U.S. stocks sank and the Canadian dollar fell further in early trading on Monday morning against the backdrop of a brewing North American trade war, then rebounded mid-morning after Mexican President Claudia Sheinbaum announced that U.S. tariffs against her country would be delayed by one month.
U.S. President Donald Trump announced on Saturday that extensive tariffs on Canadian and Mexican goods would be implemented Tuesday. Canada retaliated with its own tariffs after Trump’s executive order, which imposes a 25 per cent tariff on Canadian goods and a 10 per cent tariff on Canadian oil.
“We do not expect the 25 per cent tariffs on Canada and Mexico to be sustained for a prolonged period,” said Solita Marcelli, chief investment officer of Americas at UBS Global Wealth Management.
“The Trump administration would not want to jeopardize U.S. economic growth or risk higher inflation by leaving the tariffs in place for a sustained period, and significant stock market volatility could lead to a change in approach.”
Opening market reaction in the U.S. saw the S&P 500 down 1.7 per cent, while the tech-centric Nasdaq composite tumbled 2.1 per cent. The Dow Jones Industrial Average fell 557 points in early trading.
By 10:30 a.m. ET, some of those losses had been recovered, with the Dow Jones down 233 points, the Nasdaq 1.4 per cent lower and the S&P 500 down one per cent.
The upward swing came after Sheinbaum confirmed during a news conference that she’d spoken with Trump and that the tariffs against Mexico had been delayed by one month, after the country agreed to deploy 10,000 national guard troops to the U.S. border.
Meanwhile, the Toronto Stock Exchange was down nearly 230 points mid-morning. The Canadian dollar also fell to its lowest level against the U.S. dollar in more than two decades early Monday, trading at $68.13 US compared to $69.04 US on Friday afternoon. By mid-morning it had climbed slightly to $68.51 US.
Writing on his Truth Social platform Monday morning, Trump said that he spoke with Prime Minister Justin Trudeau early today and had scheduled another call with Trudeau for later this afternoon. During his news conference announcing retaliatory measures on Saturday, Trudeau said that he and Trump had not spoken since the latter’s inauguration on Jan. 20.
