Stocks in Canada Advance on Favorable Corporate Moods
In the heart of July 2025, ongoing negotiations between the U.S. and Canada for a renewed trade deal remain stalled, with the deadline for tariff hikes looming. The U.S. Commerce Secretary, Howard Lutnik, is leading the talks, but as of now, no breakthrough has been achieved.
Under the North American free trade framework (CUSMA), Canadian exports to the U.S. have enjoyed largely tariff-free trade in 2025. However, these exemptions face expiration or renegotiation pressures, with reported duty-free imports from Canada rising from 79% in January to about 89% by April.
The U.S. administration is under pressure to protect American jobs, particularly in the automotive manufacturing sector, and aims to renegotiate the deal to favour domestic production. On the other hand, some Canadian provincial leaders suggest exploring a bilateral Canada-U.S. deal excluding Mexico, which could potentially create diplomatic friction.
This uncertainty and the threat of increased tariffs are causing volatility and downside risk for Canadian exporters, especially in sectors such as automotive, manufacturing, and natural resources. Higher tariffs could reduce competitiveness, earnings forecasts, and investor confidence, negatively impacting relevant Canadian stocks and indexes.
Despite the trade tensions, the S&P/TSX Composite Index climbed on Tuesday, reaching an intra-day high of 27,396.49 before settling at 27,364.43, up by 47.43 (or 0.17%). Among the individual stocks, Ivanhoe Mines Ltd (7.02%), Agnico Eagle Mines (4.23%), Wheaton Precious Metals Corp (4.08%), Rogers Communications Inc (1.78%), and Vermilion Energy Inc (3.57%) were the prominent gainers.
On the other hand, sectors like Industrials, Consumer Staples, Healthcare, and IT experienced losses, with major losers such as Celestica Inc (4.38%), Shopify Inc (4.18%), Sienna Senior Living Inc (2.26%), and Empire Company Ltd (1.05%).
The Bank of Canada has maintained the interest rate steady at 2.75% from April, reflecting a cautious approach amidst the trade uncertainty. A Bank of Canada survey report revealed that Canadian businesses are cautious in their hiring plans and checking expansive investments in the current "trade-war" landscape, but see less chance of a "worst-case scenario."
Canadian Prime Minister Mark Carney has been actively defending the country from the effects of tariff attacks from the U.S., meeting with Canada's premiers to discuss a trade deal and planning for Canada's Trade Minister, Dominic LeBlanc, to be in Washington to accelerate the process for a trade deal.
As the August 1st deadline approaches, investors are waiting to see the finalization of a trade deal between the U.S. and Canada to make informed decisions about their investments. The lack of a firm agreement by early August may trigger tariff hikes and market nervousness, potentially affecting the Canadian stock market significantly.
In light of the pending trade deal negotiations between the U.S. and Canada, various business sectors, such as real-estate, automotive, manufacturing, and natural resources, face increased volatility and downside risk due to potential tariff hikes. On the stock market, this uncertainty has led to a mixed performance, with some stocks like Ivanhoe Mines Ltd, Agnico Eagle Mines, Wheaton Precious Metals Corp, Rogers Communications Inc, and Vermilion Energy Inc showing gains, while others like Celestica Inc, Shopify Inc, Sienna Senior Living Inc, and Empire Company Ltd experienced losses. As the deadline for tariff hikes approaches on August 1st, investors are closely monitoring financial markets, ready to adapt their investing strategies based on the outcome of the trade talks.
