TSX Ends Week Lower as Trump’s Trade Warning Rattles Markets
Canada’s main stock index, the S&P/TSX Composite, fell 0.3% on Friday to close at 26,133.45 points, reversing gains made earlier in the week as global markets reacted nervously to renewed U.S.-China trade tensions.
The dip was triggered by a social media post from former U.S. President Donald Trump, who accused China of violating tariff agreements. “China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US. So much for being Mr. NICE GUY!” Trump wrote on his Truth Social platform, stoking fears of retaliatory measures that could impact global trade flows and inflation.
Tariff Volatility Returns
This sharp rhetoric followed a dramatic week for global trade policy. While markets initially rallied after the U.S. Court of International Trade effectively blocked most levies imposed since January, a federal appeals court temporarily reinstated Trump’s tariffs on Thursday to evaluate the government’s appeal.
The uncertainty reversed positive sentiment, with Michael Sprung, President at Sprung Investment Management, warning:
“When Trump says China has violated any sort of agreement, the whole premise might be that he might do something retaliatory, which is going to be inflationary and harmful.”
Canadian Economic Data Sends Mixed Signals
Adding to the complexity, Canada’s economy grew faster than expected in the first quarter of 2025. However, the upbeat headline number masked worrying trends: increased imports, inventory build-ups, weaker household spending, and sluggish final domestic demand.
While the GDP print reduced expectations of a Bank of Canada rate cut next week, the market still sees a 22% chance of easing, down from 27% prior to the data. Analysts believe continued tariff uncertainty may pressure the central bank to hold off on tightening policy despite inflation risks.
Sector Performance: Energy Stocks Lead Declines
Within the TSX, the energy subindex dropped 1.3%, reflecting weakness in oil prices, which are headed for a second consecutive weekly loss. Other sectors, including financials and industrials, showed mixed performance, while trade-sensitive companies were hit hardest by the renewed uncertainty.
May Still a Strong Month for TSX
Despite Friday’s setback, the TSX remains up 1.2% for the week and 5.4% for the month, positioning it for its strongest monthly performance in six months. Earlier optimism was driven by hopes for easing trade tensions, especially following court decisions and hints of moderation in global inflationary pressures.
Outlook: All Eyes on the Bank of Canada
Looking ahead, investor attention will shift to the Bank of Canada’s interest rate decision next week, with policymakers navigating a difficult path between domestic economic fragility and global trade volatility.
Meanwhile, Trump’s latest salvo has reintroduced a layer of geopolitical risk that could persist in the months leading up to the U.S. election cycle, impacting Canadian markets that are tightly linked to global trade flows.
