Understanding Indices in Trading: How Canadian Stock Markets React to US Tariffs

Understanding indices in trading is essential to see how global markets like Canada react to the newly imposed US tariffs. Indices are financial instruments used to monitor the overall price performance of a basket of stocks using statistical measures of change. They act as benchmarks for stock market performance in different regions and industries depending on their composition, giving a broad view of how individual stocks in the indices perform. Here you will find the answer for what is indices in trading and understand their importance in trading. 

What Is S&P/TSX?

The S&P/TSX Composite is a popular Canadian index designed to track the performance of over 200 of the country's largest public companies. If its price rises, it is a good indicator that the Canadian market is bullish, while falling prices indicate that the overall market is bearish. 

How Are Indices Assembled?

An index is demarcated by its components and can comprise a vast range of stocks for an industry or be specific to a particular niche. For example, global indices comprise global stocks, such as the Dow Jones Global Titans 50, which tracks 50 of the largest stocks on the New York Stock Exchange. 

National indices, like the S&P/TSX, feature stocks from an individual country and are generally used as a benchmark for understanding the health of the country's most traded stocks. 

How Canadian Stock Markets Are Responding to US Tariffs

Canada's primary stock market was down 500 points during late-morning trading on April 7, 2025, primarily due to the imposed US tariffs that have seen global markets plummet for four consecutive trading days. The S&P/TSX composite index lost 1.5%, dragging energy down the most when crude oil prices dipped below US $60 per barrel. 

Volatility

Canada's market is a broader glance at the overall global market sparked by volatility. Significant price fluctuations recently are due to markets having to absorb the impact of the tariffs on the global economy, oil prices, GDP growth, and other factors. The falling prices of financial markets come amid the steady stream of tariff headlines, causing stock prices to swing wildly in either direction. 

Part of the Euro and Asian markets reporting positive gains before the 104% tariff imposed on China were sparked by optimism over what President Trump said about the tariffs. 

"We are likewise dealing with many other countries, all of whom want to make a deal with the United States," Trump posted on social media. 

As Canada's market plunged on the third consecutive day, it sparked fears of a recession. 

Canada's Reciprocal Measures

Canada says it has started imposing a 25% tariff on certain vehicle imports from the US in a retaliatory move against the US. Canadians buying these parts from the US will pay the tariffs. Canadian Finance Minister Francois-Phillippe Champagne said his country was responding to President Trump’s "unwarranted and unreasonable" tariffs that were explicitly aimed at his country. Canada was able to avoid the new round of tariffs. 

Still, Ottawa was already in a tiff with Washington over Trump's pre-existing policies, including taxes on specific goods shipping over the border. 

Champagne posted on X, "We'll protect our workers, our businesses, and our economy," confirming the beginning of the retaliatory measures.

Canada's Automobile Tariffs

A Canadian government factsheet confirms that Canadian importers must pay a 25% tax on certain automobiles or parts from the US. This includes any completely assembled vehicles not compliant with the CUSMA North American free-trade agreement and any "non-Canadian and non-Mexican content" that formed part of a fully assembled vehicle, even if compliant with CUSMA.

Canadian Prime Minister Mark Carney vowed a forceful reciprocation after the tariffs. However, the retaliatory moves are painful for Canada, whose automobile industry is interwoven with the US. 

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