The TSX Is Trading at Record Levels Despite Tariff Talk

The TSX had a pretty stellar 2024, advancing 21%. Will the Canadian stock market register gains similar to those in 2025, especially in light of U.S. President Donald Trump’s proposed 25% tariffs on Canadian goods and 10% tariff on oil and gas? Then there are the 25% tariffs on steel and aluminum, which would, according to the White House, be added to other 25% tariffs.

President Trump has postponed the broader 25% tariff on Canadian goods and services and 10% tariff on Canadian energy until early March, with tariffs on Canadian steel and aluminum expected to kick in on March 12.

For the most part, it appears as though Bay Street has shrugged off President Trump’s tariff threats. How do we know this? The TSX continues to trend steadily higher. In fact, on January 30, it hit a new record intra-day high of 25875.61, and it continues to hover near that level.

As of February 14, the TSX is up 22.45% on an annual basis and 3.5% year-to-date. For comparison’s sake, the so-called red-hot S&P 500 is up 22.3% on an annual basis and 3.9% year-to-date.

Aren’t Trump’s Tariffs Bad for Canadian Stocks?

President Trump’s tough talk on tariffs seems pretty daunting. But his bantering is nothing new. During Trump’s first term in the Oval Office, he slapped duties on Canadian steel and aluminum while the U.S. was renegotiating a new free-trade agreement with Canada and Mexico.

It seems, in hindsight, that President Trump was using those tariffs as a negotiating tactic. And it’s quite possible he is again. Admittedly, President Trump is engaged in even more aggressive tariff talk this time, but it could be used as a negotiating tactic in the lead-up to the 2026 review of the Canada-U.S-Mexico agreement (CUSMA). In fact, the three countries could theoretically get together before then to renegotiate CUSMA.

Canada, of course, plans to announce its own retaliatory tariffs on the U.S.

How will the U.S. react? To put further pressure on Canada, there are concerns that President Trump’s isolationist or protectionist policies could lead to U.S. securities held by Canadians seized by the U.S.

What should Canadian investors do? Should they sell or avoid U.S. stocks? It’s important to remember that this isn’t the first trade war we’ve faced with the U.S. President Trump has been threatening tariffs since before he won the election in November. As a result, Canadian stocks have already adjusted their valuations a little. Keep in mind that tariffs have been delayed once and might be delayed again. Alternately, tariffs could be reduced and might not even happen at all.

On the campaign trail, then-presidential-hopeful Donald Trump said any tariffs would be paid for by the punished countries and that prices in the U.S. would not be affected. But anyone who has taken an economic class or has been involved in stocks knows that trade wars tend to result in higher prices.

And the last thing President Trump wants to see is higher prices and a return of higher inflation. That would fly in the face of his campaign promises and, as a deal maker, to control other countries.

That doesn’t mean President Trump won’t enact tariffs and that the markets will experience volatility. But we’ve been here before. And the outlook for the TSX hasn’t really changed with tariff talk. The S&P/TSX Composite Index is expected to hit 28,517 in 2025. That would represent a 14.9% increase from the start of 2025 and 10% from current levels.

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