face the most direct pressure, while gold and some domestic-focused companies have held up better.
For long-term investors, this is a reminder of why diversification across sectors and regions matters, and why reacting to one headline can be costly. A weaker loonie also makes U.S. purchases and travel more expensive. This is general information, not personalized advice.
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Sources
- BNN Bloomberg — TSX gains ground despite new U.S. tariffs, markets south of the border mixed
- BNN Bloomberg — Re-escalating trade war puts Canada's economic rebound at risk: economists
- BNN Bloomberg — These provinces could see the most job losses with new U.S. tariffs: report
- Al Jazeera — US imposes 50 percent tariffs on $20bn in Canadian goods after talks fail
General news and information, not individualized financial advice. Figures reflect the publication date.