TSX Drops on Trade War and Inflation Fears

The S&P/TSX Composite Index edged lower to trade near 36,000 on Wednesday after the US expanded trade restrictions on Canada. The US banned imports of numerous alcoholic beverages, motorcycles and dairy products, following 50% tariffs imposed last month on about $20 billion of Canadian goods and retaliatory tariffs from Canada. Saputo lost more than 1%, Canada Packers nearly 2%, and BRP about 1%. Meanwhile, intensifying Middle East hostilities pushed oil prices higher, rekindling inflation fears ahead of Friday’s US CPI data. Banks came under pressure amid increased rate-hike expectations, with RBC, TD Bank, BMO and Scotiabank losing more than 1% each. Miners gained on higher gold prices, with Agnico Eagle, Barrick and WPM adding over 2%. Lithium Americas jumped more than 6% after J.P. Morgan initiated coverage with an “overweight” rating.

Futures tracking Canadian stocks moved lower on Wednesday after the US expanded trade restrictions on Canada on Tuesday. The US banned imports of numerous alcoholic beverages, motorcycles and dairy products. The measures followed 50% tariffs imposed last month on about $20 billion of Canadian goods, as well as retaliatory tariffs from Canada. Meanwhile, intensifying hostilities in the Middle East pushed oil prices higher, rekindling inflation fears. Risks to global energy supplies have risen in recent weeks as the six-month-old conflict escalated, fueling inflation concerns ahead of Friday’s US CPI data. Credit-sensitive stocks, including major banks, have come under pressure amid increased expectations for rate hikes in Canada and the US. Elsewhere, US-listed shares of Lithium Americas rose in premarket trading after J.P. Morgan initiated coverage with an “overweight” rating. Gold prices also rose, supporting miners.

The S&P/TSX Composite Index fell 1.1% to close at 36,123, pressured by financial, industrial and tech stocks. Canada’s retaliatory tariffs on US goods took effect, covering $20 billion of imports, with duties ranging from 15% to 50% on steel, furniture, clothing and electronics. The US tariffs introduced last month covered $20 billion, or 5%, of Canadian exports. President Trump said Monday that Bombardier (-1.5%) would not be allowed to sell planes in the US unless it began manufacturing there. Financials also came under pressure as oil prices climbed amid an escalation in the US-Iran war, raising concerns over energy disruptions and inflation and boosting rate-hike bets. RBC fell 1.1% and TD Bank 1.2%. Tech stocks tracked losses among US hyperscalers and other credit-sensitive software companies, with Shopify tumbling 7.8% and Constellation Software falling 5.6%. Enbridge added 0.5% after saying CEO Greg Ebel will retire by late 2026 and ?be succeeded by Michele Harradence.