Stocks are plunging and that may only be the start of the pain for Canadian consumers

'This is the biggest realignment in global trade ever'

Published Apr 04, 2025  •  3 minute read

Traders work on the floor at the New York Stock Exchange in New York, Thursday, April 3, 2025. The S&P 500 was down more than 17 per cent from its mid-February high on Friday. Photo by Seth Wenig /The Associated Press

The shock of United States President Donald Trump’s global trade war has already hit the stock portfolios of Canadian consumers, but that may be just the beginning of the pain.

Article content

Article content

“This is the biggest realignment in global trade ever,” said Walid Hejazi, an associate professor of international business at the Rotman School of Management.

Here’s a look at the risks facing consumers.

Article content

Stock market losses

U.S. stock markets have shed a staggering US$6.4 trillion in market capitalization in just two days, according to The Wall Street Journal. On Thursday, after reciprocal tariffs were announced, the S&P 500 index fell five per cent, its biggest one-day drop since 2020 and followed that up with a bigger decline on Friday.

China soon retaliated to Trump’s reciprocal tariffs (he slapped tariffs of 34 per cent on the nation) with matching levies on all imported goods from the U.S., which only rattled the market further. The S&P 500 was down more than 17 per cent from its mid-February high on Friday.

Canadian stocks are deep in the red as well, down about four per cent on both Thursday and Friday.

In the meanwhile, multiple brokerages, including UBS Group AG and Royal Bank of Canada Capital Markets, slashed their year-end targets for the S&P 500.

Hejazi said that if Canada and Mexico come to a deal with the U.S., there might be some recovery in financial markets — though this could be stifled if more countries retaliate with tariffs like China.

Recession fears are growing

Article content

Article content

JPMorgan analysts recently said the odds of a global recession have increased to 60 per cent.

“The big threat is uncertainty, and people don’t know what’s coming,” Hejazi warned. “The longer this goes on, the bigger the impact you’re going to see on the real economy.”

Canada already lost 33,000 jobs in March and the unemployment rate ticked up to 6.7 per cent.

“Now that many tariffs are in place, the trend in the upcoming months is more layoffs and unemployment as tariffs cause widespread economic pains,” wrote Tu Nguyen, an economist at RSM Canada LLP, in a recent note.

“This will be especially prominent in trade-dependent industries such as wholesale and retail trade, manufacturing, especially auto production, and steel and aluminum, due to tariffs.”

Nguyen added that shrinking demand for goods and services will reduce the appetite for talent, which coupled with recession fears, could potentially lead to layoffs and a slowdown in hiring across sectors.

Hejazi said negative expectations could take on a life of their own.

“When people become pessimistic, they stop spending,” he said. “It’s a self-fulfilling prophecy … and it makes the recession more likely.”

Article content

Rising prices

Economists from Toronto-Dominion Bank recently said U.S. inflation is at risk of approaching four per cent or more, with consumers already starting to “tap the brakes” on spending.

In comparison, they anticipate consumer price growth in Canada to stretch to more than three per cent this summer.

Hejazi noted that Canada is only grappling with a trade war with the U.S., while the latter has launched a trade war “with everybody,” exacerbating the breadth and scale of price growth for American consumers.

Yale University’s The Budget Lab predicted 2025 tariffs will cause U.S. prices to rise 2.3 per cent in the short-term, the equivalent to a US$3,800 loss per household.

The report said clothing and textiles will be disproportionately impacted, with apparel prices surging 17 per cent, but goods like metals, electrical equipment and rice could see hefty price increases as well.

Canadian consumers won’t be immune to the pain of higher prices, and they aren’t just going to be placed on American goods with tariffs, Hejazi warned.

Recommended from Editorial

1. 

   Bank of Canada April rate cut still in play as job market weakens, economists say

2. 

   Posthaste: Canada dodged Trump's tariff slamdown, but recession bullet still coming our way

Article content

“When American products become more expensive, Canadian companies raise their prices as well,” Hejazi said, adding that the longer we experience sustained inflation, the harder it can be to bring it under control.

“The challenge is that we’re probably going to see prices rise gradually and it’s going back to that self-fulfilling (prophecy) and inflationary expectations becoming entrenched.”

• Email: [email protected]

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.

Article content