U.S. President Donald Trump’s expanded global trade war sent shock waves through markets Thursday with the S&P 500 suffering its largest one-day loss in value since the pandemic hit in 2020.
“A day like today is dominated by emotions,” said Bipan Rai, managing director of BMO Global Asset Management. “We got an historical announcement yesterday and the shock is still reverberating through the market.”
Markets in Asia and Europe were the first to open following Trump’s announcement Wednesday of reciprocal tariffs targeting U.S. allies and foes alike.
London’s FTSE 100 Index was down by 1.6 per cent as the U.K. faces 10 per cent tariffs from the U.S. In Japan, the Nikkei 225 plunged nearly three per cent after Trump slapped the island nation with 24 per cent duties,
Similar scenes played out in Canadian and U.S. markets by the time they opened.
By 10:30 a.m., trillions of dollars in value had been wiped out from North American markets, as major indices — including Toronto’s S&P/TSX Composite Index — were hit hard.
Canada’s main stock index closed down more than three per cent, wiping out more than $100 billion in shareholder value.
In New York, the S&P 500 closed down more than four per cent, wiping out some $1.6 trillion (U.S.) in value.
Major tech stocks were hardest hit in the U.S. with Apple losing around eight per cent by midday.
In the TSX, Vancouver-based Aritzia and Shopify were seeing the biggest loses around 20 and 19 per cent respectively.
No country’s stock market was safe from Trump’s trade war escalation, but it was the U.S. market that took the biggest gut punch.
Thursday’s drop brings the S&P 500 back into correction territory, meaning it has lost at least 10 per cent from its recent peak.
Since its high water mark on Feb. 19, the S&P 500 has dropped more than 11 per cent.
“There’s a degree of concern about potentially the erosion of institutional trust in the U.S. market,” Rai said, adding that it makes sense for markets to trade more defensively given the uncertainty surrounding the tariffs.
Canada was largely spared from the heaviest blows from Trump’s latest tariffs, although all Canadian auto imports into the States will be slapped with a 25 per cent tariff.
The lack of more punitive trade penalties appeared to be reflected in the value of the loonie Thursday morning.
The Canadian dollar traded closed up at 71 cents U.S. compared with 70 cents on Wednesday.
The U.S. dollar, however, appeared headed for its worst day in more than two years.
Rai again attributed Thursday’s bump for the loonie on initial shock from Trump’s latest announcement, warning that near-term risks threaten to weaken the Canadian dollar.
“There is always the risk that we could see additional sectoral tariffs levied,” Rai said, noting that Trump has mused about slapping penalties on pharmaceuticals, semiconductor chips, lumber and the agricultural sector.
The upcoming federal election at the end of the month, and whether the winning party pursues fiscal stimulus, also is a factor, Rai explained.
With files from The Canadian Press and Bloomberg
