The trade conflict between the U.S. and Canada has intensified as Canada responds to U.S. tariffs with its own set of counter-tariffs, affecting over 700 U.S. products. This includes a range of goods such as dairy, seafood, and appliances, with tariffs ranging from 15% to 50%.
The immediate market reaction saw a surge in steel and materials stocks, with companies like Nucor and Steel Dynamics benefiting from the breakdown in trade talks. The VanEck Steel ETF rose 1.6% on the day of the announcement, while the State Street Materials Select Sector SPDR reached an all-time high before closing the week in negative territory.
Year-to-date, both ETFs have outperformed the S&P 500, with SLX up over 28% and XLB up over 18%. However, Moody's chief credit officer Atsi Sheth warns that the uncertainty surrounding these tariffs will persist, particularly affecting the auto sector, which relies on a complex supply chain that spans both countries.
Sheth indicates that while U.S. steel companies may gain from the tariffs, the auto sector faces challenges with no clear winners due to the integrated nature of production across borders