04:21 PM EDT, 03/20/2025 (MT Newswires) -- The Toronto Stock Exchange gave up modest gains late on Thursday and ended in the red, but investors got plenty of reminders about the pressures that Canadian exporters face due to brewing tariff disputes, and not just the highest profile one with the United States.

The S&P/TSX Composite Index closed down 8.97 points to 25,060.24. Among sectors, Battery Metals was the biggest gainer, up 2.05%, followed by Energy, up 0.62%.

On the mounting pressure on Canada's exporters, The Globe and Mail newspaper noted new Chinese tariffs worth $3.7 billion on Canadian agricultural and food products came into force just after midnight Thursday, 12 days after they were announced by Beijing as retaliation for a levy on Chinese electric vehicles imposed by Ottawa last year.

In a sign of the uncertainty being created by the threats to Canada's economy from tariffs, the Canadian Federation of Independent Business early today said its Business Barometer long-term index crashed to an record low in March, dropping 24.8 index points to 25.0. The small business confidence indicator reached a lower mark than it did at any time during the 2020 pandemic, the 2008 financial crisis or 9/11.

Taylor Schleich, Director, Economics and Strategy at National Bank Financial, said for a forward looking central bank, the survey result is worrying and would typically lead to a steady dose of pre-emptive rate relief. He added the problem is that this weakness comes alongside a sharp increase in pricing plans as firms intend to raise prices at the fastest pace since early 2023. Last week, Schleich noted, the Bank of Canada was already elevating inflation risks, and he said this more hawkish stance proved justified after February's "red hot" CPI report. "So," he added, "while the soft data is softening, the BoC may have its hands tied in the near-term. We still see scope for further cuts this year but those may only be delivered if/when deteriorating survey data is reflected in hard data."

Schleich's note was published just before BoC Governor Tiff Macklem delivered a speech entitled 'Navigating tariff uncertainty' before Calgary Economic Development in Alberta.

Royce Mendes, Head of Macro Strategy at Desjardins Capital Markets, in a quick take on Governor Macklem's Thursday speech said the BoC is "looking to be both humble and nimble" as it navigates the challenges of the current trade war. He noted Macklem stated in the speech to a Calgary audience the central bank will not set monetary policy "for a specific economic outlook" because no one, including the bank's Governing Council, knows what may happen with regard to tariffs. Instead, policymakers plan on employing a strategy that "works for different outcomes," Mendes noted.

As a result, according to Mendes, officials will be less forward looking than is typically the case. "Given that his speech opened with a nod to the recent strength in the economy and the fact that both measured inflation and inflation expectations have moved higher recently, an approach more focused on the contemporaneous environment would favour at least a brief pause in monetary easing," Mendes said.

Through the speech, Mendes noted, Macklem reminded those in the audience that the BoC will be guided by the 2% target for inflation. Macklem specifically said that there can be no doubt about the central bank's commitment to low inflation. Mendes added: "That's in line with the hawkish pivot we have seen from the Bank of Canada in recent weeks and reinforces our call for policymakers to hold rates steady in April. In the near-term, we expect that markets will price in fewer cuts, but that's likely to be a temporary adjustment."

Towards the end of Macklem's prepared remarks, Mendes noted, Macklem suggested that a less forward looking approach to monetary policy could mean reacting more quickly if risks materialize. "The Governor was likely intentionally vague about whether he was referring more to upside risks to inflation or downside risks to growth. But our view is that the downside risks to growth will be more pervasive and will lead the Bank of Canada to cut rates down to a terminal rate of 1.75% later this year. In essence, the Bank of Canada's latest communications are very much in line with our view that officials remain hawkish in the near-term, but switch gears to a much more dovish approach later in the year."

Of commodities today, West Texas Intermediate crude oil rose following a day-prior report showing U.S. oil inventories rose last month but gasoline inventories dropped, while the United States placed additional sanctions on Iran. WTI crude for April delivery closed up $1.10 to settle at US$68.26 per barrel, while May Brent crude was last seen up $1.41 to US$72.19.

Gold traded at yet another record high mid-afternoon on Thursday even as the dollar rose following the Federal Reserve's day-prior decision to hold interest rates steady, as safe-haven buying continues to support the metal on growth worries. Gold for April delivery was last seen up $12.20 to US$3,053.40 per ounce, rising for an eighth straight session and sticking above the $3,000 mark for a fifth day.

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