Canada’s main stock index saw gains on Wednesday as investors reacted to the latest developments in the ongoing trade war. The Canadian government imposed retaliatory tariffs worth C$29.8 billion in response to US President Donald Trump’s increased levies on steel and aluminum imports, which took effect the same day.
This move followed Trump’s decision on Tuesday to retract plans to double trade duties on Canadian steel and aluminum products. The fluctuating tariff policies have created uncertainty among businesses and consumers, negatively impacting investments and spending.
In response to these economic pressures, the Bank of Canada reduced its benchmark interest rate by 25 basis points, marking the seventh consecutive cut and bringing the policy rate to 2.75 per cent.
Meanwhile, in the US, the consumer price index (CPI) rose by 0.2 per cent for the month, resulting in an annual inflation rate of 2.8 per cent. Both figures were below Dow Jones estimates. Core CPI, which excludes food and energy prices, also increased by 0.2 per cent for the month and 3.1 per cent over the past year, falling short of expectations.
Concerns over Trump’s unpredictable trade policies potentially leading to stagflation—a combination of inflation and slowed growth—contributed to recent market selloffs. However, the latest CPI report has alleviated some of these fears, suggesting that the Federal Reserve may have room to cut rates again if necessary.
The Canadian dollar traded for 69.56 cents US compared to 69.25 cents US on Tuesday.
US crude futures traded US$1.46 higher at US$67.71 a barrel, and the Brent contract rose US$1.41 to US$70.97 a barrel.
The price of gold was up US$20.44 to US$2,935.78.
In world markets, the Nikkei was up 25.98 points to ¥36,819.09, the Hang Seng was down 181.83 points to HK$23,600.31, the FTSE was up 42.00 points to ₤8,537.99, and the DAX was up 347.64 points to €22,676.41.
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(Top image generated with AI.)