Market in Canada Lingers in Negative Zone Due to Concerns over Tariffs
The Canadian stock market experienced a significant downturn on August 1, 2025, following the U.S. government's decision to increase tariffs on Canadian imports from 25% to 35%. This move has negatively impacted various sectors, including industrials, financials, information technology, and healthcare, causing a decline in the S&P/TSX Composite Index.
In early trading, the S&P/TSX Composite Index fell to 26,846.74 before recovering slightly to close at 27,052.10, down 207.68 points or 0.76%. Notable losers included Sun Life Financial, Manulife Financial, Onex Corp, Igm Financial, Laurentian Bank, Fairfax Financial Holdings, Toronto-Dominion Bank, and IA Financial Corp, which were down 1 to 2%.
The tariff increase has caused investor concerns over higher costs and trade uncertainties. However, the impact is somewhat mitigated as goods covered under the U.S.-Mexico-Canada Agreement (USMCA) remain exempt, accounting for as much as 80-90% of Canadian exports to the U.S. The tariffs primarily impact non-USMCA compliant goods, roughly 10-20% of exports, affecting sectors like steel, autos, and certain industrial goods.
The Canadian government has pledged to support the hardest-hit sectors and defend Canadian workers amid ongoing negotiations. The tariff effects are also evident in the overall short-run price level in Canada, which rose by approximately 1.8% due to all 2025 tariffs, adding inflationary pressure to businesses and households.
In a positive note, energy stocks gained 0.6% alongside rising oil prices, and some gold mining companies posted share price increases due to rising gold prices. Notably, ARC Resources Ltd. is up 1.3% after reporting a net income of $396 million or $0.68 per share for the second quarter of 2025.
Meanwhile, Magna International Inc. has revised upward its full-year earnings outlook, with an expected adjusted income per share of $1.35 to $1.55 per share for the full-year. Magna International Inc.'s stock is up 0.5%.
Other significant losers in the Canadian market include Nfi Group, Coveo Solutions, Bitfarms, Cargojet, Boyd Group Services, Tfi International, and Russel Metals, which are down by varying percentages. Bausch Health Companies is down more than 4%. Among financials shares, Brookfield Asset Management is down 3.2% and Brookfield Corporation is lower by about 2.6%.
The S&P Global Canada Manufacturing PMI rose to 46.1 in July of 2025, but continued to reflect a contraction in the Canadian private-sector factory activity. The overall uncertainty and trade tensions continue to weigh on Canadian equities and industries.
Businesses in the financial sector, such as Sun Life Financial, Manulife Financial, and Toronto-Dominion Bank, experienced a decline in their share prices following the tariff increase, contributing to the overall downturn in the Canadian stock market. Similarly, the industrials sector, including Onex Corp, Igm Financial, Laurentian Bank, Fairfax Financial Holdings, and IA Financial Corp, also saw notable losses, impacted by the tariffs on non-USMCA compliant goods like steel and certain industrial goods.
