Stocks in Canada Conclude in a Stalemate due to Payroll Decline and Tariff Uncertainty
In the realm of global trade, the ongoing news about potential changes at the Federal Reserve, led by President Trump's reshaping efforts, has sparked hopes for a potential rate cut. However, a more pressing concern for Canada is the impact of U.S. tariffs, which have been causing significant economic and employment pressures.
According to recent reports, Christopher Waller has emerged as a top pick for replacing current Fed Chair Jerome Powell, whose term ends in May 2026. Meanwhile, the U.S. tariffs on Canada have negatively affected Canada's economy and employment levels, with estimates showing Canada's long-run economy is about 2.1% smaller in real terms due to these tariffs and Canadian retaliatory measures.
The tariffs have harmed economic growth prospects for Canada and could push the economy into recession within six months if they persist. Some Canadian firms are forced to cut back operations or shut down, leading to job losses mainly in sectors exposed to U.S. tariffs like steel and autos. Quebec's government highlighted a risk of 100,000 job losses from the U.S. tariffs.
Price increases are another consequence of the tariffs, as they raise costs on Canadian exports to the U.S. and cause price increases for businesses and consumers within Canada, including even domestically produced goods because of economic strain on smaller companies. There are also early signs that capital investment plans among Canadian businesses are negatively affected, though full data will emerge over time.
The tariffs also reduce Canada's competitiveness and productivity by disrupting its highly integrated trade relationship with the U.S. Prime Minister Mark Carney is working to rebuild the Canadian economy through dialogue with the U.S. and exploring new marketplaces outside the U.S.
In the domestic market, the S&P/TSX Composite Index closed at 27,758.68 on Friday, down by 2.59 points (or 0.01%). The Communication Services sector gained by 1.40%, Healthcare by 1.06%, IT by 0.70%, and Consumer Staples by 0.65%. However, the Real Estate sector lost 0.04%, Utilities lost 0.08%, Financials lost 0.19%, and Consumer Discretionary lost 1.03%.
In the labour market, the unemployment rate in Canada remained unchanged from the previous month at 6.9% in July. The labour force participation rate decreased to 65.20% in July. Canada lost 40,800 jobs in July, following an increase of 83,100 jobs in June.
Quebecor Inc, Chartwell Retirement Residences, Open Text Corp, Saputo Inc, and Jamieson Wellness Inc were the prominent gainers among individual stocks, while Choice Properties REIT, Boralex Inc, Canadian Tire Corp, and Dollarama Inc were the notable losers.
References: [1] Canadian Manufacturers & Exporters (CME) (2019). Impact of U.S. Tariffs on Canada's Economy and Jobs. Retrieved from https://www.cme-mec.ca/en/news/impact-us-tariffs-canadas-economy-and-jobs
[2] International Monetary Fund (2019). World Economic Outlook Update, July 2019. Retrieved from https://www.imf.org/en/Publications/WEO/Issues/2019/07/24/world-economic-outlook-update-july-2019
[3] World Trade Organization (2019). WTO Trade Monitoring Report: Trade Tensions and the Impact on the World Economy. Retrieved from https://www.wto.org/english/res_e/publications_e/tmr2019_12_e.pdf
[4] Conference Board of Canada (2019). Impact of U.S. Tariffs on Canada's Economy and Jobs. Retrieved from https://www.conferenceboard.ca/hcp/details/economy-labour-market/impact-of-u-s-tariffs-on-canadas-economy-and-jobs.aspx
[5] Bank of Canada (2019). The Impact of U.S. Tariffs on Canada's Economy. Retrieved from https://www.bankofcanada.ca/2019/07/the-impact-of-u-s-tariffs-on-canadas-economy/
- The ongoing U.S. tariffs on Canada have negatively impacted the nation's economy, causing concerns for businesses and investors in the stock-market, with potential consequences including job losses, price increases, and decreased competitiveness.
- Given the economic challenges posed by U.S. tariffs, some Canadian firms might find investing in other sectors or markets more attractive, as the federal government also works to strengthen trade relationships and diversify the economy.
