Investment update

Weekly insight into the marketplace.

March 3 to 7, 2025

Stock markets tumbled over global trade uncertainty

Sentiment was gloomy as the trading week started on Monday. With more questions than answers available as steep U.S. tariffs were set to launch the next day against Canada, Mexico and China, the major North American stock indexes plummeted into the closing bells. The tech-heavy Nasdaq led losses for the U.S. equity benchmarks, dropping 2.6% on the day. Shares of the influential AI chipmaker Nvidia sank more than 8%. Canada's resource-heavy TSX fell 1.5% as base metal, energy and tech stocks weighed down performance. The losses continued to mount on Tuesday, as U.S. tariffs took affect, and trade partners announced counter measures. The Dow dropped 1.55%, the S&P 500 shed 1.22% and the Nasdaq dipped 0.35%. The TSX ended down 1.72%. Companies that rely on imports were hit hard. Shares of Ford and GM lost around 3% and 4%, respectively. Wednesday saw equity markets rebound after the White House announced a one-month exemption from tariffs for automakers, and raised investor hopes for more compromise. The resource-heavy TSX rose from a seven-week low, led by shares of mining companies as copper prices climbed. The Wall Street benchmarks all closed over 1% higher for the day, led by the Nasdaq, which regained 1.46%. Stock markets were back in the red on Thursday, with the stock market benchmarks posting losses across the board. The Nasdaq was hardest hit, losing 2.6% on the day to close 10% off its record level set in December – what’s technically referred to as a “correction.” But a ray of hope that compromise may be possible came late in the trading session, as U.S. President Donald Trump announced a month-long pause for tariffs on goods covered by the Canada-U.S.-Mexico Agreement. This helped the Canadian and U.S. stock markets end the volatile week on a positive note, with the TSX gaining almost 200 points and the Wall Street benchmarks also rising on Friday.

U.S. tariffs sparked a trade war

On Tuesday, President Trump’s promised tariffs against trading partners went into effect. These included 25% tariffs on imports from Canada and Mexico, and an increase in tariffs on Chinese goods from 10% to 20%. In response, Canada announced 25% tariffs on $155 billion worth of U.S. imports, starting with tariffs on $30 billion worth of goods immediately, and more to come on the remaining $125 billion in 21 days. In addition to fuelling stock market losses, the early salvos in the trade war caused bond yields to decline and gold prices to strengthen, as investors sought safer assets amid the economic uncertainty. A prolonged trade war with the U.S. has the potential to affect the Canadian economy and global financial markets in many ways over the short and long term. In its last meeting on January 29, the Bank of Canada looked at different possible outcomes and their impacts, but its benchmark scenario forecasts Canada’s GDP growth to be 2.5% lower in the first year than it would be if there were no tariffs. In the second year, growth would be approximately 1.5% lower, and by the third year, GDP growth would be relatively back to normal. The exemptions announced on Wednesday and Thursday offer some hope that further compromise can be achieved sooner rather than later.

Canadian and U.S. employment data came in lower than expected

According to data released by the U.S. Department of Labor on Friday, the U.S. economy added 151,000 jobs in February, falling short of the 160,000 anticipated by economists. The unemployment rate edged up to 4.1% from 4%. The increase was driven by job gains across a broad range of industries, while federal government employment declined for the first time since June 2022 after Elon Musk's Department of Government Efficiency laid off 10,000 workers. Canadian data released by StatCan before Friday's opening bells showed that Canada’s unemployment rate remained flat in February, as the participation rate and full-time employment decreased. Overall, the Canadian economy added 1,100 jobs led by gains in part-time work.