Update on US-Canada Tariffs
Canada’s Inflation Rate Rises to 1.9% Amid Energy Cost Surge and Tariff Threats from Trump
According to Statistics Canada on Tuesday, Canada’s inflation rate in January rose to 1.9% from 1.8% the previous month, driven by rising energy costs. The increase in energy prices poses additional challenges to Canadian businesses and the economy, particularly amid uncertainties brought about by recent tariff policies from U.S. President Donald Trump.
President Trump recently signed a memorandum calling for reciprocal tariffs on all major trading partners, followed by an announcement that starting March 12, a 25% tariff would be imposed on all U.S. imports of steel and aluminum products, with Canada being a major supplier of these. Furthermore, the threat of hefty tariffs on all goods from Canada and Mexico, including oil, remains. The Royal Bank of Canada estimates that the renewal of steel and aluminum tariffs could affect approximately CAD 24 billion of Canadian exports, although these sectors represent only about 0.5% of Canada’s GDP and jobs, and about 3% of overall Canadian exports.
The Canadian Federation of Independent Business reports that more than one-third of small and medium-sized enterprises in Canada have experienced canceled or paused orders due to tariff threats. Additionally, one-quarter of the surveyed businesses are considering delaying expansion plans, and 20% are contemplating reducing their workforce or working hours. Over 60% of businesses indicated that they would have to pass on costs to consumers if the U.S. implements tariffs and Canada retaliates. About one in five businesses said they could survive less than three months without support if tariffs are imposed.
Economists warn that such trade tensions could harm the confidence in Canada’s housing market, potentially leading to job losses and dampening housing demand. Assessing the outlook for Canada’s housing market under these circumstances is akin to appraising a home prior to an earthquake—it’s challenging to predict the structural state at the end of the day.
Pre-Market Overview for This Week
Canadian Stock Market
Ahead of the Family Day long weekend in Toronto, the Canadian stock market faced pressures from falling commodity prices, weaker-than-expected U.S. retail sales data, and mixed corporate earnings. On Friday, the S&P/TSX Composite Index fell by 215 points, a drop of 0.8%, closing at 25,483 points. Despite a rebound in financial and utilities stocks, declines in the energy, materials, and consumer sectors heavily impacted the market. Canadian investors should keep an eye on consumer inflation data and earnings reports from companies like iA Financial and Gibson Energy, which could further influence the market direction.
U.S. Stock Market
U.S. stock index futures saw collective gains before Tuesday’s session. Following last week’s upward trend, major U.S. stock indices are nearing historical highs, with the Dow Jones Industrial Average and the Nasdaq about 1% from record levels, and the S&P 500 just 0.2% shy. U.S. markets were closed on Monday due to Presidents’ Day. Despite President Trump’s directive last Thursday to his economic team to devise a plan for reciprocal tariffs, no new tariffs have been announced. The market remains highly attentive to Trump’s moves, anticipating further policy guidance. Additionally, a rise in U.S. consumer prices in January and hawkish remarks from Federal Reserve Chairman Jerome Powell have added to market volatility, although the stock market was buoyed earlier this month by data showing a rise in U.S. producer prices.
China’s A-Share Market
On Tuesday, China’s A-share market opened lower and continued to decline throughout the day, with the STAR Market and ChiNext leading the losses. The Shanghai Composite Index closed down 0.93% at 3,324.49 points, the Shenzhen Component Index fell 1.61% to 10,617.26 points, and the ChiNext Price Index dropped 1.98% to 2,182.57 points. The China A50 futures index was up 0.28% at 13,349 points by the end of the day. The market saw more declines than gains, with over 700 stocks rising and more than 4,600 falling. The total transaction volume for the Shanghai and Shenzhen stock markets was 1.8 trillion yuan, a decrease of 1,424 billion yuan from the previous trading day.
European Stock Markets
Before Tuesday’s session, European stocks showed mixed results. Germany’s DAX index fell 0.07%, the UK’s FTSE 100 index rose 0.06%, France’s CAC40 index increased by 0.03%, and the Euro Stoxx 50 index gained 0.12%.
Gold and Oil Prices
On Tuesday, spot gold traded around $2,897.92, with prices rebounding above $2,900 per ounce on Monday, supported by a weakening U.S. dollar and trade concerns sparked by President Trump’s tariff threats. Crude oil prices saw modest gains, with WTI crude oil up 0.83% at $71.30 per barrel and Brent crude up 0.13% at $75.32 per barrel. Oil prices strengthened on Monday following an attack on a pumping station in the Caspian Sea, which slowed the flow of oil from Kazakhstan.
Upcoming This Week
Monday, February 17th
- U.S. stock and bond markets are closed due to Presidents’ Day holiday.
- Canada Mortgage and Housing Corp. is expected to release January housing starts data.
- UFP Industries (UFPI) is scheduled to report earnings.
Tuesday, February 18th
- The U.S. will release the Empire State Manufacturing Survey and the Homebuilder Confidence Index for February.
- The Canadian Real Estate Association is expected to release January home sales data, which showed a 19.2% year-over-year increase in December.
- Statistics Canada is set to publish the January Consumer Price Index, with the annual inflation rate previously recorded at 1.8% in December.
- RioCan Real Estate Investment Trust is anticipated to announce earnings.
- Earnings are also expected from Arista Networks (ANET), Medtronic (MDT), Cadence Design Systems (CDNS), Occidental Petroleum (OXY), and Baidu (BIDU).
Wednesday, February 19th
- The U.S. will publish the minutes from the Federal Open Market Committee (FOMC) meeting in January.
- Apple (AAPL) is scheduled to host a product launch event.
- Earnings reports are due from Gildan Activewear Inc., Manulife Financial, HSBC Holdings (HSBC), Analog Devices (ADI), Carvana, and Garmin (GRMN).
Thursday, February 20th
- The U.S. will release initial jobless claims for the week ending February 15, the February Philadelphia Fed Manufacturing Survey, and January U.S. Leading Economic Indicators.
- Earnings announcements are expected from Cameco Corp., Cascades Inc., Cenovus Energy Inc., Teck Resources Ltd., Walmart (WMT), Alibaba (BABA), Southern Co. (SO), Block (SQ), Rivian, and Live Nation Entertainment (LYV).
Friday, February 21st
- The U.S. will publish preliminary values for the February S&P Purchasing Managers’ Index (PMI), final February Consumer Sentiment Index, and January Existing Home Sales data.
- Bank of Canada Governor Tiff Macklem is set to speak at the Mississauga Board of Trade and Oakville Chamber of Commerce.
- United States Cellular and Onex Corp. are scheduled to release their financial results.
This week, retail giant Walmart, Chinese e-commerce companies Alibaba and Baidu, both listed in the U.S., online used car retailer Carvana, and electric vehicle manufacturer Rivian are set to release their earnings reports.
Additionally, the week will also see a focus on the minutes from the Federal Reserve meeting, scheduled speeches by Federal Reserve representatives, as well as data on housing, manufacturing, and consumer confidence.
Published by Vikki Zhao
February 18, 2025 13:00 PM EST. 6 min read
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