Update on US-Canada Tariffs
Trump Plans to Impose 25% Tariffs on Steel and Aluminum Imports
—— The tariffs will apply to metal imports from all countries, but it is currently unclear when they will take effect.
U.S. President Donald Trump plans to impose a 25% tariff on all steel and aluminum imports to the United States, including major suppliers like Mexico and Canada. He did not specify when the tariffs would take effect. Shares of steel and aluminum manufacturers rose in response.
Faced with the threat of high tariffs on Canadian goods and energy, Canadian exporters are considering adjusting their operational strategies to cope with the challenges. According to a survey by KPMG, 88% of Canadian businesses are considering diverting their exports to countries without these tariffs to avoid the impending 25% tariffs on steel and aluminum products from the U.S. Additionally, the tariff impact has compelled 83% of businesses to seek ways to make their supply chains more resilient, such as sourcing alternative materials and implementing new technologies.
Moreover, Canada and Mexico have secured a 30-day reprieve from these tariffs, but the 10% tariff increase on Chinese goods since February 4 has prompted many Canadian businesses to consider withdrawing from China. KPMG warns that changing production locations and switching suppliers involve risks and recommends that businesses conduct a comprehensive risk assessment before making any changes.
Pre-Market Overview for This Week
Canadian Stock Market
On Monday, the Canadian stock market experienced a downturn for the second consecutive day. The S&P/TSX Composite Index fell by 92 points, a decline of 0.4%, closing at 25,443 points. This decline was primarily due to uncertainties in the labor market data and mixed corporate earnings, particularly significant losses in healthcare and technology stocks. Additionally, market volatility increased following President Donald Trump’s announcement of a new 25% tariff on steel and aluminum products. Investors are also keenly awaiting testimony from Federal Reserve Chairman Jerome Powell for the latest updates on interest rates and inflation.
US Stock Market
The major US indices also closed lower on Monday, impacted by weak employment and consumer confidence data, along with President Trump’s announcement of plans to impose reciprocal tariffs on multiple countries later in the week. This measure, aimed at addressing the US budget issues, has left investors wary as specific targeted countries were not mentioned.
Consumer confidence dropped unexpectedly to a seven-month low in February, with inflation expectations sharply rising. The expected inflation rate for the coming year surged to 4.3%, the highest since November 2023. Despite a slowdown in job growth in January, the unemployment rate at 4% could deter the Federal Reserve from cutting interest rates until at least June.
In terms of stock movements, the Dow Jones Industrial Average fell by 0.54%, the S&P 500 by 0.24%, and the Nasdaq by 0.53%. All 11 sectors of the S&P 500 ended lower, with the non-essential consumer goods sector leading the losses by about 2.5%. Uber’s stock price rose by 6.6% following billionaire hedge fund manager Bill Ackman’s disclosure of a significant stake, while Amazon’s shares fell by 4.1% due to poor performance in its cloud computing division and lower than expected revenue and profit forecasts for the first quarter. The Cboe Volatility Index, often referred to as the Wall Street fear gauge, increased by 6.6% to 16.3. Market speculators currently predict only one interest rate cut by the Fed this year, adjusting down from previous bets on two cuts starting in June.
A-share Market
The A-share market in China showed a general upward trend on Monday, with all three major indices posting modest gains and achieving a three-day winning streak. The Shanghai Composite Index rose by 0.56% to 3,322.17 points, the Shenzhen Component Index by 0.52% to 10,631.25 points, and the ChiNext Price Index by 0.44% to 2,183.88 points. Market turnover decreased from the previous day, with total transactions amounting to 1.73 trillion yuan.
Sector-wise, the military restructuring and education sectors performed strongly. Meanwhile, stocks related to the DeepSeek concept remained active, driving overall market performance. The photovoltaic sector underwent adjustments, with varying degrees of decline observed.
Gold and Oil Prices
Gold prices reached new highs, with spot gold surpassing $2,900 per ounce. This increase follows President Trump’s announcement of additional tariffs, which heightened market demand for safe-haven assets.
Meanwhile, oil prices rebounded, recovering some of the losses from a continuous three-week decline. Last week, due to a sharp increase in U.S. crude inventories, both U.S. crude futures and Brent crude fell by nearly 2%.
Upcoming This Week
Monday, February 10th
- McDonald’s, Vertex Pharmaceuticals, and Onsemi are set to release their earnings reports.
Tuesday, February 11th
- The January Small Business Optimism Index will be published.
- Federal Reserve Chairman Jerome Powell is scheduled to testify before the Senate Banking Committee.
- Coca-Cola, Shopify, Gilead Sciences, Marriott International, Welltower, and DoorDash will announce their earnings.
Wednesday, February 12th
- The January Consumer Price Index and the U.S. federal budget for January will be released.
- The Bank of Canada will publish a summary of deliberations for its latest interest rate decision, which previously included a reduction of the key policy rate by 0.25 percentage points to 3%.
- Restaurant Brands International Inc., owner of Tim Hortons, Burger King, Popeyes, and Firehouse Subs, will release its fourth-quarter earnings before the market opens.
Thursday, February 13th
- Initial jobless claims for last week and the January Producer Price Index will be released.
- Applied Materials, Unilever, Sony, Brookfield, Moody’s, Airbnb, Honda Motor, Motorola, and Coinbase are scheduled to report their earnings.
Friday, February 14th
- January U.S. retail sales, import/export price indexes, industrial production, and capacity utilization, as well as December business inventories, will be published.
- Air Canada will announce its fourth-quarter earnings before financial markets open.
- Enbridge and Moderna will also release their earnings reports.
This Week’s Earnings Preview
This week, earnings reports from McDonald’s (MCD), Coca-Cola (KO), and Shopify (SHOP) are set to provide insights into the health of American consumer sentiment. Investors are also anticipating updates from technology firms Cisco Systems (CSCO) and Applied Materials (AMAT). Pharmaceutical companies Moderna (MRNA) and Vertex Pharmaceuticals (VRTX) are scheduled to release their earnings this week. Additionally, investment app Robinhood (HOOD) and cryptocurrency exchange Coinbase (COIN) will also be reporting their corporate performance.
Published by Vikki Zhao
February 10, 2025 13:00 PM EST. 6 min read
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