While things could change between now and April 11, when Trump will decide whether to impose the steel tariff, and April 19, when he must make a decision on aluminum tariffs, stocks have taken a hit from the announcement.
The S&P/TSX Composite Index representing Canadian stocks hasn’t been hit as hard as the S&P 500, dropping by 0.5 percent, but some companies have seen their share prices decline more significantly. Global auto parts supplier Magna, for example, is down 3.5 percent and shares of aerospace giant Bombardier fell by nearly 6 percent when the markets opened Friday, but have regained some ground since.
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Jeff Mills, managing director and co-chief investment strategist at Pittsburgh-based PNC Management Group, isn’t surprised that stocks in the U.S. and elsewhere are selling off post-announcement, though U.S. stock did rebound on Friday afternoon.
“The policy change will very likely increase costs for all consumers which means it will serve to reduce some of the benefit of the recently passed tax bill,” he said. “Markets are now worried about countermeasures from other countries, and investors are starting to wonder what other protectionist measures Trump could take.”
Basking Financial’s Schwartz doesn’t think the Canadian stock market will take that much of a hit over these tariffs specially — the S&P/TSX is already underperforming other markets – but if a trade war heats up then stocks in Canada and around the globe will see big declines.
“Who knows what will happen, but I presume the direction would be negative,” he said.” The price of goods for everything around the world would go up, inflation would rise and while companies ultimately adjust to inflation, stocks will be negative while that adjustment period happens.”
Global investors can’t do much now, added Mills, as the exact details are still largely unknown, though he does think, generally, people should be making sure they’re comfortable with the risk they’re taking in their portfolios. Any investors interested in Canada, though, should hope that Trump, at the very least, makes the country tariff-exempt.
“Canada is probably the most penalized as things stand today,” Mills said. “Perhaps cooler heads prevail over the weekend and the tariffs end up being less broad-based.”