Even after the Canada‑United States trade negotiations fell apart late on Friday, the Toronto Stock Exchange’s benchmark index brushed off the news and reached a fresh closing high. The S&P/TSX Composite climbed to 36,957.63 on Tuesday before slipping nearly 150 points the following day, as gains in energy, materials and financials outweighed concerns over new tariffs on autos, lumber and dairy.
Tariff Talk Collapse and Market Reaction
The breakdown in talks prompted the United States to announce that auto tariffs would double to 50 % from 25 % effective 1 January 2027, with the levy also extending to auto parts that had previously been exempt. Shares of Ontario’s three largest publicly traded auto‑parts suppliers fell on Monday in response. Yet the broader market showed little reaction, a point highlighted by Greg Taylor, chief investment officer at PenderFund Capital Management, who reminded investors that “It’s important to remember that the TSX is not the economy.”
Commodity Rally Powers Energy and Materials
Global forces have been the main driver of the TSX’s strength. Since the Iran conflict erupted in early spring, oil prices have surged past US$100 a barrel, and the uncertainty has kept a geopolitical risk premium embedded in crude values. The S&P/TSX Capped Energy Index, which tracks companies such as Canadian Natural Resources Ltd. and Suncor Energy Inc., is up 60 % year‑on‑year. Philip Petursson of IG Wealth Management noted that “Historically, the safer way to tap into the oil markets is by buying Canadian energy stocks or the TSX.”
Materials have performed even better. The S&P/TSX Capped Materials Index, dominated by metal miners, has risen 66 % over the past twelve months. Agnico Eagle Mines Ltd., Barrick Mining Corp. and Wheaton Precious Metals Corp have each posted gains above 50 %, buoyed by a historic gold rally that has lifted the precious metal roughly 37 % since last August. Robert Cohen, senior portfolio manager at Scotiabank Global Asset Management, linked the gold surge to rising U.S. fiscal debt, saying, “They never fathomed this kind of amount of debt in the system. At what point are people starting to get really panicky? And based on what I see going on in the gold price over the last couple of years – they’re waking up to it,”
Demand for copper and other metals essential to power grids, data centres and electric vehicles remains robust. First Quantum Minerals, the TSX’s largest pure‑play copper miner, traded at $48 a share on Wednesday – up around 100 % year‑on‑year.
Financial Sector Steadies the Index
Financial stocks continue to be the cornerstone of the TSX’s performance. The S&P/TSX Capped Financials index, home to the Big Six banks, major asset managers and insurers, has gained 39 % over the past year. Because financials represent the largest weighting in the benchmark, any shift in investor sentiment toward bank valuations could pose a near‑term risk. Greg Taylor warned that “People are just overlooking these tariff short‑term headlines, thinking they won’t have any impact on the banks, but the longer that drags out, it just might have some degree of impact.”
Despite the tariff backdrop, the Canadian benchmark is on track to outperform its U.S. counterpart for a second consecutive year. In 2025 the TSX delivered roughly a 28 % return, compared with about 16 % for the S&P 500. Over the same period the broader TSX rose 30 % while the U.S. index increased 18 %, with financials, energy and materials together driving the bulk of the advance.
Why it Matters
The TSX’s ability to climb to record heights amid rising trade tensions shows how deeply the Canadian market is tied to global commodity cycles rather than bilateral trade flows. While tariffs on autos, lumber and dairy have hurt specific sectors, their limited weight in the index means the broader market can continue to thrive as long as oil, gold and copper prices remain elevated. Investors should therefore watch commodity fundamentals and financial‑sector valuations closely, as these will dictate whether the TSX can sustain its outperformance or face a correction if sentiment shifts.
