North American stock markets tank as latest tariffs heighten recession fears

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This article was published 03/04/2025 (206 days ago), so information in it may no longer be current.

TORONTO – Stock markets in Canada and the U.S. plunged Thursday as investors reacted to the latest tariffs from U.S. President Donald Trump.

“The tariff news that came out last night, I think was certainly worse than the vast majority of people expected,” said Mike Archibald, vice-president and portfolio manager with AGF Investments Inc.

Markets are trying to re-evaluate the likelihood of a recession as a result, he said.

“Obviously, these tariffs would be very, very negative for global growth if they stay in effect.”

The S&P/TSX composite index closed down 971.41 points or 3.8 per cent at 24,335.77 as markets worried the latest round of U.S. tariffs could sink the global economy into a recession.

In New York, trillions of dollars in value were wiped out in a matter of hours. The Dow Jones industrial average was down 1,679.39 points or 4 per cent at 40,545.93. The S&P 500 index was down 274.45 points or 4.8 per cent at 5,396.52, while the Nasdaq composite was down 1,050.44 points or 6 per cent at 16,550.61.

After the bell on Wednesday, U.S. President Donald Trump announced so-called “reciprocal tariffs” hitting just about every country around the world including a new 20 per cent tariff on the European Union and a 34 per cent levy on imports from China.

Major tech stocks led the way down, as companies like Apple stand to be affected by tariffs on countries like China, said Martin Pelletier, senior portfolio manager at Wellington-Altus Private Counsel Inc.

Even gold, which has been hitting highs as investors seek a safe haven, was down.

The fresh round of levies sparked concerns from economists that they could drag the global economy into a recession. Tariffs are widely expected to be inflationary, as are Canada’s retaliatory tariffs. They are also likely to weigh on economic growth.

Trump seems to view this possibility as a short-term pain that will be worth the longer-term shift he’s looking for, said Pelletier.

The drop in North American markets followed similar moves on markets in Europe and Asia following the news.

Of course, there’s still plenty of uncertainty for investors, said Pelletier. The latest announcement by Trump came after a couple of months of tariff threats, announcements, exemptions and delays, so it’s possible what was laid out on Wednesday isn’t the final story.

“Having said that, there are some important signals in the market that this is a major structural shift by the U.S. administration,” he said.

“Is the market overreacting to what we saw yesterday? We don’t know, but it certainly is adjusting its expectations more to the downside risks than the upside recovery.”

Archibald thinks we may have reached “peak tariff,” and may be entering a negotiation phase where some could be lifted in the near future.

“The question now is just, do we get some kind of negotiated outcome here that is less negative for broader markets?”

The Canadian dollar traded for 71.08 cents US compared with 69.83 cents US on Wednesday.

“The U.S. dollar is selling off against all major currencies,” said Pelletier, leading to strength for the loonie.

The May crude oil contract was down US$4.76 at US$66.95 per barrel and the May natural gas contract was up nine cents US at US$4.14 per mmBTU.

The June gold contract was down US$44.50 at US$3,121.70 an ounce and the May copper contract was down 21 cents US at US$4.83 a pound.

— With files from The Associated Press

This report by The Canadian Press was first published April 3, 2025.

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