While tariff tensions returned, a full-blown trade war remains unlikely
President Trump kicked off a fresh round of trade tensions over the weekend, imposing a 10% tariff on Chinese imports while temporarily delaying planned 25% tariffs on Canadian and Mexican goods, in exchange for increased border security and anti-trafficking measures. This 30-day reprieve, extended until March 4, leaves open the question of whether these tariffs will ever take effect. Given past precedents, further extensions or selective applications seem more likely than an outright escalation. Unlike the trade war of 2018-2019, this latest move appears more tactical than confrontational, with tariffs serving as leverage rather than immediate economic weapons.
China, meanwhile, gave a measured response, avoiding an all-out retaliatory spiral. Looking ahead, industries like semiconductors, pharmaceuticals, industrial metals and energy are at risk of further tariff action, with announcements expected as early as February 18. A universal 10% tariff on all U.S. imports remains unlikely, as the administration appears to favour targeted trade measures over blanket policies. While tariffs could push core inflation slightly higher, financial markets have remained stable, with the U.S. Federal Reserve still expected to cut rates twice in 2025, and GDP growth forecasts holding at 2.4%. Key dates ahead include February 18 for new tariff decisions, March 4 for Canada and Mexico’s tariff reprieve expiration and April 1 for further U.S. trade policy guidance. While uncertainty remains, Canada’s resilience and strategic positioning in key industries explains why the S&P/TSX Composite Index is still having a great performance so far this year.
Gold surged past $2,880, setting another record high, as signs of tight supply intensified. A key sign of stress emerged in the Bank of England's vaults, where gold is now trading at a discount to the broader market, due to traders scrambling to move metal to the U.S. ahead of potential Trump tariffs. While precious metals haven’t been explicitly targeted, concerns are growing that they could be included in blanket trade measures, pushing demand for U.S.-based bullion higher. Signs of a growing shortage are becoming increasingly clear. Freely available gold in London remains scarce, as traders struggle to secure physical metal for delivery. Meanwhile, one-month lease rates for bullion have soared to 4.7%, a big jump from the usual near-zero levels, reflecting the premium being placed on short-term access to physical gold. Silver markets are facing similar tightness, adding to concerns that the situation could escalate into a supply squeeze.
Despite a solid earnings season overall, this week brought a series of high-profile disappointments. Google slipped after a slight earnings miss, while Qualcomm dropped amid concerns that smartphone demand may be weakening. The auto sector also took a hit, with Ford sliding more than 6% after cautioning that new U.S. tariffs could pressure on industry profits. Meanwhile, Skyworks Solutions — a key Apple supplier — plunged over 20% as the company warned that competition in the semiconductor space is heating up.
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