Canadian Stocks Decline As U.S. Measures Drag Down Economy

(RTTNews) - Canadian stocks fell sharply on Friday, extending yesterday's slide as investors assessed the headwinds to the economy after U.S. attempts to pull businesses from Canada back to the U.S. amid the central bank governor's cautious remarks on the effect of tariffs.

After opening below yesterday's close, the benchmark S&P/TSX Composite Index traded firmly negative to finally close at 30,108.48, down by 350.32 points (or 1.15%).

Five of the 11 sectors posted gains today, with consumer staples sector leading the pack.

U.S. President Donald Trump has stepped up his efforts to pull automakers out of Canada and to relocate to the U.S.

Trump imposed tariffs of 50% on steel and aluminum and 25% on Canadian cars and light duty trucks (excluding the value of the vehicle made from the U.S. parts).

On Tuesday, Stellantis announced plans to transfer production of one Jeep model to Illinois from Brampton, Canada.

This move has sparked widespread criticism in Canada. As the economy is already struggling in a hostile business scenario with 35% U.S. tariffs on Canadian exports, these new moves are adding to fears of joblessness.

Provoked by Trump's efforts, Canadian opposition leaders and businesses are pressuring Prime Minister Mark Carney to levy more retaliatory taxes on the U.S. However, Carney asserted that neither is he up for that nor is it the time for that, but he reassured that there are indications that the bilateral talks are heading in the right direction.

Carney was earlier criticized for returning "empty-handed" after his meeting with Trump in Washington last week ended without a significant breakthrough in tariff reduction.

Governor of the Bank of Canada Tiff Macklem today stated that he expects growth in the Canadian economy to likely be softer during the second half of 2025 after activity contracted in the second quarter of this year.

Macklem added that the central bank will put more emphasis on the potential risks ahead of rate decisions and warned that spillovers from Trump's tariff policies could weaken the economy.

Macklem's comments gave rise to expectations of a rate cut at the October 29 meeting of the central bank.

In the U.S., global auto parts manufacturer First Brands Group declared bankruptcy close on the heels of the failure of Tricolor Auto Group; an auto retail/finance company. These developments raised doubts on the health of lending and credit quality by U.S. lenders in a multi-trillion-dollar credit market.

This triggered panic selling of banking stocks in the U.S. yesterday which also spilled over to the Canadian markets today.

The renewed U.S.-China trade tension that surfaced last week after China started imposing export curbs on its rare earth exports followed by new 100% retaliatory tariffs by the U.S. is slowly cooling down.

Today, sounding practical, Trump acknowledged that 100% tariffs on China were not sustainable. He also confirmed that he would meet Chinese President Xi Jinping in two weeks in South Korea to see what happens.

In the U.S., the government shutdown entered day number 17 today.

The closure likely extending to a third week is continuing to shake up investor confidence with key economic data releases standing disrupted.

Carney stated that Canada was reassessing its exposure to China amid trade disputes involving agricultural exports and electric vehicles.

On the economic data front, today was uneventful for Canadian markets.

Major sectors that gained in today's trading were Consumer Staples (1.57%), Communication Services (0.97%), Real Estate (0.80%), Consumer Discretionary (0.40%), and Industrials (0.20%).

Among the individual stocks, Alimentation Couche-Tard Inc (2.18%), Loblaw CO (1.89%), Premium Brands Holdings Corp (1.79%), Cogeco Communications Inc (2.86%), and Pet Valu Holdings Ltd (2.58%) were the prominent gainers.

Major sectors that lost in today's trading were Energy (0.25%), IT (0.42%), Healthcare (0.50%), and Materials (6.03%).

Among the individual stocks, Orla Mining Ltd (10.93%), Discovery Silver Corp (10.85%), Endeavor Silver Corp (10.82%), G Mining Ventures Corp (10.47%), and Curaleaf Holdings Inc (8.22%) were the notable losers.

Canada Packers Inc WI (7.22%), Granite Real Estate Investment Trust (4.64%), and Chartwell Retirement Residences (4.37%) were among the prime market-moving stocks today.