TSX higher even as Trump escalates global trade war

Investing.com - Canada’s main stock index exchange ended higher on Monday even as U.S. President Donald Trump escalated his trade war with his country’s biggest trading partners, this time targeting the European Union and Mexico.

The S&P/TSX Composite was settled up 175 points, or 0.65% at 27,198.85. 

Trump announced over the weekend he would be introducing 30% tariffs on imports from Mexico and the European Union.

Trump’s tariffs will be effective from August 1, giving the targeted countries less than three weeks to reach a trade deal with Washington, after having postponed a deadline from July 9. 

The U.S. president announced late Thursday that the U.S. would impose a 35% tariff on Canadian imports next month, which followed news of similar tariffs on Japan, South Korea and Brazil, as well as a 50% duty on all copper imports. 

Canada is the second-largest U.S. trading partner after Mexico, and the largest buyer of U.S. exports. 

That said, Politico reported that Canada is pausing its planned escalation of retaliatory tariffs on U.S. steel and aluminum, even with Trump threatening new tariffs. 

According to two Canadian government officials cited by Politico, Ottawa will no longer proceed with plans to double its tariffs on U.S. metals from 25% to 50% on July 21.

The shift offers both nations a narrow window to avoid a broader trade rupture, though tensions remain high over economic and security issues.

Data released on Friday showed that Canada’s economy added 83,100 jobs in June, the first net increase since January, and the jobless rate edged down to 6.9%.

“While the unemployment rate is still elevated, the strength in other measures in this report clearly diminishes the odds of a BoC (interest rate) cut in July," said Katherine Judge, Senior Economist at CIBC (TSX:CM) Capital Markets.

U.S. stocks resilient

U.S. stocks reverse course from its early losses to end higher on Monday. There is an increased fears of a global trade war after Trump’s latest trade announcement, with quarterly corporate earnings also in focus.

The Dow Jones Industrial Average gained 88.14 points, or 0.20%, the S&P 500 index gained 8.69 points, or 0.14%, while the NASDAQ Composite also gained 54.80 points, or 0.27%.

Investors were focused on the new quarterly earnings season, ramping up this week, starting in earnest on Tuesday with numbers from a number of senior banks.

Oil prices tick lower

Oil prices rose Monday as traders await news of potential additional U.S. sanctions on Russia that may affect global output. 

Trump is due to make a "major statement" on Russia on Monday, having expressed frustration with Russian President Vladimir Putin due to the lack of progress in ending the war in Ukraine.

A bipartisan U.S. bill that would hit Russia with sanctions gained momentum last week in Congress, but it still awaits support from Trump.

Gold prices rise

Gold prices rose slightly on Monday, extending recent gains as caution over more trade tariffs from Trump boosted appetite for safe havens.

Haven demand was also buoyed by reports that Trump planned to send offensive weapons to Ukraine, potentially escalating a conflict with Russia.