S&P/TSX Composite Index down 378 points, Ontario slaps tariffs on energy
Canada’s main stock index closed 378 points lower Monday as concerns about a more intense trade war prompted investors to head for the hills.
The S&P/TSX Composite Index ended the session down more than 1.5% having plunged 500 points earlier in the day. In New York, the S&P 500 lost 2.7%, the Dow Jones lost more than 2%, and tech-heavy Nasdaq closed around 4% lower with the potential of a US recession in focus.
Canadian investors are weighing the likelihood of widespread tariffs affecting trade with the US, despite Trump’s previous two temporary pauses.
Canadian crude prices gained on expectation that the 10% tariff on energy imports to the US (vs. 25% on other goods) may not be imposed and the discount on Canadian heavy for April delivery compared to West Texas Intermediate was at its lowest since last November ($11.70).
Meanwhile, Ontario announced a 25% price hike on electricity supplied from the province to Minnesota, Michigan and New York with premier Doug Ford expressing regret for the impact it will have an American consumers but stating: “It’s one person who is responsible. That’s President Donald Trump.”
Canadian corporate bond sales are also suffering with a Bloomberg gauge showing corporate credit spreads widening against government bonds to the highest level in around five months. Canadian businesses’ reliance on trade with the US and the impact of the uncertainty and volatility are dampening demand for corporate bonds.
With concerns growing about how the trade war may play out, expectation is rising that the Bank of Canada will make an interest rate cut tomorrow (March 12), including two major banks whose economists are predicting a faster and deeper trajectory of cuts this year than previous expected.
The current tension between Canada and the US also appears to be affecting travel between the two countries.
Statistics Canada reported Monday that the number of return trips to the US by Canadian residents was down 23% year-over-year last month, while return trips to Canada by US residents dropped 8%. Air traffic also fell, with a 2.4% decline in Canadians making return flights to the US and a 10% decline in Americans making return flights to Canada.
Cross-border travel has been increasing over recent years following the pandemic slump.
