Investing.com - Canada’s main stock indexes closed higher on Wednesday as traders assessed U.S. President Donald Trump’s trade policy and the Bank of Canada’s policy rate cut of 25bp to 2.75%.
After the 4:00 ET close, the S&P/TSX 60 index had increased by 9.3 points or 0.64%. The Toronto Stock Exchange climbed 175 points, or 0.72%, after experiencing its lowest close since October 31st on Tuesday.
At 9:45 ET, Bank of Canada cut interest rates by 25 basis points, as anticipated, while policymakers warned that an ongoing trade spat between Ottawa and U.S. President Donald Trump is set to weigh on Canadian economic activity and push up domestic prices. The central bank said the country had entered 2025 in a "solid position" with growth "robust" and inflation near its 2% target level, but cited heightened trade tensions for the rate slash.
Furthermore, Canada announced new 25% counter-tariffs on approximately $22 billion of U.S. goods, targeting steel and aluminum products, among other consumer items. The new tariffs will match the U.S. steel and aluminum tariffs imposed today "dollar for dollar," and are set to come into effect at 12:01 ET.
On Tuesday, Trump threatened to double import duties on Canadian steel and aluminum imports in response to a 25% levy imposed by the province of Ontario on electricity exports to the U.S. However, Ontario later dropped the trade tax and Trump backed down from his warning.
The incident marked the latest twist in an on-again, off-again raft of import tariffs on Canada by the White House. Meanwhile, it remains to be seen how incoming Prime Minister Mark Carney’s approach to trade negotiations with Washington will differ, if at all, from current leader Justin Trudeau.
"[Carney] has mentioned that he will continue to retaliate on U.S. tariffs and use the proceedings to help workers impacted by the U.S. tariffs and that he plans to find new markets for Canada’s exports," analysts at BofA said in a note to clients.
Analysts have flagged that the U.S. duties on Canada, which include a 10% surcharge on energy imports, could threaten the stability of a tightly-integrated North American economy. Goods needed to manufacture cars, for example, often cross Canadian and Mexican borders multiple times before ending up in American showrooms.
Media reports have said that Canadian retaliatory tariffs against the U.S. would remain in place despite Trump postponing the duties on most goods from the country for a month.
Crucially, the U.S. allowed tariffs on global steel and aluminum imports into the U.S. to come into effect on Wednesday. Canada is the largest supplier of the materials to its neighbor to the south.
U.S. stocks closed mixed
U.S. stocks pointed into the green on Wednesday, with markets also assessing a major reading of inflation.
By the 4:00 close, the S&P 500 added 27 points or 0.5%, and the NASDAQ Composite climbed by 212 points or 1.22%. However, the Dow Jones Industrial Average fell today by 82.7 points or 0.2%.
U.S. consumer prices rose at a slower-than-anticipated pace in February, according to government data on Wednesday that will likely be closely monitored by Federal Reserve officials wary of the potential impact of President Donald Trump’s policies on inflation.
The headline consumer price index (CPI), a key measure of inflation in the world’s largest economy, came in at 2.8% in the twelve months to February, cooling from 3.0% in January. Month-on-month, the gauge eased to 0.2% from 0.5%, figures from the Labor Department showed.
Economists had predicted readings of 2.9% and 0.3%, respectively.
Shelter costs accounted for nearly half of the monthly uptick and were partially offset by a 4% decline in airline fares and 1% drop in gasoline prices, the Labor Department’s Bureau of Labor Statistics said. A jump in egg prices, which have surged due to bird flu-linked shortages in hens, was also counterbalanced by easing costs in other categories like dairy and fruits and vegetables.
Stripping out volatile items like food and fuel, so-called "core" CPI was 3.1% year-over-year and 0.2% on a monthly basis. Both of these decelerated from the prior month and were below estimates.
The numbers will be among the last the Fed receives before its next policy gathering on March 18-19. The central bank pushed pause on an easing cycle at its last meeting in January and indicated that it will take a wait-and-see approach to further rate cuts, partly citing uncertainty around the inflationary impact of Trump’s plans for tariffs and immigration.
Economists have predicted that the levies in particular, which Trump has threatened to impose on friends and adversaries alike, could drive up prices and weigh on broader growth.
Oil climbs
In commodities, oil prices rose in trade, recovering mildly after increased concerns over U.S. tariffs and slowing economic growth recently dragged prices to over three-year lows.
Investors were focusing on the cooler U.S. inflation data, as well as a monthly report from the Organization of the Petroleum Exporting Countries oil producer group for more cues on supply.
Crude has gained some ground this week, although sentiment remained largely on edge as concerns remained that tariff-related disruptions could lead to weak demand.
By 5:15 ET, Brent futures had gained 0.01% to $70.97 per barrel, while U.S. West Texas Intermediate crude futures had climbed by 2.2% to $67.97 a barrel.
Gold steady
Gold prices held steady in trading as investors were cautious following the inflation report, while safe-haven appeal kept the yellow metal supported amid fluctuations in Trump’s tariff decisions.
Fed officials have indicated that a near-term rate cut was unlikely, emphasizing vigilance over potential levy-fueled inflation risks.
Lower interest rates decrease the opportunity cost of holding non-yielding assets like gold, often leading to an increase in gold demand and prices.
Spot gold enjoyed a 0.61% increase at $2,933.43 an ounce, while gold futures expiring in April rose to $2,943.40 per ounce by 5:15 ET.
(Scott Kanowsky also contributed to this article)