Trading in Canadian markets remained surprisingly subdued as news of the ruling swept through the markets. The TSX rose 0.11% as of 10:45 a.m. while moving less than the S&P 500.
The tepid trading in the TSX was surprising considering that many sectors of the Canadian economy had been negatively affected by Trump’s tariffs. Canadians reacted with outrage to Trump’s tariff increases when they were announced, responding with boycotts of American goods. However, there are rational explanations for why markets didn’t move as much after the Supreme Court ruling, as well as reasons for Canadian investors to remain cautious despite today’s good news.
Source: Getty Images
Many Canadian industries are unaffected by tariffs
Although Trump’s 2025 tariff increases angered many Canadians, their actual economic impact was limited. Canada’s real GDP is estimated to grow between 1.2% and 1.4% in 2025 (figures not yet finalized), meaning tariffs have seemingly not prevented the economy from growing. Moreover, Trump remained surprisingly faithful to the 2018 Canada-U.S.-Mexico Free Trade Agreement when he implemented his tariff increases, concentrating the new tariffs on a few sectors. Canadians working in the auto, steel and lumber sectors did lose jobs, but outside of these sectors it was largely business as usual.
Last year was indeed a banner year for the S&P/TSX Capped Composite Index! For the full year, the composite index rose 27%, easily outperforming US markets over the same period. The year was a good one for banking, energy and utilities – three sectors largely unaffected by Trump’s tariffs, and which make up an outsized percentage of the TSX’s market capitalization. The strong performance in tariff immune sectors has lifted the market as a whole to impressive heights.
Banking: a star in 2025
An example of a large, rate-immune Canadian sector is banking. Canadian banks do business in both Canada and the United States. When they operate in the US, they physically establish themselves there rather than sending exports across the border. So apart from the indirect effects caused by unemployment – which appear to have been minimal – the banking sector was not hit particularly hard last year.
A good example to illustrate the above point is Royal Bank of Canada (TSX:RY). Royal Bank shares performed quite well in 2025, rising 35% and delivering a total return of 39%. The strong rise in RY’s share price was fairly well supported by the performance of the underlying company. In 2025, Royal Bank of Canada’s revenues, earnings and book value grew at the following rates:
- Turnover: 15%
- Income: 25%
- Book value: 7.9%
At the same time, the bank was extremely profitable, with a net profit margin of 32.7% and a return on equity of 16.2%.
2025 was a good year for Royal Bank of Canada, which paradoxically means today’s news may not be much of a reason to celebrate for Canadian investors. Trump’s tariffs have certainly cost some Canadians their jobs, and most likely shaved a fraction of a percentage point from GDP. However, they left the production-light TSX Index largely unscathed. It would be foolish, then, to expect a major stock market reaction to Trump’s removal of tariffs. For my money, the TSX is still a buy. But not much more of a buy than yesterday.
#Supreme #Court #strikes #Trumps #tariffs #Canadians #dont #rejoice