Thursday's Grateful Recovery: Canadian Stocks Thank Trump's Tariff Retreat

Following Wednesday’s momentum, Canadian equities extended their rally on Thursday as investors found reason to be thankful after markets responded positively to U.S. President Donald Trump’s policy reassurances. The benchmark S&P/TSX Composite Index closed at 33,002.70, representing a gain of 151.17 points or 0.46%, marking a continuation of the positive sentiment. The market’s relief was palpable as traders had grown weary of escalating trade tensions that threatened to disrupt North American economic stability.

Market Relief After Days of Trade Tensions

The pivot in market sentiment came swiftly after Trump’s statements regarding two critical issues: the U.S. stance on Greenland acquisition and tariff threats against the European Union. Speaking at the World Economic Forum, Trump declared that the U.S. would not resort to military force to claim Greenland from Denmark. Hours later, he reinforced this message on Truth Social, announcing that a “framework” agreement had been reached with NATO Secretary General Mark Rutte on Arctic security matters. More crucially, Trump indicated that there would be no additional tariffs imposed on the EU, a statement that sent relief through global markets and particularly benefited Canadian investors who had anxiously monitored the situation.

The gratitude investors displayed was warranted given the volatility that had preceded these announcements. Days earlier, Trump had threatened to impose 10% tariffs on eight European nations effective February 1 if they refused to cooperate on his Greenland initiative. The prospect of escalation to 25% tariffs by June 1 had created significant uncertainty in the markets. Thursday’s reassurances essentially reset the immediate tariff timeline, allowing investors to breathe easier and reallocate capital toward risk assets.

Trump Signals Softer Stance on EU and Greenland

The shift in Trump’s rhetoric marked a notable departure from his hardline position of mere days prior. His willingness to finalize a framework agreement with NATO officials and declare that tariff escalation was no longer necessary suggested a recalibration of priorities. For Canadian investors who had been holding defensive positions due to trade uncertainty, this represented an opening to reconsider their market allocation strategies.

The market’s positive reception was evident across six of the eleven sectors, with the materials sector leading the advance, gaining 2.24%. Communication Services rose 1.26%, Healthcare climbed 1.26%, and Industrials posted a 0.66% gain. The breadth of gains indicated that Thursday’s rally was not concentrated in a single area but represented a genuine broadening of market appetite for risk-taking.

Canada Faces Deeper Trade Isolation Amid Political Rift

Ironically, while global tensions eased, U.S.-Canada bilateral relations deteriorated further. Canadian Prime Minister Mark Carney delivered a forceful speech at the World Economic Forum on Tuesday, criticizing American economic hegemony and the disruptive impact of U.S. tariff policies. Carney advocated for a strengthened “rules-based international order” and called upon “middle powers” to unite against economic coercion by larger nations—a transparent reference to U.S. trade tactics. His remarks garnered rare standing ovation recognition from the international audience.

Trump did not take Carney’s criticism lightly. He responded by suggesting that Canada should be grateful for American economic support and implied that Canada’s prosperity depends on U.S. goodwill. This exchange between two leaders at a global forum has deepened concerns about the trajectory of U.S.-Canada relations. The context makes Thursday’s market gains for Canadian stocks particularly significant, given that the nation has been under significant trade pressure since August 2025, when Canadian exports faced 35% tariffs when crossing into the United States.

The prospects for trade negotiation have dimmed considerably. Trump has effectively closed the door on fresh discussions with Canada and has signaled reluctance to renew the Canada-United States-Mexico free-trade agreement, having previously hinted at U.S. withdrawal from the pact. Despite these headwinds, Thursday’s trading showed that market participants remained willing to look past short-term political tensions when given any indication of easing global trade friction.

Sector Winners and Stock Gainers Emerge

The materials sector’s robust 2.24% advance was complemented by impressive performances from individual commodity-related stocks. Seabridge Gold Inc surged 12.62%, while Discovery Silver Corp jumped 12.21%. New Gold Inc advanced 11.98%, and SSR Mining Inc posted an 11.97% gain. Among non-commodity stocks, Quebecor Inc emerged as a notable winner with a 2.74% increase.

The market’s divergence was equally telling on the downside. Consumer Discretionary slipped 0.04%, Utilities declined 0.11%, Energy fell 1.29%, and IT lost 1.69%. Prominent losers included Dye & Durham Ltd (down 10.13%), Celestica Inc (down 6.55%), Baytex Energy Corp (down 5.88%), and Vermillion Energy Inc (down 4.44%).

Supplementary data released Thursday revealed that the Canadian Federation of Independent Business’ long-term confidence index slipped marginally to 59.5 in January 2026, just below December’s three-year high of 59.9. Statistics Canada reported that new housing prices in Canada declined 0.2% month-on-month in December 2025 after remaining flat in November, in line with market expectations.

On balance, Thursday proved to be a day when Canadian equity markets had much to be thankful for, as global trade tensions unexpectedly eased. Yet underlying concerns about Canada’s isolated position in trade negotiations and the deteriorating tone of U.S.-Canada relations remained evident beneath the surface of Thursday’s gains.