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The shock of United States President Donald Trump’s global trade war has already hit the stock portfolios of Canadian consumers, but that may be just the beginning of the pain.
“This is the biggest realignment in global trade ever,” said Walid Hejazi, an associate professor of international business at the Rotman School of Management.
Here’s a look at the risks facing consumers.
Stock market losses
U.S. stock markets have shed a staggering US$6.4 trillion in market capitalization in just two days, according to The Wall Street Journal. On Thursday, after reciprocal tariffs were announced, the S&P 500 index fell five per cent, its biggest one-day drop since 2020 and followed that up with a bigger decline on Friday.
China soon retaliated to Trump’s reciprocal tariffs (he slapped tariffs of 34 per cent on the nation) with matching levies on all imported goods from the U.S., which only rattled the market further. The S&P 500 was down more than 17 per cent from its mid-February high on Friday.
Canadian stocks are deep in the red as well, down about four per cent on both Thursday and Friday.
In the meanwhile, multiple brokerages, including UBS Group AG and Royal Bank of Canada Capital Markets, slashed their year-end targets for the S&P 500.
Hejazi said that if Canada and Mexico come to a deal with the U.S., there might be some recovery in financial markets — though this could be stifled if more countries retaliate with tariffs like China.
Recession fears are growing
JPMorgan analysts recently said the odds of a global recession have increased to 60 per cent.
“The big threat is uncertainty, and people don’t know what’s coming,” Hejazi warned. “The longer this goes on, the bigger the impact you’re going to see on the real economy.”
Canada already lost 33,000 jobs in March and the unemployment rate ticked up to 6.7 per cent.
“Now that many tariffs are in place, the trend in the upcoming months is more layoffs and unemployment as tariffs cause widespread economic pains,” wrote Tu Nguyen, an economist at RSM Canada LLP, in a recent note.
“This will be especially prominent in trade-dependent industries such as wholesale and retail trade, manufacturing, especially auto production, and steel and aluminum, due to tariffs.”
Nguyen added that shrinking demand for goods and services will reduce the appetite for talent, which coupled with recession fears, could potentially lead to layoffs and a slowdown in hiring across sectors.
Hejazi said negative expectations could take on a life of their own.
“When people become pessimistic, they stop spending,” he said. “It’s a self-fulfilling prophecy … and it makes the recession more likely.”