Another day, another roller coaster ride in the markets.
As U.S. President Donald Trump threatened Tuesday to impose 50 per cent tariffs on Canadian steel and aluminum imports beginning Wednesday, stock markets bounced up and down on both sides of the border.
In Toronto, the S&P TSX Composite Index closed the day down 132.51 points at 24,248, a drop of just over half a percentage point.
In New York, the S&P 500 was off by 0.76 per cent while the Dow Jones industrial average was down 1.14 per cent. While all three indices ended the day in the red, they were well off their intraday lows .
Shares of Algoma Steel, based in Sault Ste. Marie, Ont., sank by almost three per cent in midday trading, but closed the day up by more than five per cent.
Algoma had already laid off 20 employees as a result of tariffs, even before Trump’s threat of an increase. The company is set to report fourth-quarter earnings Wednesday.
The S&P Composite had been treading water until around 10 a.m., when Trump posted on Truth Social that he’d be hitting the Canadian metals with 50 per cent tariffs rather than the previously threatened 25 per cent.
Trump said the increase was in response to Doug Ford’s decision to impose a 25 per cent surcharge on Ontario electricity sent to the U.S. By late afternoon, Ford said he was suspending the surcharge, and Trump said he’d consider backing off on the increased metal tariffs.
The on-again, off-again tariff threats are wreaking havoc for businesses and investors, said Stephen Foerster, a finance professor at Western University’s Ivey Business School.
“The markets do not like uncertainty,” said Foerster, “and … much of what Trump says virtually every day creates uncertainty, creates chaos. It’s hard to anticipate.”
In the U.S. markets, that uncertainty can be seen in the recent spike in the Chicago Board Options Exchange’s Volatility Index, or VIX, which has often been called the “fear index.” Tuesday, the VIX was at 28.34 points. As recently as February, it was at 15 points, Foerster pointed out.
“It’s almost doubled in less than a month,” said Foerster.
Part of the reason markets have dropped so steeply, said Foerster, is that many investors clearly didn’t believe Trump’s tariffs threats at first.
“I think many analysts and investors had thought that perhaps a lot of the tariff talk was for the purpose of negotiation and not a real thing. Now, the reality is starting to bite,” said Foerster.
It’s hard for businesses to do planning with any kind of confidence with this level of uncertainty, said Moshe Milevsky, a finance professor at York University’s Schulich School of Business.
“Business people like to plan. ‘How many widgets do I need to build? How many of this product do I need to order or make?’ ” said Milevsky. “It’s the people that are making decisions, saying, ‘Let’s hold off.’”
And that uncertainty means that for investors, choosing where to put their money is even more difficult than usual, said Milevsky.
“You wake up in the morning, you look at the news and think, ‘How has this gotten even worse?’ ” said Milevsky.
